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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

(Mark One)

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

OR

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

for the fiscal year endedDecember 31, 2007

OR

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

OR

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

Date of event requiring this shell company report
_________________________

For the transition period from _________________________ to
_________________________

COMMISSION FILE NUMBER: 000-25827

LINCOLN GOLD CORPORATION(Exact name of Registrant as specified in its charter)

Not applicable(Translation of
Registrants name into English)

Canada(Jurisdiction of incorporation
or organization)

Suite 350, 885 Dunsmuir Street-Vancouver,
British Columbia, Canada, V6C 1N5(Address of principal
executive offices)

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

|Title of each Class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|None                | Not applicable                           

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

Common Shares(Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:

N/A(Title of Class)

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

51,391,666 Common Shares outstanding as at December 31,
2007

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

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

Note  Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.

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

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):

|Large accelerated filer [   ] | Accelerated filer [   ] | Non-accelerated filer [X]
|----------------------------- | ----------------------- | -------------------------

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|U.S. GAAP [   ] | International Financial Reporting Standards
      as issued | Other [X]
|--------------- | ----------------------------------------------------------- | ---------

If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the
registrant has elected to follow.

[X]  Item 17    [   ] Item 18

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

Yes [ 
 ]          No [ X
]

________

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TABLE OF CONTENTS

|                                              |          |                                                                                    | Page No
|--------------------------------------------- | -------- | ---------------------------------------------------------------------------------- | -------
|                                              |          |                                                                                    |        
|**GENERAL**                                   | 1       
|                                              |          |                                                                                    |        
|**NOTE REGARDING FORWARD LOOKING STATEMENTS** | 1       
|                                              |          |                                                                                    |        
|**GLOSSARY OF TERMS USED IN THIS FORM 20-F**  | 2       
|                                              |          |                                                                                    |        
|PART I                                        | 4       
|                                              |          |                                                                                    |        
|                                              | ITEM 1   | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS                              | 4      
|                                              | ITEM 2   | OFFER STATISTICS AND EXPECTED TIMETABLE                                            | 4      
|                                              | ITEM 3   | KEY INFORMATION                                                                    | 4      
|                                              | ITEM 4   | INFORMATION ON THE COMPANY                                                         | 15     
|                                              | ITEM 4A  | UNRESOLVED STAFF COMMENTS                                                          | 42     
|                                              | ITEM 5   | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                       | 42     
|                                              | ITEM 6   | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                         | 47     
|                                              | ITEM 7   | MAJOR SHAREHOLDER AND RELATED PARTY TRANSACTIONS                                   | 58     
|                                              | ITEM 8   | FINANCIAL INFORMATION                                                              | 60     
|                                              | ITEM 9   | THE OFFER AND LISTING                                                              | 61     
|                                              | ITEM 10  | ADDITIONAL INFORMATION                                                             | 62     
|                                              | ITEM 11  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                         | 81     
|                                              | ITEM 12  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                             | 82     
|                                              |          |                                                                                    |        
|PART II                                       | 82      
|                                              |          |                                                                                    |        
|                                              | ITEM 13  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                    | 82     
|                                              | ITEM 14  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
      AND USE OF PROCEEDS | 82     
|                                              | ITEM 15  | CONTROLS AND PROCEDURES                                                            | 82     
|                                              | ITEM 16A | AUDIT COMMITTEE FINANCIAL EXPERTS                                                  | 84     
|                                              | ITEM 16B | CODE OF ETHICS                                                                     | 84     
|                                              | ITEM 16C | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                             | 84     
|                                              | ITEM 16D | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                         | 85     
|                                              | ITEM 16E | PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
      PURCHASERS        | 85     
|                                              |          |                                                                                    |        
|PART III                                      | 86      
|                                              |          |                                                                                    |        
|                                              | ITEM 17  | FINANCIAL STATEMENTS                                                               | 86     
|                                              | ITEM 18  | FINANCIAL STATEMENTS                                                               | 87     
|                                              | ITEM 19  | EXHIBITS                                                                           | 88     

__________

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GENERAL

In this Annual Report, references to we, us, our, the
Company and Lincoln mean Lincoln Gold Corporation.

We use the United States dollar as our reporting currency. All
references in this document to dollars or $ or $ are expressed in United
States dollars, unless otherwise indicated. References to CDN$ refer to
Canadian dollars.

Except as noted, the information set forth in is as of December
31, 2007 and all information included in this document should only be considered
correct as of such date.

NOTE REGARDING FORWARD LOOKING STATEMENTS

Much of the information included in includes or is based upon
estimates, projections or other forward looking statements. Such forward
looking statements include any projections or estimates made by us and our
management in connection with our business operations. These statements relate
to future events or our future financial performance. In some cases you can
identify forward-looking statements by terminology such as may, should,
expects, plans, anticipates, believes, estimates, predicts,
potential or continue or the negative of those terms or other comparable
terminology. While these forward-looking statements, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein. Such estimates, projections or
other forward looking statements involve various risks and uncertainties and
other factors, including the risks in the section titled Risk Factors below,
that may cause our actual results, levels of activities, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. We caution the reader that important factors in some
cases have affected and, in the future, could materially affect actual results
and cause actual results to differ materially from the results expressed in any
such estimates, projections or other forward looking statements. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform those statements to actual results.

The statements contained in Item 4.B.  the Business
Overview, Item 5  Operating and Financial Review and Prospects and Item 11 
Quantitative and Qualitative Disclosures About Market Risk are inherently
subject to a variety of risks and uncertainties that could cause actual results,
performance or achievements to differ significantly.

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GLOSSARY OF TERMS USED IN THIS FORM 20-F

Certain terms used herein aredefined as follows:

Term
      DefinitionAndesite
    A dark to grayish colored, fine-grained extrusive
      volcanic rock that may contain phenocrysts of sodic plagioclaseAngular Unconformity
    Contact between two groups of rocks where the underlying
      rocks dip in a different angle that the younger overlying rocksArtesian Water
    Ground water under pressureArtesian water
    Ground water under pressureCarboniferous
    Geologic Period referring to rocks 286 to 360 million
      years oldCarlin-type deposit
    Gold deposits hosted in sedimentary rocks with
      disseminated gold occurring as micron or submicron particles (invisible
      gold), typically with very little to no silver  very large deposits of
      this type are found in the Carlin Trend in north- central Nevada.Caving Ground
    A drilling term that refers to rock formations that break
      when penetrated by a drill and produce rock fragments that may block the
      borehole and/or contaminate the drill cuttingsCaving ground
    A drilling term that refers to rock formations that break
      when penetrated by a drill and produce rock fragments that may block the
      borehole and/or contaminate the drill cuttingsCove-type deposit
    Gold-silver deposits hosted in sedimentary rocks with
      significant amounts of precious metals mineralization hosted in veinlets 
      the Cove deposit is located in the northern portion of the Battle
      Mountain-Eureka Trend.Cretaceous
    Geologic Period referring to rocks 66.4 to 144 million
      years oldDacite
    Fine-grained extrusive volcanic rock with the same
      composition as andesite but having less calcic plagioclase and more quartzDevonian
    Geologic Period referring to rocks 360 to 408 million
      years oldDikes and sills
    Generally narrow bodies of igneous rock implaced as magma
      along faults across bedding (dike) or along zones parallel to bedding
      (sill)Epithermal
    A hydrothermal mineral deposit formed within 1 km of the
      surface at temperatures of 50°-200°C, occurring mainly as veinsGeochemical survey
    A sampling program focusing on trace elements that are
      commonly found associated with mineral deposits  common trace elements
      for gold are mercury, arsenic, and antimony.Geologic mapping
    The process of mapping geologic formations, associated
      rock characteristics and structural featuresGeophysical survey
    The systematic measurement of electrical, gravity,
      seismic, magnetic, or other properties as a tool to help identify rock
      type(s), faults, structures and mineralsGolconda thrust
    A major, flat-lying fault that has transposed older rocks
      over younger rocksGossanous
    An iron-bearing material that typically overlies a
      sulfide-bearing mineralized zone  it forms by the oxidation and leaching
      out of sulfur and most metals leaving hydrated iron oxides.gpt
    Grams per metric tonne


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Term
      DefinitionGravimeter survey
    A survey using a sensitive instrument that can detect
      density differences in geologic formationsHematite breccia
    A rock composed of angular rock fragments with
      conspicuous iron-oxide minerals in the matrix and fracturesIntrusive rock
    Any igneous rock (e.g. granite) that was implaced as a
      magmaJurassic
    Geologic Period referring to rocks 144 to 208 million
      years oldLost Circulation
    The loss of drilling fluids through open faults,
      fractures, and/or permeable rockMagnetometer survey
    A survey using a sensitive instrument that can detect the
      distortion of the Earths magnetic field by different geologic formationsMercury soil gas survey
    A geochemical sampling survey in which mercury vapor is
      sampled and measured  mercury is typically associated with gold deposits
      in the Great Basin and is a pathfinder for finding gold deposits.Metamorphic rock
    Pre-existing rock that has been physically changed by
      temperature, pressure, shearing stress, or chemical environment, generally
      at depth in the Earths crustPathfinder elements
    Trace elements that are typically associated with gold
      deposits  common pathfinder elements are mercury, arsenic and antimony.Penn-Permian
    Geologic Periods referring to rocks ranging from 245 to
      320 million years oldPermo-Triassic
    Geologic Periods referring to rocks ranging from 208 to
      286 million years oldQuartz Breccia
    Quartz vein material that is broken into angular
      fragmentsQuartz Stockworks
    A three-dimensional network of planar to irregular quartz
      veinlets closely enough spaced that the whole mass can be minedReverse-circulation drilling
    A drilling method that minimizes contamination of drill
      cuttingsRoberts Mountains
      Thrust
    A major, flat-lying fault that has transposed older rocks
      over younger rocksRock-chip sampling
    The process of chipping off rock samples from outcrops
      for chemical analysisSchist
    A metamorphic rock that is highly foliated and readily
      splits into flakes or slabs commonly due to a high content of micaSkarn deposit
    Mineralization formed at the flanks and in contact with
      intrusive rocksStratigraphy
    The sequence of stratified rocksSubcrop
    Bedrock just below the surface and usually contributing
      weathered rock material to the surficial debrisTertiary
    Geologic Period referring to rocks ranging in age from
      1.6 to 66.4 million years oldThrust sheet
    A block of rock underlain by a flat-lying fault that
      originated from compressional forcesTriassic
    Geologic Period referring to rocks 208 to 245 million
      years oldTuff
    Volcanic ash that has been solidified into rockVolcanics
    Generally finely crystalline or glassy igneous rocks
      ejected explosively or extruded at or near the Earths surface through
      volcanic action


- 3 -

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PART I

ITEM
1           IDENTITY OF
DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

A.          
Directors and Senior Management

Not applicable.

B.          
Advisers

Not applicable.

C.          
Auditor

Not applicable.

ITEM
2           OFFER STATISTICS
AND EXPECTED TIMETABLE

Not applicable.

ITEM
3           KEY INFORMATION

A.          
Selected Financial Data

The following table presents selected financial data derived
from our audited financial statements for the fiscal years ended December 31,
2007, 2006, 2005, 2004 and 2003. You should read this information in conjunction
with our financial statements and related notes and Item 5. - Operating and
Financial Review and Prospects.

Our independent auditor, Davidson & Company LLP, Chartered
  Accountants, audited our 2007, 2006 and 2005 annual financial statements. Our
  financial statements for the years ended December 31, 2007, 2006 and 2005 have
  been prepared in accordance with Canadian generally accepted accounting principles
  (“Canadian GAAP”). Note 15 to the annual financial statements for
  the years ended 2007, 2006 and 2005 provides descriptions of material measurement
  differences between Canadian GAAP and accounting principles generally accepted
  in the United States of America (“US GAAP”) as they relate to us
  and a reconciliation of our financial statements to US GAAP. Our financial statements
  for the years ended December 31, 2004 and 2003 have been prepared in accordance
  with US GAAP.

All information provided in the Summary of Financial
Information below and in is presented in United States dollars (dollars, $
or US$) and is in accordance with Canadian GAAP, unless indicated otherwise.

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SUMMARY OF FINANCIAL INFORMATION

Statement of Operations and Deficit Data
      Years ended December 312007
      2006
      2005
      2004
      From Inception September
        25, 2003 to December 31, 2003Revenues 
        Canadian GAAP 
        US GAAP
      $Nil 
        Nil
      $Nil 
        Nil
      $Nil 
        Nil
      $ -
        Nil
      $ -
        NilExpenses 
        Canadian GAAP 
        US GAAP
      (1,071,132) 
        (1,071,132)
      (405,439) 
        (405,439)
      (1,318,543) 
        1,318,543)
      -
        (1,672,304)
      -
        (16,319)Loss for the year 
        Canadian GAAP 
        US GAAP
      (1,078,730) 
        (1,078,730)
      (413,541) 
        (413,541)
      (1,294,546) 
        (1,294,546)
      -
        (1,691,351)
      -
        (16,319)Basic and diluted loss per common share
        
        Canadian GAAP 
        US GAAP
      (0.02) 
        (0.02)
      (0.01) 
        (0.01)
      (0.03) 
        (0.03)
      -
        (0.06)
      -
        (0.01)


Balance Sheet Data
      As
        at December 312007
      2006
      2005
      2004
      2003Canadian GAAP
      US GAAP
      Canadian GAAP
      US GAAP
      (US GAAP)Cash and cash equivalents 
        Working capital (deficit) 
        Resource properties and/or 
        equipment 
        Total assets 
        Total liabilities 
        Shareholders equity (deficit)
      $ 123,201 
        (71,665) 
        27,602 
        286,734 
        310,897 
        (24,163)
      $ 123,201 
        (71,665) 
        27,602 
        286,734 
        310,897 
        (24,163)
      $ 21,961 
        (130,363) 
        4,440 
        31,294 
        157,217 
        (125,923)
      $ 21,961 
        (130,363) 
        4,440 
        31,294 
        157,217 
        (125,923)
      132,806 
        3,457 
        7,328 
        151,436 
        140,651 
        10,785
      $ 127,785 
        (43,959) 
        - 
        127,785 
        371,744 
        (243,959)
      $ 15,405 
        (31) 
        - 
        15,405 
        15,374 
        31


We have paid no dividends on our common shares since
incorporation and do not anticipate doing so for the foreseeable future. The
declaration of dividends on our common shares is within the discretion of our
board of directors and will depend upon, among other factors, our earnings,
capital requirements, and the operating and financial condition.

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B.          
Capitalization and Indebtedness

Not applicable.

C.          
Reasons for the Offer and Use of Proceeds

Not applicable.

D.          
Risk Factors

Our securities are highly speculative and subject to a number
of risks. You should not consider an investment in our securities unless you are
capable of sustaining an economic loss of the entire investment.

The risks associated with our business include:

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

As of December 31, 2007, we had cash on hand of $123,201 and a
working capital deficit of $71,665. As of March 31, 2008, we had cash on hand of
$83,378 and working capital deficit of $625,967. Our business plan calls for us
to spend approximately $1,935,000 in connection with the exploration of our
mineral claims during the next twelve months, the maintenance of our interests
in our mineral claims and our general and administrative expenses during the
next twelve months. Based on our cash and working capital position, we will
require additional financing in the approximate amount of $2,500,000 in order to
complete our plan of operations for the next twelve months. We currently do not
have any arrangements for financing and we may not be able to obtain financing
when required. Obtaining additional financing would be subject to a number of
factors, including the market price of gold. These factors may make the timing,
amount, terms or conditions of additional financing unavailable to us.

If we are unable to maintain our interests in our Nevada
mineral claims, then we will lose our interests in these mineral claims.

We are required to make substantial payments in order to
maintain our interests in certain of our Nevada mineral claims. Over the next
twelve months, we must make payments totalling $80,000 in lease and option
payments in order to maintain our interests in our Pine Grove, La Bufa, JDS and
Hannah mineral properties. Our inability to make these payments due to a lack of
financing or our determination not to make these payments will result in our
losing our interests in these claims. If we are not able to maintain our
interests in our mineral claims, then we will not be able to carry out our plan
of operations.

Because we have only recently commenced preliminary
exploration of our Nevada mineral claims, we face a high risk of business
failure and this could result in a total loss of your investment.

We have only recently begun the initial stages of exploration
of our mineral claims, and thus have no way to evaluate the likelihood whether
we will be able to operate our business successfully. To date, we have been
involved primarily in organizational activities, acquiring interests in mineral
claims and in conducting preliminary exploration of mineral claims. We have not
earned any revenues and have not achieved profitability as of the date of this
prospectus. Potential investors should be aware of the difficulties normally
encountered by new mineral exploration companies and the high rate of failure of
such enterprises. The likelihood of success must be considered in light of the
problems, expenses, difficulties, complications and delays encountered in
connection with the exploration of the mineral properties that we plan to
undertake. These potential problems include, but are not limited to,
unanticipated problems relating to exploration and additional costs and expenses
that may exceed current estimates. We have no history upon which to base any
assumption as to the likelihood that our business will prove successful, and we
can provide no assurance to investors that we will generate any

- 6 -

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operating revenues or ever achieve profitable operations. If we
are unsuccessful in addressing these risks, our business will likely fail and
you will lose your entire investment.

The mineral resources estimates presented by us for our
mineral properties are estimates only and there is no assurance that these
resources represent economically recoverable mineralization.

We have included mineral resource estimates that have been made
in accordance with Canadian National Instrument 43-101. These resources
estimates are classified as indicated resources and inferred resources. We
advise investors that while these terms are recognized and required by Canadian
securities regulations, the U.S. Securities and Exchange Commission does not
recognize these terms. Investors are cautioned not to assume that any part or
all of mineral deposits classified as inferred resources will ever be
converted into reserves. Further, inferred resources have a great amount of
uncertainty as to their existence, and economic and legal feasibility. It cannot
be assumed that all or any part of an inferred mineral resource will ever be
upgraded to a higher category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or pre-feasibility
studies, except in rare cases. Investors are cautioned not to assume that part
or all of an inferred resource exists, or is economically or legally mineable.

All amounts of mineral resources are estimates only, and we
cannot be certain that any specified level of recovery of metals from the
mineralized material will in fact be realized or that our mineral properties or
any other identified mineral deposit will ever qualify as a commercially
mineable (or viable) reserves of gold or copper in any of our mineral claims
that can be economically exploited. Mineralized material, which is not mineral
reserves, does not have demonstrated economic viability. In addition, the
quantity of mineral reserves and mineral resources may vary depending on, among
other things, metal prices. Any material change in the quantity of
mineralization, grade or stripping ratio, or metal prices may affect the
economic viability of our properties. In addition, we cannot be certain that
metal recoveries obtained from small-scale laboratory tests will be duplicated
in larger scale tests, under on-site conditions or during production.

Because we do not have any revenues, we expect to incur
operating losses for the foreseeable future.

We have never earned revenues and we have never been
profitable. Prior to completing exploration on the mineral property, we
anticipate that we will incur increased operating expenses without realizing any
revenues. We therefore expect to incur significant losses into the foreseeable
future. If we are unable to generate financing to continue the exploration of
our mineral claims, we will fail and you will lose your entire investment.

We will require significant additional financing in order
to continue our exploration activities and our assessment of the commercial
viability of our mineral properties.

We will require additional financing in order to carry out our
acquisition, exploration and, if warranted, development activities. Failure to
obtain such financing on a timely basis could cause us to forfeit our interest
in certain properties, miss certain acquisition opportunities, or delay or
indefinitely postpone further exploration and, if warranted, development of our
projects, which could result in the possible loss of such properties or the
reduction or termination of our operations. Even if we achieve revenues, if any
such future revenues decrease as a result of lower commodity prices or
otherwise, it will affect our ability to expend the necessary capital to replace
our reserves or to maintain our production. If cash flow from operations is not
sufficient to satisfy our capital expenditure requirements, there can be no
assurance that additional debt or equity financing will be available to meet
these requirements or be available on favorable terms.

- 7 -

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If our costs of exploration are greater than anticipated,
then we will not be able to complete our planned exploration programs for our
mineral claims without additional financing, of which there is no assurance that
we would be able to obtain.

We are proceeding with the initial stages of exploration on our
mineral claims. We have prepared budgets for our exploration programs. However,
there is no assurance that our actual costs will not exceed the budgeted costs.
Factors that could cause actual costs to exceed budgeted costs include increased
prices due to competition for personnel and supplies during the Nevada summer
exploration season, unanticipated problems in completing the exploration
programs and delays experienced in completing the exploration program. Increases
in exploration costs could result in us not being able to carry out our
exploration programs without additional financing. There is no assurance that we
would be able to obtain additional financing in this event.

Because of the speculative nature of exploration of
mining properties, there is substantial risk that no commercially exploitable
minerals will be found and our business will fail.

We are in the initial stages of exploration of our mineral
claims, and thus have no way to evaluate the likelihood that we will be
successful in establishing commercially exploitable reserves of gold or other
valuable minerals on our mineral claims. Potential investors should be aware of
the difficulties normally encountered by new mineral exploration companies and
the high rate of failure of such enterprises. The search for valuable minerals
as a business is extremely risky. We may not find commercially exploitable
reserves of gold or copper in any of our mineral claims. Exploration for
minerals is a speculative venture necessarily involving substantial risk. The
expenditures to be made by us on our exploration programs may not result in the
discovery of commercial quantities of ore. The likelihood of success must be
considered in light of the problems, expenses, difficulties, complications and
delays encountered in connection with the exploration of the mineral properties
that we plan to undertake. Problems such as unusual or unexpected formations and
other conditions are involved in mineral exploration and often result in
unsuccessful exploration efforts. In such a case, we would be unable to complete
our business plan.

Because of the inherent dangers involved in mineral
exploration, there is a risk that we may incur liability or damages as we
conduct our business.

The search for valuable minerals involves numerous hazards. In
the course of carrying out exploration of our mineral claims, we may become
subject to liability for such hazards, including pollution, cave-ins and other
hazards against which we cannot insure or against which we may elect not to
insure. We currently have no such insurance nor do we expect to get such
insurance for the foreseeable future. If a hazard were to occur, the costs of
rectifying the hazard may exceed our asset value and cause us to liquidate all
of our assets, resulting in the loss of your entire investment.

If we discover commercial reserves of precious metals on
any of our mineral properties, we can provide no assurance that we will be able
to successfully advance the mineral claims into commercial production.

Our mineral properties do not contain any known bodies of ore.
If our exploration programs are successful in establishing ore of commercial
tonnage and grade on any of our mineral claims, we will require additional funds
in order to advance the mineral claims into commercial production. In such an
event, we may be unable to obtain any such funds, or to obtain such funds on
terms that we consider economically feasible, and you may lose your entire
investment.

- 8 -

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As we undertake exploration of our mineral claims, we
will be subject to compliance with government regulation that may increase the
anticipated time and cost of our exploration program.

There are several governmental regulations that materially
restrict the exploration of minerals. We will be subject to the mining laws and
regulations as contained in the Nevada Statutes and Nevada Administrative Code
as we carry out our exploration programs. We may be required to obtain work
permits, post bonds and perform remediation work for any physical disturbance to
the land in order to comply with these regulations. While our planned
exploration program budgets for regulatory compliance, there is a risk that new
regulations could increase our time and costs of doing business and prevent us
from carrying out our exploration program.

If we do not find a joint venture partner for the
continued exploration of our mineral claims, we may not be able to advance the
exploration work.

We may try to enter into joint venture agreements with
potential partners for the further exploration and possible production of our
mineral claims, particularly where we believe drilling of a mineral claim is
warranted. We would face competition from other junior mineral resource
exploration companies if we attempt to enter into a joint venture agreement with
a partner. The possible partner could have a limited ability to enter into joint
venture agreements with junior exploration programs and will seek the junior
exploration companies who have the properties that they deem to be the most
attractive in terms of potential return and investment cost. In addition, if we
entered into a joint venture agreement, we would likely assign a percentage of
our interest in the mineral claims to the joint venture partner. If we are
unable to enter into a joint venture agreement with a partner, we may not be
able to complete certain exploration work on certain of our properties,
including planned drilling.

If prices for gold decline, we may not be able to raise
any additional financing required to fund our exploration activities in our
mineral properties or achieve an adequate return for our shareholders.

Our ability to raise financing to fund our exploration
activities and, if warranted, development of our mineral properties will be
significantly affected by changes in the market price of gold. The price of gold
is determined based on world demand, supply and other factors, all of which are
beyond our control. World prices for gold have fluctuated widely in recent
years. Future significant price declines could cause investors to be unprepared
to finance exploration of gold, with the result that we may not have sufficient
financing with which to fund our exploration activities. In this event, we may
not be able to carry out planned exploration activities and, if warranted,
development of our mineral properties with the result that we may not be able to
continue our plan of operations.

If we are able to establish commercially mineable reserves, we
must be able to successfully market our natural resources to prospective buyers.
The marketability and price of natural resources which we may acquire or
discover will be affected by numerous factors beyond our control. Government
regulations, including regulations relating to prices, taxes, royalties, land
tenure, land use, importing and exporting of natural resources and environmental
protection are all factors which may affect the marketability and price of
natural resources. The exact effect of these factors cannot be accurately
predicted, but any one or a combination of these factors could result in our
ability to achieve an adequate return for our shareholders.

The adoption of stricter environmental legislation
governing our mineral properties or failure to comply with environmental
legislation could increase our costs of exploring and, if warranted, developing
these properties and could delay these activities.

We must comply with applicable environmental legislation in
carrying out our exploration and, if warranted, development of our mining
properties. All phases of the natural resources business present environmental
risks and hazards and are subject to environmental regulation pursuant to a
variety of international conventions and national, provincial and local laws and
regulations. Environmental

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legislation provides for, among other things, restrictions and
prohibitions on spills, releases or emissions of various substances produced in
association with operations. The legislation also requires that facility sites
and mines be operated, maintained, abandoned and reclaimed to the satisfaction
of applicable regulatory authorities. Compliance with such legislation can
require significant expenditures, and a breach may result in the imposition of
fines and penalties, some of which may be material. Environmental legislation is
evolving in a manner expected to result in stricter standards and enforcement,
larger fines and liability and potentially increased capital expenditures and
operating costs. The discharge of tailings or other pollutants into the air,
soil or water may give rise to liabilities to third parties and may require us
to incur costs to remedy such discharge. No assurance can be given that
environmental laws will not result in a curtailment of production or a material
increase in the costs of production, development or exploration activities or
otherwise adversely affect our financial condition, results of operations or
prospects.

The presence of unknown environmental hazards on our
mineral properties may result in significant unanticipated compliance and
reclamation costs that may increase our costs of exploring and, if warranted,
developing our mineral properties.

Environmental hazards may exist on our mineral properties which
are unknown to us at present and which have been caused by previous or existing
owners or operators of the properties. The presence of such environmental
hazards may result in us being required to comply with environmental
reclamation, closure and other requirements that may involve significant costs
and other liabilities. In particular, our operations and exploration activities
are subject to Canadian laws and regulations governing protection of the
environment. These laws are continually changing and, in general, are becoming
more restrictive.

We may be subject to other laws or regulations that could
result in increased costs or delays.

We believe we are in substantial compliance with all material
laws and regulations which currently apply to our activities. However, failure
to comply with applicable laws, regulations and permitting requirements may
result in enforcement actions thereunder, including orders issued by regulatory
or judicial authorities causing operations to cease or be curtailed and may
include corrective measures requiring capital expenditures, installation of
additional equipment, or remedial actions. An entity engaged in natural resource
exploration and development activities may be required to compensate those
suffering loss or damage by reason of its activities and may have civil or
criminal fines or penalties imposed for violations of applicable laws or
regulations.

Amendments to current laws, regulations and permits governing
operations and activities of natural resources companies, or more stringent
implementation thereof, could have a material adverse impact on us and cause
increases in capital expenditures or, if applicable, production costs, reduction
in levels of production at any properties on which we may achieve production, or
abandonment or delays in the development of new properties.

In addition, natural resource activities may be affected in
varying degrees by political and financial instability, inflation and haphazard
changes in government regulations relating to this industry. Any changes in
regulations or shifts in political or financial conditions are beyond our
control and may adversely affect our business. Our operations may be affected in
varying degrees by government regulations with respect to restrictions on
production, price controls, export controls, income taxes, expropriation of
property, environmental legislation and safety.

We may not be able to obtain all necessary licenses and
permits that may be required.

Our operations will require licenses and permits from various
governmental authorities. There can be no assurance that we will be able to
obtain all necessary licenses and permits that may be required to carry out our
exploration and, if applicable, development projects.

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Limits on equipment availability could delay our
operations.

Natural resource exploration and development activities are
dependent on the availability of drilling and related equipment in the
particular areas where such activities will be conduced. Demand for such limited
equipment or access restrictions may affect the availability of such equipment
to us and may delay exploration and, if applicable, development activities.

We compete with larger, better capitalized competitors in
the mining industry.

The mining industry is competitive in all of its phases,
including financing, technical resources, personnel and property acquisition. It
requires significant capital, technical resources, personnel and operational
experience to effectively compete in the mining industry. Because of the high
costs associated with exploration, the expertise required to analyze a projects
potential and the capital required to develop a mine, larger companies with
significant resources may have a competitive advantage over us. We face strong
competition from other mining companies, some with greater financial resources,
operational experience and technical capabilities than we have. As a result of
this competition, we may be unable to maintain or acquire financing, personnel,
technical resources or attractive mining properties on terms we consider
acceptable or at all.

More specifically, we actively compete for acquisitions,
leases, licences, concessions, claims, skilled industry personnel and other
related interests with a substantial number of other companies. Our ability to
successfully bid on and acquire additional property rights to participate in
opportunities and to identify and enter into commercial arrangements with other
parties will be dependent upon developing and maintaining close working
relationships with our future industry partners and joint operators and our
ability to select and evaluate suitable properties and to consummate
transactions in a highly competitive environment.

If we were to lose the services of Paul Saxton or other
members of our management team, we may be delayed in our plan of operations and
our operating expenses may be increased.

Our success is dependent upon the performance of key personnel
working in management, supervisory and administrative capacities. These
personnel include Paul Saxton, who is our President and Chief Executive Officer.
We do not maintain life insurance or key man insurance for such personnel. The
loss of the services of senior management or key personnel may result in us
being required to identify and engage qualified management personnel who are
capable of managing our business activities. We may be delayed in the
implementation of our plan of operations and our operating expenses may be
increased if we were to lose the services of senior management or key
personnel.

Certain of our officers and directors may have conflicts
of interests due to their involvement with other companies.

Certain of our directors and officers are also directors and
officers of other natural resource companies. Consequently, there exists the
possibility for such directors and officers to be in a position of conflict. Any
decision made by any of such directors and officers relating to us will be made
in accordance with their duties and obligations to deal fairly and in good faith
with us and such other companies.

If we lose the services of the independent contractors
that we engage to undertake our exploration, then our plan of operations may be
delayed or be more expensive to undertake than anticipated.

Our success depends to a significant extent on the performance
and continued service of certain independent contractors. We have contracted the
services of professional drillers and other contractors for exploration,
environmental, construction and engineering services. Poor performance by such
contractors or the loss of such services could result in our planned exploration
activities being delayed or being more expensive to undertake than anticipated.

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We are subject to many risks that are not insurable and,
as a result, we will not be able to recover losses through insurance should such
risks occur.

Our involvement in the exploration for and, if applicable,
development of natural resource properties may result in us becoming subject to
liability for certain risks, and in particular unexpected or unusual geological
operating conditions, including rock bursts, cave ins, fires, floods,
earthquakes, pollution, blow-outs, property damage, personal injury or other
hazards. Although we will obtain insurance in accordance with industry standards
to address such risks, such insurance has limitations on liability that may not
be sufficient to cover the full extent of such liabilities. In addition, such
risks may not be insurable in all circumstances, or, in certain circumstances,
we may elect not to obtain insurance to deal with specific risks due to the high
premiums associated with such insurance or other reasons. The payment of such
uninsured liabilities would reduce the funds available to us for operations. The
occurrence of a significant event that we are not fully insured against could
have a material adverse effect on our financial position, results of operations
or prospects.

No assurance can be given that insurance to cover the risks to
which our activities will be subject will be available at all or at economically
feasible premiums. Insurance against environmental risks (including potential
for pollution or other hazards as a result of the disposal of waste products
occurring from exploration and, if applicable, production) is not generally
available to us or to other companies within the industry. The payment of such
liabilities would reduce the funds available to us for operations. Should we be
unable to fund fully the cost of remedying an environmental problem, we might be
required to suspend operations or enter into interim compliance measures pending
completion of the required remedy.

Because we have no history of earnings with respect to
our mineral exploration business and no foreseeable earnings, we may never
achieve profitability or pay dividends.

We have a history of losses and there can be no assurance that
we will ever be profitable. We have paid no dividends on our shares since
incorporation. We presently have no ability to generate earnings because our
mineral properties are in the exploration stage. If we are successful in
developing our mineral properties, we anticipate that we will retain future
earnings and other cash resources for the future operation and development of
our business. We do not intend to declare or pay any cash dividends in the
foreseeable future. Payment of any future dividends is solely at the discretion
of our board of directors, which will take into account many factors including
our operating results, financial condition and anticipated cash needs. For these
reasons, we may never achieve profitability or pay dividends.

We do not have a history of paying dividends and do not
have any intention of paying dividends in the foreseeable future.

Investors cannot expect to receive a dividend on their
investment in the foreseeable future, if at all. Accordingly, it is likely
investors will not receive any return on their investment in our securities
other than possible capital gains.

U.S. investors who obtain judgments against us or our
officers or directors for breaches of U.S. securities laws may have difficulty
in enforcing such judgments against us and our officers and directors.

We are incorporated under the laws of a province of Canada and
the majority of our directors and officers are residents of Canada.
Consequently, it may be difficult for United States investors to effect service
of process within the United States upon us or upon our directors or officers,
or to enforce, inside or outside of the United States, any judgments of United
States courts predicated upon civil liabilities under the United States
Securities Exchange Act of 1934, as amended. A judgment of a U.S. court
predicated solely upon such civil liabilities may not be enforceable in Canada
by a Canadian court

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if the U.S. court in which the judgment was obtained is
determined by the Canadian court not to have had jurisdiction in the matter.
Furthermore, an original action might not be able to be brought successfully in
Canada against any of such persons or us predicated solely upon such civil
liabilities.

Broker-dealers may be discouraged from effecting
transactions in our common shares because they are considered a penny stock and
are subject to the SECs penny stock rules.

The SEC has adopted rules (the Penny Stock Rules) that
regulate broker-dealer practices in connection with transactions in penny
stocks. Penny stocks are equity securities with a price of less than U.S.$5.00
(other than securities registered on certain national securities exchanges or
quoted on the NASDAQ system, provided that current prices and volume information
with respect to transactions in such securities is provided by the exchange or
system).

The Penny Stock Rules require a broker-dealer, prior to
effecting a transaction in a penny stock not otherwise exempt from such rules,
to deliver a standardized risk disclosure document prepared by the SEC that
provides information about penny stocks and the nature and level of risks in the
penny stock market. In particular the statement must contain:

| | (a) | a description of the nature and level of risk in the
      market for penny stocks in both public offerings and secondary
    trading;                                                                                     
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                            
| | (b) | a description of the broker-dealers duties to the
      customer and of the rights and remedies available to the customer with
      respect to a violation to such duties or other requirements of securities
      laws;
| |     |                                                                                                                                                                                                                            
| | (c) | a brief, clear, narrative description of a dealer market,
      including bid and ask prices for penny stocks and the significance of the
      spread between the bid and ask price;                                      
| |     |                                                                                                                                                                                                                            
| | (d) | a toll-free telephone number for inquiries on
      disciplinary actions;                                                                                                                                                  
| |     |                                                                                                                                                                                                                            
| | (e) | the definitions of significant terms in the disclosure
      document or in the conduct of trading in penny stocks; and                                                                                                    
| |     |                                                                                                                                                                                                                            
| | (f) | such other information and be in such form, including
      language, type, size and format, as the Commission shall require by rule
      or regulation.                                                                  

The broker-dealer must obtain from the customer a written
acknowledgement of receipt of the standardized disclosure document.

The broker-dealer also must provide the customer with:

| | (a) | the inside bid and offer quotations for the penny stock,
      or other bid and offer price information for the penny stock if inside bid
      and offer quotations are not available;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                        
| | (b) | the compensation of the broker-dealer and its
      salespersons in the transaction;                                                                                                   
| |     |                                                                                                                                                                                        
| | (c) | the number of shares to which such bid and ask prices
      apply, or other comparable information relating to the depth and liquidity
      of the market for such stock; and         
| |     |                                                                                                                                                                                        
| | (d) | a monthly account statements showing the market value of
      each penny stock held in the customers account.                                                                        

In addition, the Penny Stock Rules require that prior to a
transaction in a penny stock not otherwise exempt from such rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchasers written
acknowledgment of

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the receipt of a risk disclosure statement, a written agreement
to transactions involving penny stocks, and a signed and dated copy of a written
suitability statement. At the present market prices our common shares will (and
in the foreseeable future are expected to continue to) fall within the
definition of a penny stock. Accordingly, United States broker-dealers trading
in our shares will be subject to the Penny Stock Rules. Rather than complying
with those rules, some broker-dealers may refuse to attempt to sell penny stock.
As a result, shareholders and their broker-dealers in the United States may find
it more difficult to sell their shares of Lincoln, if a market for the shares
should develop in the United States.

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ITEM
4           INFORMATION ON THE
COMPANY

We are a mineral resource exploration company trading on the
NASD Over the Counter Bulletin Board (OTCBB) in the United States under the
symbol LGCPF. We own interests in exploration properties located in the State
of Nevada and in Mexico.

A.          
History and Development of the Company

Name

Our legal and commercial name is Lincoln Gold Corporation

Principal Office

Our principal office is located at Suite 350 - 885 Dunsmuir
Street, Vancouver, British Columbia, Canada, V6C 1N5. Our telephone number is
(604) 688-7377.

Incorporation and Continuation

The Company was incorporated under the laws of the State of
Nevada as Braden Technologies, Inc. on February 17, 1999. The Company has been
engaged in the acquisition and exploration of mineral properties since
inception.

Braden completed the acquisition of Lincoln Gold Corp.
(Lincoln Gold) a Nevada corporation effective March 26, 2004. This acquisition
was completed by the acquisition of all of the issued and outstanding shares of
Lincoln Gold from the former shareholders of Lincoln Gold. On closing of the
acquisition, the Company issued 24,000,000 shares of Common Shares to the
shareholders of Lincoln Gold. As a result of this issuance, the number of issued
and outstanding shares increased from 11,400,000 shares to 35,400,000 shares, of
which approximately 67.80% was owned by the former shareholders of Lincoln Gold
upon the completion of the acquisition.

Subsequent to the acquisition of Lincoln Gold, it merged with
Lincoln Gold in a parent/ subsidiary merger in April 2004 under Chapter 92A of
the Nevada Revised Statutes. The Company completed the change of its name from
Braden Technologies Inc. to Lincoln Gold Corporation as part of this merger
process.

On November 20, 2007, the Company completed a continuation,
whereby the Company changed its jurisdiction of incorporation from Nevada to the
Canadian federal jurisdiction under the Canada Business Corporation Act
(CBCA). The Company is now governed by the provisions of the CBCA and has
adopted by-laws consistent with a CBCA company. The Company is a reporting
issuer in Canada.

Project Summary

Pine Grove, Nevada, USA

The Pine Grove project is located in Lyon County, Nevada. We
acquired our interests in the Pine Grove property in 2007, as described below.
The Pine Grove property is described in detail below under Properties, Plants
and Equipment.

On July 13, 2007, we entered into an agreement with Wheeler
Mining Company (Wheeler) to lease Wheelers 100% owned Wheeler and
Wheeler Millsite patent claims in Lyon County, Nevada from July 13, 2007 to
December 31, 2022 with an exclusive option to renew the lease by written notice
to

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December 31, 2023. If the property is and remains in commercial
production by November 1 of each year after 2022, we may renew the lease for a
period of one year by delivering written notice to the owner prior to November
15 of that year. We must produce a bankable feasibility study on the properties
by July 1, 2009 and obtain all necessary funding to place the properties into
commercial production. We must pay a net smelter royalty of 3% (at a gold price
of US$450) to 7% (at a gold price of US$701) upon commencement of commercial
mining production based on gold prices and the Company must pay a 5% net smelter
royalty on metals or minerals other than gold produced and sold from the
properties.

Pursuant to an agreement dated July 30, 2007, we purchased from
Harold Votipka (Votipka) the Harvest lode claim, the Winter Harvest
lode claim, and the Harvest fraction lode claim, each located within the Pine
Grove Mining District in Lyon County, Nevada. The purchase price was $12,000,
which we have paid, and includes a 5% net smelter royalty on production payable
to Votipka.

On August 1, 2007, we entered into an agreement with Lyon
Grove, PLC (Lyon Grove) to lease the Wilson Mining Claim Group located
in Lyon County, Nevada from August 1, 2007 to July 31, 2022, with an option to
purchase. We can extend the term of the lease for up to ten additional one year
terms providing we are conducting exploration mining activities at the
expiration of the term immediately preceding the proposed extension term.

The following lease payments must be made by us:

- $10,000 upon signing the agreement, which we have paid and
- $25,000 prior to each one year anniversary of the lease.

We advanced to Lyon Grove a loan of $5,000 bearing an interest
rate of 5% per annum to be repaid by July 31, 2008. The loan and interest will
either be repaid at the maturity date or be offset against the lease payment due
on August 1, 2008.

The lease payment made for any one calendar year may be
credited against any net smelter royalty due and payable during the same
calendar year.

The following work commitments must be made by us:

- $25,000 by August 1, 2008;
- $25,000 by August 1, 2009;
- $50,000 by August 1, 2010;
- $50,000 by August 1, 2011
- $25,000 by August 1, 2012 and each subsequent lease year

Upon commencement of production, we must pay a net smelter
royalty of 3% to 7% based on gold prices.

Lyon Grove retains the right to require us to purchase the
property any time after we have made application to permit and develop a mine on
the property, subject to our continued obligation to pay the royalties, for
$1,000.

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Subsequent to the signing of these agreements we have staked
189 claims and the total area covered is now 6 square miles.

La Bufa, Mexico

The La Bufa Project is located in the far southwest corner of
the state of Chihuahua, Mexico near the town of Guadalupe y Calvo about 300
kilometers from the city of Chihuahua and 200 kilometers from the town of
Hidalgo de Parral. The project is within the Guadalupe y Calvo Mining District
and lies within the Sierra Madre Occidental physiographic province. The La Bufa
project is comprised of three contiguous mineral concessions totaling
approximately 2,291.26 hectares. We hold our interest in the La Bufa Project
through our joint venture agreement with Almaden Minerals Ltd.
(Almaden), as described below. La Bufa project is described in detail
below under Properties, Plants and Equipment.

We originally entered into a letter of intent dated August 5,
2005 with Almaden to form a joint venture for the exploration and development of
the La Bufa property. Almaden controls the property through its wholly owned
Mexican subsidiary, Minera Gavilan, S.A. de C.V, a Mexican corporation that
holds a 100% interest in the property. The letter of intent was superseded by a
joint venture agreement dated April 12, 2007 that we entered into with Almaden
and Minera Gavilan. Under the joint venture agreement, we are entitled to earn a
60% interest in the La Bufa property by undertaking an exploration work program
on the property aggregating $3,500,000 and issuing an aggregate of 1,550,000
shares to Almaden as follows:

Exploration expenditures required under work program:

•
    By April 12, 2008
    $ 500,000 (which must include
      drilling)•
    By April 12, 2009
    $ 750,000•
    By April 12, 2010
    $1,000,000•
    By April 12, 2011
    $1,250,000


Share issuances to Almaden:

•
    By April 19, 2007
    150,000 shares (issued April 16,
      2007)•
    By April 12, 2008
    200,000 shares (issued April 8,
      2008)•
    By April 12, 2009
    200,000 shares•
    By April 12, 2011
    1,000,000 shares


The JDS Property, Nevada, USA

We are the owner of the seventy-seven (77) unpatented lode
claims comprising the JDS project which covers approximately 1,540 acres (2.04
sq miles). We staked and recorded the mineral claims, which are located in
Sections 14, 15, 22, 23 26 & 27 T25N R50E of Eureka County, Nevada. These
mineral claims are registered in our name and are not subject to underlying
lease payments or royalties. The JDS property is subject only to annual claim
maintenance fees payable to the BLM and Eureka County.

The Hannah Property, Nevada, USA

The Hannah Property is located approximately 55 miles east of
Reno, Nevada in the southern portion of the Trinity Range north of Interstate 80
in Churchill County. Access is east from Reno via Interstate 80 and then north
on gravel and dirt roads from Hot Springs Flat to the Property.

We have an option to acquire a 100% interest in the claims
comprising the Hannah project, subject to a net smelter royalty, pursuant to an
option agreement dated December 24, 2003, as amended January 7, 2007 and January
10, 2008, between us and Larry and Susan McIntosh of Gardnerville, Nevada. We
have the option to acquire a 100% interest in the Hannah property by making
aggregate payments to the

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McIntoshs in the amount of $210,000. We may exercise this
option at any time prior to the ten year anniversary of the effective date of
the agreement, being December 24, 2013. To date $40,000 has been paid into this
option agreement.

Reporting Issuer Status under Canadian Securities Laws

We are a reporting issuer in Canada under the securities laws
of the Province of British Columbia, Canada.

Capital Expenditures and Divestitures

Our actual and planned principal capital expenditures since the
beginning of our last three fiscal years have been with respect to the
acquisition of our mineral property interests and related property and equipment
as discussed above.

Takeover Offers

We are not aware of any indication of any public takeover
offers by third parties in respect of our common shares during our last and
current financial years.

B.          
Business Overview

We are engaged in the acquisition and exploration of mineral
properties in the State of Nevada and northern Mexico. Our plan of operations
for the next twelve months is to conduct exploration of our mineral properties
in the State of Nevada and Mexico, concentrating primarily on our Pine Grove and
La Bufa properties.

We presently hold interests in three groups of mineral
properties in Nevada and one in northern Mexico, as described below:

Name of Property
      Location1.
    Pine Grove Property
    Yerrington, Nevada2.
    La Bufa
    State of Chihuahua, Mexico3.
    Hannah Property
    Churchill County, Nevada4.
    JDS Property
    Eureka County, Nevada


All of our properties are in the exploration stage. We do not
produce, develop or sell any products at this time, have any commercial mining
operations, nor do any of our current properties have any known or identified
mineral resources or mineral reserves.

Our specific exploration plan for three of our mineral
properties, together with information regarding the location and access, history
of operations, present condition and geology of each of our properties, is
presented below. All of our exploration programs, except the Pine Grove
Property, are early stage in nature in that their completion will not result in
a determination that any of our properties contains commercially exploitable
quantities of mineralization. With respect to the Pine Grove Property, we
believe that extra drilling and exploration programs combined with the
completion of a feasibility study have the potential to assess whether or not a
reserve is present on this property.

Our exploration programs will be directed by our management and
will be supervised by Mr. Jeff Wilson, our vice-president of exploration. We
will engage contractors to carry out our exploration programs under Mr. Wilsons
supervision. Contractors that we plan to engage include project

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geologists, geochemical sampling crews and drilling companies,
each according the specific exploration program on each property. Our budgets
for our exploration programs are set forth below.

Projects Update

During 2007 we continued our work at the Pine Grove and La Bufa
properties, as described below. Our main focus was to complete initial
exploration work to advance these properties. No work was carried out at the
Hannah or JDS properties in Nevada.

We were able to consolidate most of the Pine Grove property in
2007. In addition, we staked 89 claims in the area to surround the Wilson,
Wheeler, Votipka and Cavanaugh claims. Subsequent to the year end we staked
another 99 claims to double the size of the property and increase the size of
the property under our control to 6 square miles. Also subsequent to the year
end, we drilled 4 additional large diameter core holes for metallurgical test
purposes. At present, there are at least 192 surface drill holes in the property
to include 29 district exploration holes, 99 holes in the Wheeler deposit, 62
holes in the Wilson deposit, and the 4 metallurgical core holes. There are an
additional 17 underground drill holes; all underground workings are collapsed.

We have also been focusing on advancing the La Bufa property.
Throughout the latter part of 2007, we carried out systematic exploration and
sampling at La Bufa in order to better understand and plan a drill hole program
for the property. Once this had been done, we applied to the government agencies
and received permission for a 15 hole drill program. The drilling started in
February and since the start a second and a third core rig has commenced
drilling there. The large La Bufa gold-silver property (2,291 hectares) is
located in the Guadalupe y Calvo mining district in southwestern Chihuahua
State. We are looking for the southern extension of the Rosario gold-silver vein
system which extends onto the La Bufa property for at least 1600 meters. Core
from promising zones of veins and stockwork in holes DDH-001 (-45°) and DDH-002
(-45°) have been submitted for assay. We plan to drill at least 15 angle core
holes in two-hole fences across the vein system for a total of 6000 meters of
drilling. All holes are targeted to reach the 2250 meter level or deeper which
was historically productive in the adjacent Rosario mine

No work was completed on the Hannah property or the JDS in
2007. A number of other properties have been submitted to management but none
has been acquired.

Technical Reports

We have received the following NI 43-101 compliant technical
reports on our Pine Grove and La Bufa properties during 2007:

- technical report on the Pine Grove Property dated September 28, 2007, as
  amended December 4, 2007, prepared by David M. R. Stone of Minefill Services,
  Inc., (the Pine Grove Report) and
- geological Report on the La Bufa property dated October 19, 2007, authored
  by Richard W. Bybee, P. Geo. (the La Bufa Report).

The technical reports include recommended exploration programs
on each of our Pine Grove and La Bufa properties.

Plan of Operations

Our plan of operations for the exploration of our mineral
properties over the next twelve months includes the following:

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- we plan to complete the exploration program and resource modeling on the
  Pine Grove property recommended in the Pine Grove Report of Minefill Services,
  as described below under Properties, Plants and Equipment,
- we plan to complete the phase one drilling program on the La Bufa property
  recommended in the La Bufa Report dated October 19, 2007, authored by Richard
  W. Bybee, P. Geo., as described below under Properties, Plants and
  Equipment, and
- we plan to seek a joint venture partner to enable us to continue
  exploration work on the Hannah property.

Our planned exploration expenditures for the next twelve months
on our Nevada and Mexican mineral properties, together with amounts due to
maintain our interest in these claims, are summarized as follows:

Name of Property
      Planned Exploration ExpenditureExploration of Pine Grove Property, Nevada
    $850,000 (Phase 1)Exploration of La Bufa Property, Mexico
    $725,000 (Phase 1)Exploration of JDS Property, Nevada
    $10,000Exploration of Hannah Property, Nevada
    $20,000Property
      Acquisitions
    $30,000Administration
    $300,000Total
    $1,935,000


We had cash of $83,378 and working capital deficit of $625,967
as of March 31, 2008. We will require $1,935,000 in order to carry out our plan
of operations over the next twelve months. Accordingly, we require financing of
approximately $2,500,000 in order to fund our plan of operations for the next
twelve months. We plan to complete a further private placements of our
securities in order to secure the funds necessary for us to complete our plan of
operations for the next twelve months, as outlined above. We have no arrangement
in place for the necessary financing and there is no assurance that this
financing will be achieved.

As we have done in the past, we may consider entering into
joint venture arrangements to provide the required funding to pursue drilling
and advanced exploration of our mineral claims. Even if we determined to pursue
a joint venture partner, there is no assurance that any third party would enter
into a joint venture agreement with us in order to fund exploration of our
mineral claims. If we entered into a joint venture arrangement, we would likely
have to assign a percentage of our interest in our mineral claims to the joint
venture partner.

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Our exploration plans will be continually evaluated and
modified as exploration results become available. Modifications to our plans
will be based on many factors, including: results of exploration, assessment of
data, weather conditions, exploration costs, the price of gold and available
capital. Further, the extent of our exploration programs that we undertake will
be dependent upon the amount of financing available to us.

Employees

We have three executive officers, namely Paul Saxton, our chief
executive officer, Nathalie Pilon, our chief financial officer, and Jeffrey
Wilson, our vice-president of exploration. We carry out our exploration programs
through contracts with third parties, including geologists, engineers, drilling
companies.

Government Regulation and Environmental Protection
Requirements

We will be required to obtain work permits from the United
States Bureau of Land Management (BLM) for any exploration work on our Nevada
mineral properties that results in a physical disturbance to the land. We will
not be required to obtain a work permit for any phase of our proposed mineral
exploration programs that does not involve any physical disturbance to the
mineral claims, such as data compilation, field work and geochemical surveys. We
will be required to obtain work permits for all drilling operations that we plan
to conduct on our mineral properties. Prior to commencing drilling operations on
any of our properties, we must submit a Notice of Intent to Operate to the BLM
and post a bond as security for our obligation to complete reclamation
activities. We will be required by the Bureau of Land Management to undertake
remediation work on any work that results in physical disturbance to the mineral
claims, including drilling programs. We estimate that the cost of remediation
work for our drilling programs will be approximately $25,000 for each drilling
program. The estimated amount of remediation work is included within our budgets
for our exploration programs. The actual amount of reclamation cost will vary
according to the degree of physical disturbance.

We have made all current Bureau of Land Management filings for
our Nevada properties. All claims are in good standing until September 1, 2008.
Applicable county fees have also been paid.

The La Bufa property is an exploration concession granted by
  a branch of the Mexican government and is for a three year terms. Thereafter,
  the La Bufa property may be converted into an exploitation concession that would
  have a term of fifty years. The La Bufa property is presently beginning the
  second year of the term of its exploration concession. An annual fee of $1.25
  pesos per hectare is due to the Mexican federal government. The net area of
  the La Bufa exploration concession is 1040.75 hectares, thereby requiring an
  annual payment of $1300.94 pesos. These amounts are subject to change and adjustment
  by the Mexican authorities.

Competition

We are a junior mineral resource exploration company. We
compete with other mineral resource exploration companies for financing and for
the acquisition of new mineral properties. Many of the mineral resource
exploration companies with whom we compete have greater financial and technical
resources than those available to us. Accordingly, these competitors may be able
to spend greater amounts on acquisitions of mineral properties of merit, on
exploration of their mineral properties and on development of their mineral
properties. In addition, they may be able to afford more geological expertise in
the targeting and exploration of mineral properties. This competition could
result in competitors having mineral properties of greater quality and interest
to prospective investors who may finance additional exploration and development.
This competition could adversely impact on our ability to achieve the financing
necessary for us to conduct further exploration of our mineral properties.

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We will also compete with other junior mineral exploration
companies for financing from a limited number of investors that are prepared to
make investments in junior mineral exploration companies. The presence of
competing junior mineral exploration companies may impact on our ability to
raise additional capital in order to fund our exploration programs if investors
are of the view that investments in competitors are more attractive based on the
merit of the mineral properties under investigation and the price of the
investment offered to investors.

We will also compete with other junior and senior mineral
companies for available resources, including, but not limited to, professional
geologists, camp staff, helicopter or float planes, mineral exploration supplies
and drill rigs.

Research and Development Expenditures

We have not spent any amounts on research and development
activities since our inception. Our planned expenditures on our exploration
programs are summarized under the section of this Registration Statement
entitled Description of Properties.

C.          
Organizational Structure

We are not part of a group and we have no subsidiaries.

D.          
Property, Plants and Equipment

The following sets forth information relating to our material
mineral properties.

Pine Grove Property, Nevada, United States

Ownership Interest

Wheeler Patent and the Wheeler Millsite Patent
Claims

On July 13, 2007, we entered into an agreement with Wheeler
Mining Company (Wheeler) to lease Wheelers 100% owned Wheeler and
Wheeler Millsite patent claims in Lyon County, Nevada from July 13, 2007 to
December 31, 2022 with an exclusive option to renew the lease by written notice
to December 31, 2023. The Wheeler patent and the Wheeler Millsite patent claims
are described in the table and map below. If the property is and remains in
commercial production by November 1 of each year after 2022, we may renew the
lease for a period of one year by delivering written notice to the owner prior
to November 15 of that year. We must produce a bankable feasibility study on the
properties by July 1, 2009 and obtain all necessary funding to place the
properties into commercial production. We must pay a net smelter royalty of 3%
(at a gold price of US$450) to 7% (at a gold price of US$701) upon commencement
of commercial mining production based on gold prices and the Company must pay a
5% net smelter royalty on metals or minerals other than gold produced and sold
from the properties.

Harvest Lode Claim, Winter Harvest Lode Claim and Harvest
Fraction Lode Claim

Pursuant to an agreement dated July 30, 2007, we purchased from
Harold Votipka (Votipka) the Harvest lode claim, the Winter Harvest
lode claim, and the Harvest fraction lode claim, each located within the Pine
Grove Mining District in Lyon County, Nevada. The purchase price was $12,000,
which we have paid, and includes a 5% net smelter royalty on production payable
to Votipka.

Wilson Mining Claim Group

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On August 1, 2007, we entered into an agreement with Lyon
Grove, PLC (Lyon Grove) to lease the Wilson Mining Claim Group located
in Lyon County, Nevada from August 1, 2007 to July 31, 2022, with an option to
purchase. We can extend the term of the lease for up to ten additional one year
terms providing we are conducting exploration mining activities at the
expiration of the term immediately preceding the proposed extension term.

The following lease payments must be made by us:

- $10,000 upon signing the agreement, which we have paid and
- $25,000 prior to each one year anniversary of the lease.

We advanced to Lyon Grove a loan of $5,000 bearing an interest
rate of 5% per annum to be repaid by July 31, 2008. The loan and interest will
either be repaid at the maturity date or be offset against the lease payment due
on August 1, 2008.

The lease payment made for any one calendar year may be
credited against any net smelter royalty due and payable during the same
calendar year.

The following work commitments must be made by us:

- $25,000 by August 1, 2008;
- $25,000 by August 1, 2009;
- $50,000 by August 1, 2010;
- $50,000 by August 1, 2011
- $25,000 by August 1, 2012 and each subsequent lease year

Upon commencement of production, we must pay a net smelter
royalty of 3% to 7% based on gold prices.

Lyon Grove retains the right to require us to purchase the
property any time after we have made application to permit and develop a mine on
the property, subject to our continued obligation to pay the royalties, for
$1,000.

Additional Staked Claims

Subsequent to the signing of these agreements we have staked
189 claims and the total area covered is now 6 square miles.

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List of Mineral Claims  Pine Grove Project

Claim Name
      BLM Serial #
      Type
      Area-acresLG1 to LG60 (90
        claims)
      NMC0960776 - NMC0960865
      Unpatented
      1859.504CONTAINSWheeler Patent 
        Wheeler Millsite
      
      Patented 
        Patented
      73.705 
        4.989Wilson Patent
      
      Patented
      33.781Harvest Lode 
        Winter Harvest 
        Harvest Fraction
      NMC793071 
        NMC800355 
        NMC800356
      Unpatented 
        Unpatented 
        Unpatented
      20.66 
        20.66 
        20.66


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Location and Access

The Pine Grove project is located 20 miles due south of
Yerington, Nevada via State Highway 208 (paved) to the East Walker Road (gravel)
to the Pine Grove Canyon drainage. A map showing the location and access to the
Pine Grove property is presented below.



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A map showing the location of the claims is below.



History of Operations

In 1969, Quintana Minerals of Houston, Texas reportedly was
interested in the copper potential of the property and undertook a program of
surface mapping and completed one drill hole. The results of that program are
not known, and the log/assays from the one drill hole were not available at the
time of writing this report.

In 1981, Lacana Mining Corporation of Toronto, Ontario explored
the property for gold. This work consisted primarily of surface mapping. No
further details on Lacanas work program or results are available.

In 1988 the property was optioned by Teck Resources of
Vancouver, British Columbia. Teck undertook the most extensive exploration
program to date, drilling 185 holes for a total of 68,000 feet, and expenditures
of US$2.2 million. Teck dropped their option 1992.

Silver Standard briefly explored the property in 1994 but they
too subsequently dropped their option.

Present Condition of the Property and Current State of
Exploration

There are no known reserves on the Pine Grove project, and
Lincoln has no plant or equipment on this property.

Geology

The region is dominated by Basin and Range-style, north
trending, extensional fault-block mountain ranges separated by alluvium-filled
valleys. The ranges have cores of Mesozoic volcanic, sedimentary and intrusive
rocks that are in turn overlain by Tertiary sedimentary and volcanic rocks. The
Pine Grove Hills occupy a west-dipping structural block that is bounded on the
east side by a series of faults, some of which transect the Pine grove District.

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The oldest rocks in the region are a series of middle Triassic
to middle Jurassic metavolcanic and metasedimentary rocks and coeval intrusions
that are part of a west facing continental are that extended along the western
margin of North America in the middle Mesozoic. The sequence has been divided
into four packages by Schweickert and others (1991), consisting of a middle to
upper Triassic package sub aerial volcanic rocks, an upper Triassic platform
carbonate sequence, an upper Triassic to lower Jurassic basinal sedimentary rock
package and a middle calc-alkaline volcanic suite.

North to northwest striking, steeply-dipping faults were active
during emplacement of the Mesozoic intrusions. The faults down-drop a large
cast-west-trending structural block that includes the Yerington Batholith.
Faults within the block often contain dikes of granite porphyry and served as
loci for hydrothermal fluids.

The most significant geologic feature in the district is a
northwest-striking, northeast-dipping normal fault that juxtaposes Mesozoic
intrusive rocks in the footwall against intrusive capped by Tertiary sedimentary
rocks in the hanging wall. This structure herein termed the Pine Grove fault
is a diffuse, 200 m-wide extensional shear zone that forms part of the eastern
boundary of the Pine Grove Hills structural block. The fault originally had a
steep dip but has been rotated to nearly flat by regional extension. Numerous
parallel dikes occur within the fault and the structure served as the locus for
mineralization in the district.

The deposit at Wheeler comprises a elliptical shaped tabular
zone measuring some 400 m by 200 m in plan, by about 90 m in thickness. It lies
parallel the Pine Grove fault and its attendant dikes, dipping at about 30
degrees to the northeast. The deposit consists of one to three subparallel,
irregular zone of anomalous gold mineralization from 3 m to over 15 m thick that
anastomose and coalesce.

Two quartz veins were emplaced early in a transitional
chlorite-actinolite alteration event. These were followed by sulphide veinlets,
fracture coatings and thin quartz veins occupying brittle faults. The first set
does not contain appreciable gold mineralization, however, the second does.

Mineralization at Wilson is confined to discrete tabular zones
in the granodiorite that dip between 0 and 10 degrees north. Two or three, and
in places up to six, separate, stacked mineralized zones from 3 to 20 m thick
are separated by thicker, un-mineralized ryholite porphyry and dacite dikes. The
deposit is traceable for 150 m down-dip, and the mineralized zones extend
virtually flat for at least another 350 m down-dip to the north where gold
bearing veins have been encountered in drill holes. The mineralization at Wilson
is much less disrupted than at Wheeler due to a lack of significant shearing
events. Alteration at Wilson is similar to that found at Wheeler, although the
intensity is much weaker.

Resource Classification

Resources are summarized in the tables below for Wilson and
Wheeler, respectively. The resources have been classified as Inferred, according
the CIM (2005) resource classification standards.

Cautionary Note to Investors Concerning Estimates of
      Inferred ResourcesThe following table uses the term inferred resources.
      Lincoln advises that while this term is recognized and required by
      Canadian securities regulations (under National Instrument 43-101
      Standards of Disclosure for Mineral Projects), the U.S. Securities
      and Exchange Commission does not recognize it. Inferred resources have a
      great amount of uncertainty as to their existence, and great uncertainty
      as to their economic and legal feasibility. It cannot be assumed that all
      or any part of an Inferred Mineral Resource will ever be upgraded to a
      higher category. Under Canadian rules, estimates of Inferred Mineral
      Resources may not form the basis of feasibility or preliminary feasibility
      studies, except in rare cases. Investors are cautioned not to assume
      that any part or all of an inferred resource exists, or is
      economically or legally mineable.


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Undiluted Inferred Mineral Resources by Cutoff Grade  Wilson

(assays capped at 0.5 opt)

(assays capped at 0.5 opt) Cutoff
      (opt)
      Tons
      Au (opt)
      Cu (%)
      Au (oz)
      Cu (lbs)0.005
    4,647,000
    0.018
    0.0210
    83,531
    1,953,0000.010
    2,738,000
    0.025
    0.0234
    69,744
    1,284,0000.015
    1,602,000
    0.035
    0.0252
    56,056
    807,000


Undiluted Inferred Mineral Resources by Cutoff Grade -
Wheeler

(assays capped at 0.5 opt)

Cutoff (opt)
      Tons
      Au
        (opt)
      Cu
        (%)
      Au
        (oz)
      Cu
        (lbs)0.005
    4,367,000
    0.059
    0.0432
    257,839
    3,774,0000.010
    3,321,000
    0.075
    0.0465
    250,236
    3,087,0000.015
    2,647,000
    0.091
    0.0476
    241,981
    2,520,000


Interpretation and Conclusions of Report

The Pine Grove district hosts several gold bearing quartz-vein
stockwork style deposits emplaced in Mesozoic granitic host rocks. Exploration
by Teck Resources in the early 1990s outlined a bulk tonnage low grade gold
resource of roughly 2.5 million tons grading 0.06 opt containing 150,000 ounces.
These resources are the un-mined remnants from mining carried out in the
district in the late 1800s.

The author of the Pine Grove Report has not done sufficient
work to classify the historical estimate as current mineral resources or mineral
reserves, and Lincoln Gold is not treating the historical estimate as current
mineral resources or mineral reserves as defined in Section 1.2 and 1.3 of
NI43-101, hence the historical estimate should not be relied upon.

A re-evaluation of the Teck data by MineFill produced similar
results for the Wilson deposit, however, at Wheeler the MineFill estimate was
considerably higher in both tons and grade. A detailed review of the drill
assays superimposed on the Teck polygons revealed large zones of mineralized
material that were not included in the Teck estimate.

There appears to be sufficient resources to justify further
exploration at Pine Grove, and recommendations are provided herein. The Wheeler
deposit shows the best immediate potential since it contains the bulk of the
resources, and hosts a higher grade. A ground reconnaissance of the area
surrounding the Wheeler and Wilson mines suggests that there may be additional
resources which could be added with additional exploration. During the site
visit the author noted a number of caved adits and mine dumps in an adjacent
drainage to the north of Wilson.

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Recommendations of the Pine Grove Report

Based on the information compiled to date, the Pine Grove
Report concluded that the Pine Grove project appears to offer significant
potential for re-activating a historical mining district. The Technical Report
further concluded and recommended that, before a decision can be made,
additional data collection and verification is warranted, as follows:

Phase 1  Additional
Exploration

- Lands  additional claims - $30,000
- Photogrammetry  stereo orthophotos and digital topography - $30,000
- Reverse circulation drilling - $450,000
- 48 vertical holes at Wheeler  14,000 ft.
- 33 vertical holes at Wilson  9,000 ft.
- Total = 65 holes for 23,000 ft. at an all-in cost of $19.68/ft.
- Assaying  4600 samples - $90,000
- Contract geologist - $150,000
- Drill pads and reclamation work - $65,000
- GIS work - $10,000
- Resource update - $25,000

Phase 1 Total Budget - $850,000

Objective for Phase 1  to confirm the grades and continuity of
mineralization per the Teck drilling and resource estimate, and to test the
lateral margins of the deposits at Wilson and Wheeler. Should the results prove
positive, then the project should be advanced to Phase 2.

Phase 2  Metallurgical Assessment

|• | Core drilling - $75,000               
|- | --------------------------------------
|  |                                       
|  | o                                     
|  |                                       
|  | o                                     
|  |                                       
|• | Assays - $5,000                       
|  |                                       
|• | Metallurgical investigation - $100,000
|  |                                       
|  | o                                     
|  |                                       
|  | o                                     
|  |                                       
|  | o                                     

Total Phase 2 Budget - $180,000Total Budget - $1,030,000

There is no assurance that further exploration will result in a
final evaluation that a commercially viable mineral deposit exists on this
mineral property. Lincoln anticipates that it will require additional financing
in order to pursue full property exploration. Lincoln does not have sufficient
financing to

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undertake full exploration of these mineral claims at present
and there is no assurance that we will be able to obtain the necessary
financing.

La Bufa Property, Chihuahua, Mexico

The La Bufa Project is located in the far southwest corner of
the state of Chihuahua, Mexico near the town of Guadalupe y Calvo about 300
kilometers from the city of Chihuahua and 200 kilometers from the town of
Hidalgo de Parral. The project is within the Guadalupe y Calvo Mining District
and lies within the Sierra Madre Occidental physiographic province. The La Bufa
project is comprised of three contiguous mineral concessions totaling
approximately 2,291.26 hectares and is held by Lincoln Gold through letters of
intent to joint venture and joint venture agreements with Almaden Minerals and
their wholly owned Mexican subsidiary Minera Gavilan, S.A. de C.V. The La Bufa
Property surrounds mineral concessions of approximately 439.24 hectares held by
Gammon Gold where the Rosario Vein was discovered in 1836 and where nearly all
of the historic production from the district was derived.

Location and Access

The La Bufa exploration concession is located in the southwest
extremity of the state of Chihuahua, Mexico and is centered on the small town
(mining district) of Guadalupe y Calvo in the Sierra Madre Occidental. The
single exploration concession adjoins and surrounds other concessions within the
district. Net area is 2,291.26 hectares (approximately 5,661.7 net acres). The
nearest commercial airport is in the city of Chihuahua, 480 km by road from the
property. All-season vehicle access to the property is excellent. The town of
Guadalupe y Calvo is the terminus of the paved, well-maintained Mexico Highway
24 which winds 270 kilometers from mining town of Hidalgo del Parral to the
northeast. Access on the concession is via dirt roads. A map showing the
location and access to the La Bufa property is presented below.

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Ownership Interest

The La Bufa Property consists of three contiguous Mexican
Exploration Concessions, La Bufa (No. 219036), La Bufa 1 (No. 222724), and La
Bufa 2 (No. 223165) totalling 1,916.21 hectares, as follows:

Name
      Type
      Title
      File
      Area Hect.
      Issued
      Expires
      Tax Rate
      Pesos
      US$La Bufa
    Explor.
    219036
    16/31696
    1040.7594
    31/Jan/03
    30-Jan-09
    $6.0100
    $6,256
    $585La Bufa
    Explor.
    222724
    16/32275
    485.0000
    27-Aug-04
    26-Aug-10
    $6.0100
    $2,916
    $273La Bufa
    Explor.
    223165
    16/32529
    765.5000
    28-Oct-04
    27-Oct-10
    $6.0100
    $4,602
    $430


The La Bufa Property consists of three contiguous Mexican
concessions issued by the Direccion General de Minas in 2003 and 2004 to Minera
Gavilan, S.A. de C.V., a Mexican subsidiary controlled 100% by Almaden Minerals
Ltd. a publicly traded Canadian junior listed on the Toronto Stock Exchange
(AMM).

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On August 5, 2005, we executed a letter of intent to joint
venture the property with Almaden whereby we could earn a 51% interest in the
property by undertaking exploration expenditures in the minimum amount of $2.0
million over 4 years.

On April 12, 2007, we entered into an option agreement (the
Option Agreement) with Almaden to acquire a 60% interest in the La Bufa
Property. The Option Agreement supersedes and replaces the August 5, 2005 letter
of intent to joint venture the property with Almaden. Under the Option
Agreement, we will be entitled to earn a 60% interest in the La Bufa Property by
(a) undertaking a work program on the Bufa Property aggregating $3,500,000 in
expenditures for mining work, and (b) issuing an aggregate of 1,550,000 shares
of our Common Shares to Almaden pursuant to the terms of the Option Agreement.

The $3,500,000 of expenditures for mining work must be incurred
in accordance with the following schedule:

- we must spend $500,000 in expenditures (which must include drilling) on the
  La Bufa Property by the first anniversary of the effective date of the Option
  Agreement (the Effective Date). This obligation is a firm commitment;
- we must spend an additional $750,000 on the La Bufa Property by the second
  anniversary of the Effective Date;
- we must spend an additional $1,000,000 on the La Bufa Property by the third
  anniversary of the Effective Date; and
- we must spend an additional $1,250,000 on the La Bufa Property by the
  fourth anniversary of the Effective Date.

The 1,550,000 shares must be issued in accordance with the
following schedule:

- 150,000 shares within 5 business days from the Effective Date;
- 200,000 shares on or before the first anniversary of the Effective Date;
- 200,000 shares on or before the second anniversary of the Effective Date;
  and
- 1,000,000 shares on or before the fourth anniversary of the Effective Date.

During the term of the Option Agreement, we will be obligated
to maintain the La Bufa Property in good standing by completing and filing, or
making payment in lieu thereof, of all necessary assessment work on the La Bufa
Property and by paying all taxes.

Upon the completion of the expenditure requirements and the
share issue requirements as set forth in Option Agreement, we shall be deemed to
have earned an undivided 60% interest in the La Bufa Property. Upon our earning
an interest in the La Bufa property, all operations shall be conducted by us and
Almaden on a joint venture basis. The basic terms of the joint venture are
prescribed in the Option Agreement.

We have the right to terminate the Option Agreement at any time
by giving 30 days notice of termination to Almaden. Upon termination by us, we
will have no further obligation to issue any shares or incur any further
expenditures for mining work on the La Bufa Property, other than in respect of
obligations that had accrued to the date of termination. We have completed the
issuance of the initial 150,000 shares to Almaden.

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History of Operations

Gold was discovered in the Guadalupe y Calvo district in 1835
with extended periods of production up to 1939. The gold-silver veins were
exploited largely by underground operations. A mint was constructed in 1844 by
the Mexican government to take advantage of the precious metals production in
the district.

Modern exploration work in the district has centered largely in
the area of past production which is surrounded completely by the La Bufa
concessions. Although the vein system extends beyond the area of the old
workings, little exploration work has been conducted. Asarco drilled two angle
core holes in the 1970s on La Bufa ground with both holes encountering
ore-grade gold and silver. A previous joint venture on the La Bufa Property
between Almaden Minerals Ltd. and Grid Capital Corporation resulted in the
drilling of five angle core holes (666.15 m) in three locations during December
2004. Hole GUD04-03 returned encouraging gold-silver-lead-zinc assays from
multiple, narrow-vein intercepts (Almaden Minerals News Release, Jan. 24, 2005).
However, Grid Capital backed out of the joint venture for undisclosed reasons.
We have since entered into a new joint venture with Almaden to explore the La
Bufa concession.

The La Bufa Property lies within the Guadalupe y Calvo district
which is one of many epithermal gold-silver districts in the Sierra Madre
Occidental of western Mexico. The Sierra Madre Occidental is characterized by
deeply incised mountains, and has a total relief of about 3,000 meters. Most of
the bedrock exposed in the vicinity of Guadalupe y Calvo consists of an upper
volcanic series of bedrock which is commonly hundreds of meters in thickness.
However, erosional exposures of a lower volcanic series of rock, which is
favourable to mineralization and occurs in ranges up to 1,000 meters in
thickness, are exposed along the eastern flank and central portions of the
northwest-trending Guadalupe River Valley that traverses the La Bufa concession.
The contact between the upper and lower volcanic series of rock is rarely
exposed.

District mineralization occurs as northwest-trending,
epithermal gold-silver-lead-zinc quartz veins and breccia veins with local
attending stockworks. The veins occur only in the lower volcanic series. Veins
typically range from 1 to 3+ meters in true thickness and are generally steeply
dipping but may also have shallow dips. Historic production in the district
encountered local mineralized zones measuring tens of meters in thickness. Past
mining on the Rosario vein extended for a continuous strike length of over 600
meters on seven levels. The vein system appears to consist of multiple strands
and extends south-eastward for a distance of at least 1700 meters across the La
Bufa Concession. The main paved road entering the town has a road cut that
exposes a 70-meter zone containing multiple quartz veins.

Asarco drill holes on the La Bufa Property encountered
encouraging results. Hole H-1 hit 1.4 meters grading 9.0 gram per tonne gold +
324 grams per tonne silver. Hole H-2 hit 1.4 meters grading 6.3 grams per tonne
gold + 280 grams per tonne silver. Grid Capital drilled four core holes with
their best intercept of 1.6 meters grading 9.0 grams per tonne gold + 447 grams
per tonne silver.

Exploration Programs at La Bufa

The La Bufa Property is in the early stage of exploration and
presently contains no known gold or silver resources. There is no plant or
equipment on the Property. The concessions encompass the town of Guadalupe y
Calvo. Potential for gold-silver veins exists primarily along the eastern side
of the town in low, forested and brush-covered hills.

In 2006, we conducted aerial photography over the entire
district for the purpose of generating a topographic base map suitable for
detail geologic mapping. A Mexican survey crew was contracted to survey control
points required to produce the topographic maps. However, heavy snow delayed the
survey crew from access to the survey area. Surveying is now planned for the 1st
quarter of 2007.

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The La Bufa Report includes a recommendation that we acquire
the El Chapito concession as soon as possible and preferably before any drilling
is conducted.

Recommendations of the La Bufa Report

Based on the scope and the results of exploration activities
completed to date on the Property, a two-phase exploration program is
recommended. Because the southern La Bufa concession is at a more advanced stage
of exploration and drill targets have been identified, phase-1 would consist of
a core drilling program that could be initiated as soon as drill contracts can
be made, necessary permits obtained and logistical support are in place. A core
drilling program of 15 holes averaging 400 meters each is recommended as phase-1
and is considered the minimum required to give a reasonable chance for success.
Proposed sites have been plotted on a plan map (below) and two or more holes
drilled at different angles of inclination could be completed at selected sites
in order to test down-dip continuity of the structures. Surface owners in
Guadalupe y Calvo include private landowners and the city government and initial
contact with these surface owners has been made in order to secure access
permission.

Preliminary metallurgical studies should be included as part of
the drilling program and would include bottle roll tests along with thin section
and polished section investigations to determine basic mineralogy. Phase-1 of
the recommended work program would also consist of continued reconnaissance
throughout the concessions, including mapping and sampling in the northern
concessions of La Bufa 1 and La Bufa 2. A district-wide structural study using
satellite imagery, air photos and verification by ground checks should also be
part of this program. In addition, follow-up work by mapping and rock sampling
in areas of soil anomalies related to quartz veinlets in altered Upper Volcanic
Group rocks at the northern limit of the soil grid is needed. The district-wide
reconnaissance, sampling and structural interpretation studies that are
recommended should be completed and are not dependent on results of the drilling
recommended in the southern portion of the La Bufa concession. The additional
reconnaissance and related work could be carried out consecutively during the
phase-1 drilling and if drill targets are identified they could be tested during
the phase-2 drilling program.

It is recommended that Phase-2 consist of a greatly expanded
core drilling program that would provide a geologic, assay and preliminary
metallurgical database of sufficient size and quality to be the basis for
initial resource modeling. This phase-2 program would require the drilling of
40-50 holes on approximately 25-meter centers. Initial site planning and land
use issues would also be addressed during this phase. The initiation of phase-2
program will be dependent on successful results of phase-1 drilling. Successful
drilling results for phase-1 would be defined as the discovery of gold-silver
mineralization, along the Santo Niño Vein or parallel structures in the footwall
and hanging wall, with potentially economic grades and widths that would justify
continued expenditures on the Property.

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Proposed Phase 1 Drill Site Locations



The anticipated budget for the work program recommended by the
Geological Report on the La Bufa property is set out below:

Activity
      Amount/Persons
      Time Required
      
      Amount ($US)Phase-1:
      DrillingDrilling
    6,000
      meters (15 holes at 400m)
    90
      days
    
    480,000Drilling Support
    2 geologist, helpers, includes travel and
      field expenses
    90 days
    
    100,000Site Facilities
    Equipment, Storage and Consumables
    120
    
    50,000Analytical
    1,500
      samples
    90
      days
    
    40,000Metallurgical
    20
      samples
    90
      days
    
    15,000Data Workup
    1
      geologist, 1 GIS
    60
      days
    
    40,000Drilling
      Total
    
    
    
    725,000Phase-1:
      DistrictReconnaissance
    1
      geologist, 1 helper
    60
    
    45,000Analytical
    400
      samples
    
    
    10,000Data Workup
    1
      geologist, 1 GIS
    30
    
    25,000


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Activity
      Amount/Persons
      Time Required
      
      Amount ($US)District
      Total
    
    
    
    80,000Phase-1
      Total
    
    
    
    $805,000Phase-2:
      Drilling
    16,000 meters (40 holes at 400m)
    
    
    4,000,000Amount includes all expenses,
      metallurgical, preliminary resourceTotal Phase- 1
      & 2
    
    
    
    4,805,000


We plan plans to complete Phase 1 of the exploration program
outlined above over the next 12 to 18 months, subject to it achieving the
necessary financing.

There are several key factors that can delay completion of the
exploration program as follows:

- delays in the permit approval process for drilling;
- limited availability of core rigs in Mexico;
- lack of funding.

Factors that could cause exploration costs to be greater than
anticipated are largely from drilling conditions and include the following:

- caving ground;
- lost circulation;
- artesian water;
- stuck drill steel;
- drilling in near proximity to the town (special compensation, noise, etc.).

The exploration program is being managed on site by Filiberto
Lopez who has extensive experience in Mexico. Our vice-president of exploration,
Jeffrey L. Wilson, P. Geol. State of Utah, will oversee the project.

JDS Property, Nevada, USA

Lincoln is the owner of the seventy-seven (77) unpatented lode
claims comprising the JDS project which covers approximately 1,540 acres (2.04
sq miles). Lincoln staked and recorded the mineral claims, which are located in
Sections 14, 15, 22, 23 26 & 27 T25N R50E of Eureka County, Nevada. These
mineral claims are registered in Lincolns name and are not subject to
underlying lease payments or royalties. The JDS property is subject only to
annual claim maintenance fees payable to the BLM and Eureka County.

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The JDS property is located in central Nevada within the
Cortez Trend portion of the Battle Mountain-Eureka Mineral Belt, approximately
40 miles northwest of the small mining town of Eureka. The property is in Denay
Valley adjacent to the northern end of the Simpson Park Mountains. Access is
fair to good during good weather via the Tonkin Road (dirt/gravel) that
traverses through the property. A map showing the location of and access to the
JDS property is presented below:



Ownership Interest

Lincoln is the owner of the seventy-seven (77) unpatented lode
claims comprising the JDS project which covers approximately 1,540 acres (2.04
sq miles). Lincoln staked and recorded the mineral claims. These mineral claims
are registered in Lincolns name and are not subject to underlying lease
payments or royalties. The JDS property is subject only to annual claim
maintenance fees payable to the BLM and Eureka County. Lincoln must pay
approximately $12,500 in BLM and Eureka County annual claim maintenance fees by
September 1, 2007 in order to maintain our interest in these properties.

Effective May 15, 2006, Lincoln entered into a letter agreement
on the JDS property for an Exploration Agreement with Option to Form Joint
Venture with Golden Odyssey Exploration (TSX: GOE). Work in 2006 consisted
largely of farm-out efforts by us which were consummated in May 2006 when we
entered into the letter agreement with Golden Odyssey. Golden Odyssey drilled a
part of one hole before quitting the hole and started looking for a bigger drill
rig. Because Golden Odyssey had not started drilling again by the end of 2007
Lincoln terminated the agreement. We are now looking for another partner to JV
the property

History of Operations

There have been no previous operations of any type on the
property.

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Present Condition of the Property and Current State of
Exploration

In 2005, Lincoln completed a mercury soil gas survey and a
detail gravity survey line over the northwest portion of the claim block. This
area is considered the most prospective for discovery of a Carlin-type gold
deposit hosted in lower plate carbonate rocks.

There is no plant or equipment of the JDS Property. The
property consists of barren land with no improvements other than a Eureka County
dirt road that crosses the property and various cattle fences.

Lincoln presently has one geologic report on the JDS property
that was written by Kenneth D. Cunningham, Wyoming Professional Geologist
PG-1636, dated February 9, 2004. The report reviews the potential for Carlin
type gold deposits on the JDS Property. Lincoln has all raw data and maps for
the mercury soil gas survey and for the detail gravity survey line in the same
general area. Lincoln also has various summary maps and property diagrams.

Lincoln is looking for a JV partner to drill this property.

Geology

The JDS Property lies within the Cortez Trend in the southern
portion of the Battle Mountain-Eureka Mineral Belt. Although covered by valley
fill, the geology of the JDS Property is believed to be an extension of
favourable lower plate rocks of the Roberts Mountains Thrust that are known to
host large Carlin-type gold deposits. Potential Devonian host rocks are exposed
in the nearby Simpson Park Mountains and are believed concealed under shallow
cover at JDS. Similar Devonian strata host very large gold deposits at Pipeline
and Cortez to the northwest of the JDS Property. Available gravity data at JDS
suggest shallow depth to bedrock and north-trending faults that converge in the
northwestern portion of the claim block. The combination of favourable lower
plate bedrock and converging faults indicate exploration potential for
Carlin-type gold deposit(s). A strong mercury soil gas anomaly has also been
identified in the northwest portion of the JDS Property.

HANNAH PROPERTY, CHURCHILL COUNTY, NEVADA, USA

The Hannah Property is located approximately 55 miles east of
Reno, Nevada in the southern portion of the Trinity Range north of Interstate 80
in Churchill County. Access is east from Reno via Interstate 80 and then north
on gravel and dirt roads from Hot Springs Flat to the Property.

Lincoln has an option to acquire a 100% interest in the claims
comprising the Hannah project, subject to a net smelter royalty, pursuant to an
option agreement dated December 24, 2003, as amended January 7, 2007 and January
10, 2008, between us and Larry and Susan McIntosh of Gardnerville, Nevada.
Lincoln has the option to acquire a 100% interest in the Hannah property by
making aggregate payments to the McIntoshs in the amount of $210,000. Lincoln
may exercise this option at any time prior to the ten year anniversary of the
effective date of the agreement, being December 24, 2013. To date $40,000 has
been paid into this option agreement.

- 38 -

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Location and Access

The Hannah Property is located approximately 55 miles east of
Reno, Nevada in the southern portion of the Trinity Range north of Interstate 80
in Churchill County. Access is east from Reno via Interstate 80 and then north
on gravel and dirt roads from Hot Springs Flat to the Property. A map showing
the location of and access to the Hannah property is presented below:



Ownership Interest

The Hannah property is comprised of twenty-three (23)
unpatented lode claims covering approximately 460 acres (0.72 sq. miles) in
Churchill County, Nevada.

Lincoln has an option to acquire a 100% interest in the claims
comprising the Hannah project, subject to a net smelter royalty, pursuant to an
option agreement dated December 24, 2003 between us and Larry and Susan McIntosh
of Gardnerville, Nevada, as optionors. Lincoln has the option to acquire a 100%
interest in the Hannah property by making aggregate payments to the optionors in
the amount of $210,000. Lincoln may exercise this option at any time prior to
the ten year anniversary of the effective date of the agreement, being December
24, 2013. Lincoln is obligated to make the following option payments in order to
maintain our option agreement in good standing:

Date of Payment
      Amount of Option PaymentDecember 24,
      2003
    $5,000 (paid)January 10, 2005
    $5,000 (paid)


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Date of Payment
      Amount of Option PaymentJanuary 10, 2006
    $10,000 (paid)January 10, 2007
    $15,000 (in quarterly payments)January 10, 2008
    $20,000 (in quarterly paymentsJanuary 10, 2009
    $25,000January 10, 2010
    $25,000January 10, 2011
    $25,000January 10, 2012
    $25,000January 10, 2013
    $50,000


Lincoln will be deemed to have exercised the option upon
completion of the above option payments at which time Lincoln will be entitled
to a 100% interest in the Hannah property, subject to the payment of a net
smelter royalty to the optionors. The net smelter royalty will be calculated as
3% of net smelter returns, as defined in the option agreement, if the price of
gold is less than or equal to $400 per ounce, and 4% of net smelter returns if
the price of gold is greater than $400 per ounce. If Lincoln exercises the
option, Lincoln will have the right to reduce the net smelter royalty by 1%, up
to a maximum of 2%, upon the payment of $500,000 to the optionors for each 1% of
reduction as set out in the table below:

Gold Price (US$ per ounce)
      Net Smelter Royalty 
        payable on
      execution of the Agreement
      Net Smelter Royalty 
        payable after first
      payment of $500,000
      Net Smelter Royalty payable after
      second payment of $500,000Less than or equal
      to $400
    3%
    2%
    1%Greater than $400
    4%
    3%
    2%


If Lincoln completes a positive feasibility study for the
development or mining of mineral products on the Hannah property and obtains all
government approvals, consents, licenses and permits to construct, develop or
operate a mine on the Hannah property prior to January 10, 2013, Lincoln will be
obligated purchase the Hannah property prior to the commencement of mining of
mineral products. In this event, the purchase price for the Hannah property
shall be the sum of all unpaid option payments due to the optionors through
January 10, 2013.

Lincoln has the exclusive right to conduct exploration on the
Hannah property during the term of the option agreement, provided that Lincoln
makes the required option payments. Lincoln is obligated to make all federal and
county claim maintenance fees in a timely manner to keep the claims in good
standing during the term of the option agreement. In the event that Lincoln does
not make any required option payment, then the optionors will be entitled to
terminate the agreement and Lincoln will lose our interest in the property.
However, Lincoln will not have any obligation to make further option payments in
the event of termination due our inability to make any required option payment.
Lincoln may surrender its interest in the property and terminate the agreement
at its election upon written notice to the optionors. In this event, the
optionors will retain all option payments paid pursuant to the agreement.

Lincoln has paid $3,075 for BLM and County annual claim
maintenance fees that were required to be paid by October 1, 2006. Lincoln will
be required pay approximately $3,075 for BLM and County

- 40 -

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annual claim maintenance fees by September 1, 2008. Lincoln is
not obligated to complete any minimum exploration expenditures or other work
commitment in order to maintain its option on the Hannah property.

History of Operations

Various old shafts, adits, and numerous small prospects are on
the Hannah Property from prospecting in the early 1900s. Cominco was active in
the general area in the 1960s and Chevron drilled three scattered holes on the
claim block in the 1980s. None of Chevrons holes tested the Hannah gold
target. Four backhoe trenches were dug by Cordex in the late 1990s, however no
follow-up work was conducted. NDT Ventures held the property in 2002 but
conducted no significant work. A total of 50 soil samples and 329 rock-chip
samples have been collected from the property and assayed.

Present Condition of the Property and Current State of
Exploration

The Hannah Property is in the early stage of exploration and
presently contains no known gold or silver resources. Lincolns current state of
exploration consists of geologic mapping, soil and rock-chip sampling, a ground
magnetometer survey, and 11 reverse-circulation drill holes (4,815 ft) drilled
by the Company in 2005. Shallow ore-grade gold and silver mineralization is
present in two adjacent drill holes.

There is no plant or equipment on the Hannah Property other
than some scattered remnants of past prospecting. The property consists of
barren land with no improvements with the exception of dirt roads.

Lincoln has no formal reports on the Hannah Property. However,
Lincoln does have all soil and rock-chip sample maps and results, a preliminary
geologic map, a ground magnetometer map, and drill hole logs and assay results
from 11 reverse-circulation drill holes.

During 2006, Lincoln conducted a ground magnetometer survey in
the vicinity of mineralized drill holes H-1 and H-11 which were drilled in a
northwest-trending, highly oxidized shear zone. Results show a magnetic high to
the northwest buried under pediment gravels and a magnetic low to the southeast
beneath alluvium. The abrupt transition area from low to high magnetic response
offers a possible structural intersection between contrasting rocks types.
Structural intersections are potential gold-silver targets.

Provided adequate funding is available, Lincoln would like to
conduct offset drilling from the two holes that encountered ore-grade
gold-silver mineralization. However, Lincoln is also showing the property to
multiple juniors who have expressed potential interest in participating in a
joint venture on the Hannah Property. To date, Lincoln has not concluded any
joint venture agreement for the Hannah Property. It is important to note that
there is no work obligation in the property option agreement. Owing to this
situation, the property may sit idle until a joint venture partner is acquired,
provided that Lincoln continue to make the payments required under the option
agreement.

Lincolns plan of exploration for the Hannah Property is as
follows:

Description of Phase of Exploration
      Description of Exploration Work RequiredAcquire Joint Venture Partner
    Execute an Exploration Agreement with Option to Joint
      Venture with a potential joint venture partner (a JV Partner)Exploration Trenching
    JV Partner conducts trenching across target with an
      excavator


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Description of Phase of Exploration
      Description of Exploration Work RequiredPhase 2 Drilling
    JV Partner drills 5 to 10 angle RC drill holesBottle Roll Metallurgical Tests
    JV Partner conducts metallurgical
      tests on select drill cuttingsData Evaluation
    Evaluate results


The anticipated timetable and estimated budget for completion
for each stage of exploration is as follows:

Stage of Exploration
      Estimated Cost of CompletionAcquire Joint
      Venture Partner
    $3,000Exploration
      Trenching
    $0
      (Partners Cost)Phase 2 Drilling
    $0
      (Partners Cost)Bottle-Roll
      Metallurgical Tests
    $0
      (Partners Cost)Data Evaluation
    $2,000


All significant work is expected to be conducted by a joint
venture partner using qualified contractors.

Geology

The Hannah Property lies in exotic metamorphic terrain
comprised of Triassic metavolcancis (greenstones) and various Cretaceous
intrusive rocks and Tertiary lake beds (no formation names). A highly oxidized,
northwesttrending, gold-silver-bearing shear zone cuts the metavolcanic rocks
and is exposed in an outcrop approximately 50 to 100 ft wide and 300 ft long at
the edge of the pediment. Pediment and alluvial gravels cover the shear zone to
the northwest and southeast. The altered shear zone consists of hydrothermally
altered breccia that contains conspicuous iron-oxides and bleaching. Two drill
holes cut the zone. Angle hole H-1 (-45o) encountered 35 ft @ 0.016 opt gold
from 40 to 75 ft and angle hole H-2 (-60o) encountered 10 ft @ 0.094 opt gold +
5.1 opt silver from 15 to 25 ft. This mineralization is believed to continue
under gravels to the northwest and southeast. Similar, although much narrower,
shear zones occur on the property and extend up to 1,200 ft in strike
length.

Other Properties

Over the last four years the Company has explored and has joint
ventured a number of properties which it has subsequently returned to their
original owners or dropped.

ITEM
4A        UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM
5           OPERATING AND
FINANCIAL REVIEW AND PROSPECTS

The following should be read in conjunction with our financial
statements, forming a part of , including note 15 to the annual financial
statements, which provides reconciliations of material measurement differences
between US GAAP and Canadian GAAP, as well as Item 4  Description of Business
of .

- 42 -

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Unless otherwise indicated, all dollar figures ($) in this Item
5 (as well as the rest of ) are presented in United States dollars.

Overview

We are an exploration stage company that has not earned
revenues from our core business to date. We are currently undertaking the plan
of operations described under Item 4  Information on the Company. We will
require additional financing to fund this plan of operations.

Going Concern

Our financial statements are prepared on the basis that we will
continue operations as a going concern. Given that we have no source of
significant revenue, this assumption is subject to the further assumption that
there will continue to be investment interest in equity funding to explore our
mineral projects. We can give no assurance that we will continue to be able to
raise sufficient funds. Should we be unable to continue to do so, we may be
unable to realize on the carrying value of our projects and the net realizable
value could be materially less than our liabilities, with a potential for total
loss to our shareholders.

Critical Accounting Policies

The preparation of financial statements in conformity with
Canadian generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of commitments and contingencies at the date of the
financial statements and the amounts of revenue and expenses reported during the
period. A significant area requiring the use of management estimates involved
the determination of stock based compensation.

We evaluate our estimates on an ongoing basis and base them on
various assumptions that are believed to be reasonable under the circumstances.
Our estimates form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.

Our accounting policies are set out in the notes to the
accompanying financial statements.

Mineral property interests

We charge to operations all exploration and development
expenses incurred prior to the determination of economically recoverable
reserves. These costs would also include periodic fees such as license and
maintenance fees and advance royalty payments.

We capitalize direct mineral property acquisition costs and
those exploration and development expenditures incurred following the
determination that the property has economically recoverable reserves. Mineral
property acquisition costs include cash consideration and the fair value of
common shares and warrants issued for mineral property interests, pursuant to
the terms of the relevant agreement. These costs are amortized over the
estimated life of the property following commencement of commercial production,
or written off if the property is sold, allowed to lapse or abandoned, or when
impairment in value has been determined to have occurred. An exploration
property is reviewed for impairment whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable.

Stock-Based Compensation

The fair value of stock options granted is determined using the
Black-Scholes option pricing model and recorded as stock-based compensation over
the vesting period of the stock options.

- 43 -

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A.          
Operating Results

Results of Operations

The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with our
financial statements included in Item 17 of this Annual Report. Our results of
operations are summarized below.

|Years ended
      December 31                        |   | 2007       |   |   | 2006       |   |   | 2005       |  
|---------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                     |   |            |   |   |            |   |   |            |  
|Exploration Expenses(Note 4)                         | $ | 319,375    |   | $ | 102,030    |   | $ | 558,904    |  
|                                                     |   |            |   |   |            |   |   |            |  
|Administrative Expenses                              |   |            |   |   |            |   |   |            |  
|Advertising and promotion                            |   | -          |   |   | 428        |   |   | 13,307     |  
|Administrative support                               |   | 22,403     |   |   | -          |   |   | -          |  
|Amortization                                         |   | 4,309      |   |   | 2,888      |   |   | 1,978      |  
|Consulting fees                                      |   | 29,864     |   |   | 2,293      |   |   | 8,663      |  
|Foreign exchange loss                                |   | 4,645      |   |   | 2,043      |   |   | 2,115      |  
|Investor relations                                   |   | 151,419    |   |   | 128,590    |   |   | 419,900    |  
|Management fees                                      |   | 25,850     |   |   | 62,795     |   |   | 102,838    |  
|Office                                               |   | 31,651     |   |   | 28,467     |   |   | 69,153     |  
|Professional fees                                    |   | 190,420    |   |   | 48,924     |   |   | 79,923     |  
|Property investigation and due
      diligence       |   | 5,145      |   |   | 3,822      |   |   | 25,113     |  
|Regulatory and shareholder services                  |   | 28,026     |   |   | 5,068      |   |   | 12,130     |  
|Stock-based compensation (Note
      7)              |   | 244,304    |   |   | -          |   |   | -          |  
|Travel and entertainment                             |   | 13,721     |   |   | 18,091     |   |   | 24,519     |  
|                                                     |   |            |   |   |            |   |   |            |  
|Loss before other items                              |   | (1,071,132 | ) |   | (405,439   | ) |   | (1,318,543 | )
|                                                     |   |            |   |   |            |   |   |            |  
|Other items                                          |   |            |   |   |            |   |   |            |  
|Accounts payable written off                         |   | -          |   |   | -          |   |   | 33,564     |  
|Interest income                                      |   | 4,213      |   |   | 2,591      |   |   | 8,414      |  
|Interest expense (Note 5)                            |   | (11,811    | ) |   | (10,693    | ) |   | (17,981    | )
|                                                     |   |            |   |   |            |   |   |            |  
|Loss and Comprehensive Loss for the
      year       |   | (1,078,730 | ) |   | (413,541   | ) |   | (1,294,546 | )
|                                                     |   |            |   |   |            |   |   |            |  
|Deficit, beginning of year                           |   | (3,537,109 | ) |   | (3,123,568 | ) |   | (1,829,022 | )
|                                                     |   |            |   |   |            |   |   |            |  
|Deficit, end of year                                 | $ | (4,615,839 | ) | $ | (3,537,109 | ) | $ | (3,123,568 | )
|                                                     |   |            |   |   |            |   |   |            |  
|                                                     |   |            |   |   |            |   |   |            |  
|Basic and diluted
      loss per common share        | $ | (0.02      | ) | $ | (0.01      | ) | $ | (0.03      | )
|                                                     |   |            |   |   |            |   |   |            |  
|                                                     |   |            |   |   |            |   |   |            |  
|Weighted average number of common shares outstanding |   | 47,172,000 |   |   | 42,366,000 |   |   | 41,079,000 |  

Year Ended December 31, 2007 versus Year Ended December
31, 2006

We had no revenues during the year ended December 31, 2007 or
the year ended December 31, 2006. We have not generated any revenue from our
operations to date.

General and administrative expenses of $751,757 for 2007 were
approximately twice as high as the 2006 expenses of $303,409. Exploration
expenditures of $319,375 for 2007 were more than twice as high as the 2006
expenditures of $102,030 which reflects on the increased exploration and
property

- 44 -

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acquisition activities as a result of the acquisition and
exploration of both the Pine Grove and La Bufa properties. There was a marked
change in all the expenditure categories and three categories were up
significantly from 2006 and included stock based compensation, consulting fees
and professional fees. The increases in consulting fees reflect on the amount of
professional help needed for exploration. While more exploration was performed
travel expenses were down which reflects in the location of the exploration
activities. The increase in salaries and office expenses reflect the yearly
increases due to inflation. Regulatory and shareholder service costs were up
reflecting the increased activity in dealing with the regulatory bodies which
includes the changing of the Companys domicile and exchange dealings in
general. These activities included filing a registration statement with the
United States Securities and Exchange Commission in connection with our
continuation from Nevada to the Canada Business Corporations Act.

Year Ended December 31, 2006 versus Year Ended December
31, 2005

We had no revenues during the year ended December 31, 2006 or
the year ended December 31, 2005. Both our net loss and exploration expenditures
decreased substantially for fiscal 2006 compared to fiscal 2005. These decreases
are attributable largely to our decreased exploration activities during fiscal
2006.

B.          
Liquidity and Capital Resources

Historically, our operations have been financed by advances
from related parties and proceeds from issuance of common shares and equity. We
anticipate continuing to rely on equity financings to continue our plan of
operations.

Cash and Working Capital

Our cash position at December 31, 2007 was $123,201 compared to
$21,961 as of December 31, 2006. We had a working capital deficit of $71,665 at
December 31, 2007,compared to a working capital deficit of $130,363 as
of December 31, 2006.

Plan of Operations

We estimate that our total expenditures over the next twelve
months will be approximately $1,935,000 as outlined above under the heading
Plan of Operations. Based on our planned expenditures and our working capital,
we will require a minimum of approximately $2,500,000 to proceed with our plan
of operations over the next twelve months, including the pay down of a short
term debt. In addition, we anticipate that we will require additional financing
in order to pursue our exploration programs beyond the preliminary exploration
programs for our mineral properties that are outlined above.

If we are unable to achieve the necessary additional financing,
then we plan to reduce the amounts that we spend on our exploration activities
and administrative expenses in order to be within the amount of capital
resources that are available to us. Specifically, we anticipate that we would
defer drilling programs pending our obtaining additional financing.

Financings

On January 21, 2008 we completed a private placement of
2,067,000 units, at a price of $0.20 per unit for total proceeds of $413,400.
Each unit consists of one share and one-half of one share purchase warrant. Each
whole purchase warrant entitles the purchaser to acquire one additional share at
a price of $0.25 per share for a for a two year period from the date of the
issuance of the warrants. The securities issued in the private placement are
subject to a four month hold period under Canadian Securities law expiring May
22, 2008. Cash finder's fees of $35,375 in cash were paid in connection with
this offering.

- 45 -

---

During the year ended December 31, 2007, we completed two
private placement financings, as follows:

| | • | On May 29, 2007, we issued 3,275,000 units at $0.10 per
      unit for proceeds of $327,500. Each unit consisted of one common share and
      one share purchase warrant with each warrant exercisable to acquire one
      common share at $0.15 per share for a term of two years. We incurred share
      issuance costs of $19,425 in connection with this private placement.              
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                 
| | • | On August 23, 2007, we issued 4,250,000 units at $0.10
      per unit for gross proceeds of 425,000. Each unit consisted of one common
      share and one share purchase warrant with each warrant exercisable to
      acquire one common share at $0.15 per share for a term of two years. We
      incurred share issuance costs of $15,000 in connection with this private
      placement.

During the year ended December 31, 2006, we completed the
offering of 1,075,000 units (each a Unit) at a price of $0.20 per Unit for
total proceeds of $215,000 on July 27, 2006. We completed this offering pursuant
to our Form SB-2 registration statement filed with the Securities and Exchange
Commission pursuant to the United States Securities Act of 1933 (the Act).
Each Unit comprised of one share, one-half of one Series A Warrant and one whole
series B Warrant. Each whole Class A Warrant will be exercisable to acquire one
share (each a Class A Warrant Share and together, the Class A Warrant
Shares) at $0.35 per share and will expire on the date that is one year from
the date of issuance. Each whole Class B Warrant will be exercisable to acquire
one share (each a Class B Warrant Share and together, the Class B Warrant
Shares) at $1.35 per share and will expire on the date that is four years from
the date of issuance. Each of the Class A Warrants and the Class B Warrants are
subject to accelerated exercise provisions. We applied the proceeds from this
financing for general corporate purposes.

The Class A warrants term was extended in 2007 from its
original expiration date of July 27, 2007 to January 27, 2008, all of which have
subsequently expired unexercised. The Class B warrants term of four years
remained unchanged.

Outstanding Payable

We arranged for a $200,000 convertible note during the fiscal
year ended December 31, 2004. On September 15, 2005 we completed an agreement
whereby we repaid $100,000 of the convertible note along with $35,000 accrued
interest and agreed to repay the remaining $100,000 within sixty days. With the
completion of the first payment the conversion feature of the debt to common
stock and share purchase warrants was cancelled. The $100,000 note is currently
in default and we accrued interest expense of $11,811 during the fiscal year
ended December 31, 2007.

Going Concern

We have not attained profitable operations and are dependent
upon obtaining financing to pursue any extensive exploration activities. For
these reasons our auditors stated in their report that they have substantial
doubt we will be able to continue as a going concern.

Future Financings

We will require additional financing in order to proceed with
the exploration of our mineral properties. We plan to complete private placement
sales of our common shares in order to raise the funds necessary to pursue our
plan of operations and to fund our working capital deficit. Issuances of
additional shares will result in dilution to our existing shareholders. We
currently do not have any arrangements in place for the completion of any
private placement financings and there is no assurance that we will be
successful in completing any private placement financings.

- 46 -

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Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.

C.          
Research and Development

Not applicable to our business.

D.          
Trend Information

We consider that our ability to raise additional financing in
order to complete our exploration programs and the plan of operations for our
mineral properties during our fiscal year 2007 and beyond will be impacted by a
number of factors, including the price of gold or other minerals, applicable
laws and regulations, political conditions, currency fluctuations, the hiring of
qualified people and obtaining necessary services in jurisdictions where the
Company operates. The current trends relating to these factors could change at
any time and negatively affect the Company's operations and business.

E.          
Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes of financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources, which individually or in
the aggregate is material to our investment.

F.          
Tabular Disclosure of Contractual Obligations

The following table outlines our current contractual
obligations as at December 31, 2007:

Payments
        due by periodTotal
      Less than 1 year
      1-3 years
      3-5 years
      More than 5 yearsLong-term Debt Obligations
      $-
      $-
      $-
      $-
      $-Capital (Finance) Lease Obligations
      $-
      $-
      $-
      $-
      $-Operating Lease Obligations
      $-
      $-
      $-
      $-
      $-Purchase Obligations
      $-
      $-
      $-
      $-
      $-Other Long-term Liabilities
      $-
      $-
      $-
      $-
      $-Total
      $-
      $-
      $-
      $-
      $-


G.          
Safe Harbor

This document may contain forward-looking statements. We desire
to take advantage of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and is including this statement for the express
purpose of availing ourselves of the protections of the safe harbor with respect
to all forward-looking statements. Several important factors, in addition to the
specific factors discussed in connection with such forward-looking statements
individually, could affect our future results and could cause those results to
differ materially from those expressed in the forward-looking statements
contained herein.

- 47 -

---

We 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 filings.

Therefore, we wish to caution each reader of this document to
consider carefully these factors as well as the specific factors that may be
discussed with each forward-looking statement in this document or disclosed in
our filings with the SEC as such factors, in some cases, could affect our
ability to implement our business strategy and may cause actual results to
differ materially from those contemplated by the statements expressed therein.
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 and Senior Management

The following table sets forth information relating to our
directors and senior management as at the date of :

Name
    Position
    Age
    
    Position Held SinceAndrew F. B. Milligan (1)
    Director and Chairman of the
      Board
    84
    
    April 12, 2004Paul F. Saxton
    President, Chief Executive
      Officer, Chief Operating Officer, Treasurer and Director
    61
    
    April 12, 2004James Chapman
    Director
    54
    
    April 12, 2004Andrew Bowering (1)
    Director
    47Marc LeBlanc (1)
    Director
    45
    
    February 28, 2008Nathalie Pilon
    Chief Financial Officer
    40
    
    March 20, 2008Jeffrey L. Wilson
    Vice-President - Exploration
    59
    
    May 12, 2005Mary Morvai
    Corporate Secretary
    51
    
    February 1, 2008


Notes:

|(1) | Member of Audit Committee and Compensation
    Committee.
|--- | ---------------------------------------------------------

The following is biographical information on each of the
persons listed above:

*Paul F. Saxton, President, Chief Executive Officer,
Chief Operating Officer, Treasurer and Director*

Mr. Saxton was appointed as a director of the Company on March
26, 2004. Our board of directors also appointed Mr. Saxton as our chief
executive officer and our chief financial officer as of March 26, 2004. Paul
Saxton is a mining engineer who also holds an MBA from the University of Western
Ontario. He has been active in the mining industry since 1969, holding various
positions including mining engineer, mine superintendent, President and CEO of
numerous Canadian mining companies. Following 10 years

- 48 -

---

with Cominco, Paul became Vice President and President of
Mascot Gold Mines Ltd., initially working on the design and construction of the
Nickel Plate mine in BC. Subsequently Paul became a Vice-President of Corona
Corporation where he was responsible for western operations and exploration for
the company and was instrumental in the re-opening of the Nickel Plate. In 1989,
Paul was appointed Senior Vice President of Viceroy Resource Corporation where
he was responsible for obtaining financing and the construction and operations
of the Castle Mountain mine in California. As President of Loki Gold Corporation
and Baja Gold Inc, Paul was responsible for bringing the Brewery Creek Gold mine
into production. Following his departure from Viceroy in 1998, Paul became
President of Standard Mining Corp., organizing the company and supervising its
exploration activities until 2001, when Standard Mining Corp. was merged with
Doublestar Resources Ltd.

Andrew F. B. Milligan, Chairman and Director

Mr. Andrew Milligan was appointed as one of our directors on
March 26, 2004. Our board of directors also appointed Mr. Milligan as our
chairman as of March 26, 2004. Mr. Milligan is a business executive who has
concentrated on mining ventures over the past 25 years. From 1984 to 1986 he was
President and Chief Executive Officer of Glamis Gold Ltd. In November 1986 he
was appointed President and Chief Executive Officer of Cornucopia Resources Ltd.
In 1998 and 1999 Cornucopia disposed of its gold mining interests and
subsequently merged with three other companies to form Quest Investment
Corporation. Mr. Milligan was a director of Quest until June, 2003. He is
currently a director of several mining companies trading on the TSX Venture
Exchange.

James Chapman, Director

Mr. Chapman was appointed as one of our directors on April 12,
2004. Mr. Chapman graduated from the University of British Columbia in 1976 with
a B.Sc. Geology degree and has focused on mineral exploration primarily for
junior mining companies and consulting groups. This experience has incorporated
all aspects of the industry from property evaluation, project generation through
implementation and report preparation for owners, clients and regulatory
authorities. Since 1982 he has operated as an independent consulting geologist
on projects including precious and base metals, uranium, diamonds and phosphate,
from reconnaissance level projects to deposit definition drill programs. He is a
Qualified Person under Canadian regulations, as defined by National Instrument
Policy 43.101.

Andrew W. Bowering, Director

Mr. Andrew Bowering was appointed as a director of the Company
on August 20, 2004. Mr. Bowering is a corporate administrator with 17 years
experience in the financing and management of exploration, development and
start-up companies. He has held senior executive positions and directorships in
numerous public companies involved in mineral exploration in Canada, the United
States, Mexico and China. Mr. Bowering has directly raised over $25 million for
mineral exploration and development. He has led several large acquisition
programs in Northwest British Columbia, Alberta and Central Mexico. In addition
to mineral exploration activities, Mr. Bowering was a founder and principle of
two publicly traded consumer product companies that operated worldwide. He has
an in-depth knowledge of securities markets, regulatory affairs and
investor/public relations.

Marc LeBlanc, Director

Mr. Marc LeBlanc was appointed as a director on March 26, 2008.
Mr. LeBlanc has been the VP Corporate Development Mercator Minerals Ltd. since
May 2007 and their Corporate Secretary since January 2005. Mr. LeBlanc is
currently a member in good standing with the Canadian Society of Corporate
Secretaries and the British Columbia Paralegal Association and a member of the
Prospectors and Developers Association of Canada. Mr. LeBlanc holds a Bachelor
of Arts Degree from Simon Fraser University and an Associates Degree in Legal
Studies from Capilano College. Prior to joining

- 49 -

---

the Corporation, Mr. LeBlanc provided consulting services to a
number of public mining companies in the areas of corporate finance and
regulatory affairs in the review and preparation of offering materials and
continuous disclosure filings pursuant to Canadian and US securities legislation
and regulation. From 2000 to May 2004, Mr. LeBlanc was employed with a number of
Vancouver law firms and was responsible for the preparation and review of all
continuous disclosure documents for publicly traded companies listed in North
America and Europe and ensuring the maintenance of these companies of the
requirements of Canadian and US securities legislation and regulations. Mr.
LeBlanc was formerly the Assistant Corporate Secretary of Miramar Mining
Corporation and Northern Orion Explorations Ltd. responsible for all corporate
and securities filings, disclosure requirements and exchange maintenance with
the Toronto Stock Exchange and the NASDAQ Stock Market. Mr. LeBlanc is and has
been a director or officer of a number of public mining and industrial
companies.

Nathalie Pilon, Chief Financial Officer

Ms. Pilon was appointed as our Chief Financial Officer on March
20, 2008. Ms. Pilon holds a CMA designation and obtained her bachelors degree
in Business Administration from Sherbrooke University in 1990. Ms. Pilon is a
financial reporting consultant for a number of listed companies on both Canadian
and US exchanges. She focuses on complementing the existing financial teams by
providing expertise in various accounting and financial reporting areas.

Jeffrey L. Wilson, Vice-President - Exploration

Mr. Wilson has been appointed as our Vice President -
Exploration on May 25, 2004. Mr. Wilson has twenty-seven years of professional
exploration experience in the United States, Mexico and Central America with
emphasis on gold. He served as Director of Exploration for Echo Bay Exploration
Inc. for eleven years, first in western U.S. and later in Mexico and Central
America. He earlier served as Exploration Manager, Western U.S., with Tenneco
Minerals Company, with most projects in Nevada. Mr. Wilson earned his MSc. in
Geology from the University of Southern California.

Mary Morvai, Corporate Secretary

Ms. Morvai is an Office Administrator who has over 25 years of
experience. From 2004 to 2006, she was a Contract Administrator for MacDonald
Dettwiler in Richmond, BC. From 2006 to 2007, she was at Mundoro Mining Inc. and
was appointed Corporate Secretary. She is currently Office Manager and Corporate
Secretary of Lincoln Gold Corporation.

Certain of Lincoln's directors and officers are part-time and
serve as officers and/or directors of other resource exploration companies and,
as such, are engaged in, and will continue to be engaged in, the search for
additional resource opportunities on behalf of such other companies. In
particular, the success of Lincoln and its ability to continue to carry on
operations is dependent upon its ability to retain the services of certain
directors and officers of the Company.

B.          
Compensation

Executive Compensation

The Corporation has three (3) executive officers. During the
Corporations financial year ended December 31, 2007 the aggregate direct
remuneration paid or payable to the Corporations executive officers by the
Corporation and its subsidiaries, all of whose financial statements are
consolidated with those of the Corporation, was $54,300.

Named Executive Officer includes Mr. Paul Saxton acted as our
Chief Executive Officer and Chief Financial Officer during the financial year
ended December 31, 2007. None of our executive officers

- 50 -

---

received salary and bonus exceeding $150,000. The compensation
paid to our Named Executive Officer during the three most recently completed
financial years of December 31 is as set out below:

Summary Compensation Table

NAMED EXECUTIVE OFFICERS Name
        and Principal Position
      Year
      Annual
        Compensation
      Long
        Term Compensation
      All Other Compen- sation
        ($)Awards
      PayoutsSalary ($)
      Bonus ($)
      Other Annual Compen -sation
        ($)
      Securities Under Options/SA RsGranted
        (#)
      Shares
        or Units Subject to Resale Restrictions ($)
      LTIP Payouts ($)Paul F. Saxton 
        President, Chief 
        Executive Officer, Chief 
        Financial Officer and 
        Chief Operating Officer
      2007 
        2006 
        2005
      $22,500 
        $20,545 
        $32,240
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      600,000 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil


Notes:

|(1) | Nathalie Pilon was appointed as Chief Financial Officer
      of the Corporation on March 20, 2008.
|--- | ---------------------------------------------------------------------------------------------------

Long-Term Incentive Plan Awards

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

Options

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

Option Grants During the Most Recently Completed Financial
Year

NAMED
      EXECUTIVE OFFICERS
    Securities
      Under Options/ Granted (#)
    % of Total
      Options Granted to Employees in
      Financial Year
    Exercise
      or Base Price ($/Security)
    Market Value of
      Securities Underlying Options on the Date
      of Grant ($/Security)
    Expiration DatePaul F. Saxton President, Chief Executive Officer,
      Chief Financial Officer and Chief Operating Officer
    600,000
    24.5%
    $0.25 per share
    $0.18 per share
    September 25, 2010


No options were exercised by the Named Executive Officers
during the financial year ended December 31, 2007. The values of outstanding
options at December 31, 2007 were as follows:

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Aggregate Option Exercises During the Most Recently Completed
Financial Year and Financial Year-End Option Values

NAMED
      EXECUTIVE OFFICERS Name
    Securities
      Acquired on Exercise (#)
    Aggregate
      Value Realized ($)
    Unexercised
      Options/SARs at FY- End (#)
      Exercisable/ Unexercisable
    Value of Unexercised in-the-Money
      Options/SARs at FY- End ($)
      Exercisable/ UnexercisablePaul F. Saxton President, Chief Executive Officer,
      Chief Financial Officer and Chief Operating Officer
    Nil
    Not Applicable
    600,000/Nil
    $Nil/$N/A


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

Termination of Employment, Change in Responsibilities and
Employment Contracts

There is no written employment contract between the Corporation
and any Named Executive Officer.

There are no compensatory plan(s) or arrangement(s), with
respect to any Named Executive Officer resulting from the resignation,
retirement or any other termination of employment of the officers employment or
from a change of any Named Executive Officers responsibilities following a
change in control.

Compensation of Directors

There are no arrangements under which directors were
compensated by the Corporation and its subsidiaries during the most recently
completed financial year for their services in their capacity as directors or
consultants.

The following directors received options under the share option
plan in their capacity as a director during the financial year ended December
31, 2007:

Option Grants During the Most Recently Completed Financial
Year

Name of Director
      Securities Under Options Granted
      (#)
      Exercise or Base Price
      ($/Security)
      Market Value of Securities Underlying Options on
      the Date of Grant ($/Security)
      Expiration DateJames Chapman, Director
    300,000
    $0.25 per Share
    $0.18 per share
    September 25, 2010Andrew Bowering, Director
    300,000
    $0.25 per Share
    $0.18 per share
    September 25, 2010Andrew F. Milligan, Director
    300,000
    $0.25 per Share
    $0.18 per share
    September 25, 2010


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Securities Authorized For Issuance Under Equity Compensation
Plans

The Corporation has in place a share option plan initially
adopted in 2005 (the Plan). The Plan was amended on September 25, 2007
adjusting the maximum number of Common Shares available to be granted from
2,000,000 Common Shares to 2,500,000 Common Shares. The Plan has been
established to provide incentive to qualified parties to increase their
proprietary interest in the Corporation and thereby encourage their continuing
association with the Corporation. The Plan is administered by the directors of
the Corporation. The Plan provides that options will be issued pursuant to
option agreements to directors, officers, employees or consultants of the
Corporation or a subsidiary of the Corporation. All options expire on a date not
later than 10 years after the issuance of such option. There are currently
options outstanding to purchase an aggregate of 2,450,000 Common Shares.

The following table sets out equity compensation plan
information as at the end of the financial year ended December 31, 2007.

Equity Compensation Plan Information

Number of securities to
      be issued upon exercise of outstanding options,
      warrants and rights
      Weighted-average
      exercise price of outstanding options,
      warrants and rights
      Number of securities remaining available for
      future issuance under equity compensation
      plans (excluding securities reflected in
      column (a))Plan
      Category
    (a)
    (b)
    (c)Equity compensation plans approved by securityholders -
    Nil
    N/A
    NilEquity compensation plans not approved by
      securityholders (the Plan)
    2,450,000
    $0.25
    50,000Total
      2,450,000
      $0.25
      50,000


Indebtedness Of Directors And Executive Officers

No directors, proposed nominees for election as directors,
executive officers or their respective associates or affiliates, or other
management of the Corporation were indebted to the Corporation as of the end of
the most recently completed financial year or as at the date hereof.

Long-Term Incentive Plan Awards

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

Pension, Retirement or Similar Benefits

We do not have any amounts set aside or accrued to provide for
pension, retirement or similar benefits.

C.          
Board Practices

All of our directors are elected annually by the shareholders
and hold office until the next annual

- 53 -

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meeting of shareholders or until their successors are duly
elected and qualified, unless they sooner resign or cease to be directors in
accordance with our By-Laws. Our last annual meeting was held on June 26, 2008.
Our officers are appointed by the Board of Directors.

Directors Service Contracts

None of the service contracts of any of Lincoln's directors
contain provisions for benefits upon termination of such director's service.

Committees of the Board of Directors

The Board has appointed an Audit Committee and a Compensation
Committee to date.

Audit Committee

The Board has a charter for the Audit Committee to follow in
carrying out its audit and financial review functions. The Audit Committee
reviews all financial statements of the Corporation prior to their publication,
reviews audits, considers the adequacy of audit procedures, recommends the
appointment of independent auditors, reviews and approves the professional
services to be rendered by them and reviews fees for audit services. The charter
has set criteria for membership which all members of the Audit Committee are
required to meet consistent with Multilateral Instrument MI 52-110 and other
applicable regulatory requirements. The Audit Committee, as needed, meets
separately (without management present) with the Corporations auditors to
discuss the various aspects of the Corporations financial statements and the
independent audit.

Composition of the Audit Committee

The following are the members of the Committee:

|Andrew Bowering | Independent(1)              | Financially
      literate(1)
|--------------- | --------------------------- | -----------------------------
|                |                             |                              
|Marc LeBlanc    | Independent(1)              | Financially
      literate(1)
|                |                             |                              
|Andrew Milligan | Not
      Independent(1)(2) | Financially
      literate(1)

|(1) | As defined by Multilateral Instrument 52-110 (MI
        52-110).                                    
|--- | -------------------------------------------------------------------------------------------------------
|(2) | Andrew Milligan is not considered independent under
        MI 52-110 as he is the Chairman of Lincoln.

Compensation Committee

The Board has adopted a charter for the Compensation Committee.
The members of the compensation committee are Andrew F.B. Milligan, Andrew
Bowering and Marc LeBlanc. A majority of the members of the compensation
committee are independent members of the board of directors of the Corporation.

The function of the Compensation Committee is to review, on an
annual basis, the compensation paid to the Corporations executive officers and
to the Directors, to review the performance and compensation paid to the
Corporations executive officers and to make recommendations on compensation to
the Board. In addition, the Committee will review annually the compensation
plans for the Corporations non-executive staff.

Other Board Committees

The Board has no other committees other than the audit
committee and the compensation committee.

- 54 -

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D.          
Employees

At the date of filing of , we had no full-time employees or
part-time employees. We have no labor unions at this time. Our officers provide
their services as consultants.

E.          
Share Ownership

Shares

The shareholdings of our officers and directors are set forth
below as at June 24, 2008.

Name of Nominee; Current Position with the
      Corporation and Province and Country of Residence
      Number of Common Shares
      Percentage of Outstanding
      Common Shares Owned(1)(2)Paul F. Saxton President, Chief Executive
      Officer, Chief Operating Officer, Treasurer and Director British
      Columbia, Canada
    4,500,000
    8.3%Andrew F. B. Milligan Chairman and Director
      British Columbia, Canada
    2,065,000
    3.8%James Chapman Director British Columbia,
      Canada
    700,000
    1.3%Andrew Bowering Director British Columbia,
      Canada
    1,000,000
    1.8%Marc LeBlanc(7)Director British
      Columbia, Canada
    Nil
    NilNathalie Pilon(8)Chief Financial
      Officer British Columbia, Canada
    Nil
    NilJeffrey Wilson VP-Exploration Nevada, USA
    750,000
    1.4%Mary Morvai Corporate Secretary British
      Columbia, Canada
    Nil
    Nil


Notes

|1. | The information as to Common Shares beneficially owned or
      controlled is not within the knowledge of the management of the
      Corporation and has been furnished by the respective nominees.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                     
|2. | Based on 54,258,666 common shares issued and outstanding
      as of June 24, 2008.                                                                                                                 

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Options

Details of the stock options held by our officers and directors
are set forth below as at June 24, 2008.

Name and Position
      Grant Date
      Expiry Date
      Exercise Price
      TotalPaul F. Saxton President, Chief Executive Officer,
      Chief Operating Officer, Treasurer and Director British
      Columbia, Canada
    September 25, 2007
    September 25, 2010
    $0.25
    600,000Andrew F. B. Milligan Chairman and Director British
      Columbia, Canada
    September 25, 2007
    September 25, 2010
    $0.25
    300,000James Chapman Director British Columbia, Canada
    September 25, 2007
    September 25, 2010
    $0.25
    300,000Andrew Bowering Director British Columbia, Canada
    September 25, 2007
    September 25, 2010
    $0.25
    300,000Jeffrey Wilson VP-Exploration Nevada, USA
    September 25, 2007
    September 25, 2010
    $0.25
    500,000Mary Morvai Corporate Secretary British Columbia,
      Canada
    September 25, 2007
    September 25, 2010
    $0.25
    50,000Total:
    
    
    
    2,050,000


Each option may be exercised to purchase one of our common
shares at the exercise price.

Warrants

Details of the share purchase warrants held by our officers and
directors are set forth below as at June 24, 2008.

Name and Position
      Grant Date
      Expiry Date
      Exercise Price
      TotalAndrew Milligan Chairman and Director
    May 14, 2007
    May 14, 2009
    $0.15
    450,000Total:
    
    
    
    450,000


Each warrant may be exercised to purchase one of our common
shares at the exercise price.

Stock Option Plan

On May 28, 2008, our board of directors adopted a new 10%
rolling stock option plan (the Option Plan) to replace our 2005 stock option
plan, as amended. The New Stock Option Plan was ratified and approved by the
shareholders at Lincolns annual general meeting held on June 26, 2008.

- 56 -

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Under the Option Plan, a maximum of 10% of the issued and
outstanding common shares of the Corporation at the time an option is granted,
less Common Shares reserved for issuance under share compensation arrangements
of the Corporation other than the Option Plan, will be reserved for options to
be granted at the discretion of the Corporations board of directors to eligible
optionees (the Optionees). This type of Option Plan is called a rolling
plan. During the Corporation's financial year ended December 31, 2007, and to
the date of the mailing of this Information Circular, options to purchase an
aggregate of 2,450,000 Common Shares have been granted by the Corporation,
representing approximately 3.2% of Common Shares outstanding. The Option Plan
will be subject to restrictions that provide that insiders may not be, as a
group, issued in excess of 10% of the issued Common Shares within any 12 month
period. The number of common shares issuable to insiders as a group under the
option plan, when combined with common shares issuable to insiders under all of
the Corporations other security based compensation plans, may not exceed 10% of
the Corporations issued common shares and no exercise price of an option
granted to an insider may be reduced nor an extension to the term of an option
granted to an insider extended without further shareholders approval.

The material terms of the Option Plan include the following
provisions:

- the participants in the Option Plan are the directors, executive officers,
  employees and other service providers of the Corporation;
- the Option Plan is administered by the directors of the Corporation;
- the exercise price of stock options granted under the Option Plan, as
  determined by the Board in its sole discretion, shall not be less than the
  "market price" of the shares (as defined by the policies of the TSX Venture)
  or, if the shares are not listed for trading on the TSX Venture, then such
  other exchange or quotation system on which the shares are listed or quoted
  for trading;
- all options granted under the Option Plan expire on a date not later than 5
  years after the issuance of such options by the Board;
- upon expiry of an option, or in the event an option is otherwise terminated
  for any reason, without having been exercised in full, the number of shares in
  respect of the expired or terminated option shall again be available for the
  purposes of the Option Plan;
- if the option holder ceases to be a director of Corporation or its
  subsidiaries or ceases to be employed by the Corporation or its subsidiaries
  (other than by reason of death or cause), as the case may be, then the option
  granted shall expire no later than the (i) the original expiry date of the
  option, or (ii) the 90th day following the date that the option holder ceases
  to be a director or ceases to be employed by the Corporation or its
  subsidiaries, subject to the terms and conditions set out in the Option Plan,
  and in the event of dismissal of the option holder from employment or service
  for cause, all options held by the option holder, whether or not vested at the
  date of dismissal, will immediately terminate without any right of the option
  holder to exercise any of the options;
- In the case of the death of an option holder, any vested option held by him
  at the date of death will become exercisable by the optionees lawful personal
  representatives, heirs or executors until the earlier of one year after the
  date of death of the optionholder and the date of expiration of the term
  otherwise applicable to such option.
- options granted pursuant to the Option Plan will be non-assignable and may
  be subject to vesting provisions determined by the Board;
- the Corporation does not offer financial assistance in respect of the
  exercise of options.

- 57 -

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ITEM
7           MAJOR SHAREHOLDER
AND RELATED PARTY TRANSACTIONS

A.          
Major Shareholders

Major Shareholders

We are a publicly-held corporation, with our shares held by
residents of the United States, Canada and other countries. To the best of our
knowledge, no person, corporation or other entity beneficially owns, directly or
indirectly, or controls more than 5% of our common shares, except as follows:

Title of Class
      Name and residential
      jurisdiction of Beneficial Owner
      Number of Common Shares
      Percentage of Common
      Shares(1)Common
    Paul F. Saxton(2)British Columbia, Canada
    5,100,000(2)
    9.3%Common
    Joe Eberhard Birmensdorf,
      Switzerland
    3,000,000
    5.5%Common
    Michael
      Baybak(3), California, U.S.A.
    3,166,666(3)
    5.8%Common
    Sprott Asset Management
      Inc.(4)Toronto, Canada
    3,400,000(4)
    6.3%


|(1) | Based on 54,285,666 of our common shares issued and
      outstanding as of June 24, 2008. Based on beneficial share ownership data
      as of December 31, 2007. For these purposes, beneficial ownership means
      the sole or shared power to vote or direct the voting or to dispose or
      direct the disposition of any security. Unless otherwise indicated, each
      shareholder listed has sole voting or dispositive power with respect to
      such common shares. Each of our common shares entitles the holder thereof
      to one vote.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2) | Consists of 4,500,000 shares held by Mr. Saxton and
      600,000 shares that can be acquired by Mr. Saxton upon exercise of options
      to purchase shares held by Mr. Saxton within 60 days of the date hereof.
      Mr. Saxton is a director and an officer of the Company.                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3) | Windsor Capital Corporation owns directly 2,500,000
      shares in the capital of the Company. Michael Baybak beneficially owns a
      100% interest in Windsor Capital Corporation.                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(4) | Consists of 1,700,000 shares held by Sprott Asset
      Management Inc. and 1,700,000 shares issuable upon exercise of 1,700,000
      share purchase warrants held by Sprott Asset Management Inc. which are
      exercisable within 60 days hereof.                                                                                                                                                                                                                                                                                                          

U.S. Shareholders

As of March 2008, approximately 33% of our common shares were
held by approximately 1,215 holders of record in the United States .

Transfer Agent

Our securities are recorded in registered form on the books of
our transfer agent, Pacific Corporate Trust Company, located at Suite 200  510
Burrard Street, Vancouver, British Columbia, V6C 3B9. However, the majority of
such shares are registered in the name of intermediaries such as brokerage
houses and clearing houses (on behalf of their respective brokerage clients). We
do not have knowledge or access to the identities of the beneficial owners of
such shares registered through intermediaries.

- 58 -

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Control

To the best of our knowledge, we are not directly or indirectly
owned or controlled by any other corporation, by any foreign government or by
any other natural or legal person, severally or jointly.

Insider Reports under the British Columbia Securities Act

Under the British Columbia Securities Act, insiders
(generally officers, directors and holders of 10% or more of our shares) were
required to file insider reports of changes in their ownership in the first ten
days of the month following a trade in our securities. Copies of such reports
are available for public inspection at the offices of the British Columbia
Securities Commission, 9th Floor, 701 West Georgia Street, Vancouver,
British Columbia, V7Y 1L2 (telephone (604) 899-6500) or at the British Columbia
Securities Commission website (www.bcsc.bc.ca). Since 2002, in British Columbia all
insider reports must be filed electronically ten days following the date of the
trade at www.sedi.ca. The public is able to
access these reports at www.sedi.ca.

B.          
Related Party Transactions

No director or senior officer, and no associate or affiliate of
the foregoing persons, and no insider has or has had any material interest,
direct or indirect, in any transactions, or in any proposed transaction, which
in either such case has materially affected or will materially affect us or our
predecessors during each of the year ended December 31, 2007 except as follows:

- During the year ended December 31, 2007, we paid management fees and
  consulting fees of $13,800 (2006  $42,250; 2005 - $49,098) and rent, included
  in office, of $2,700 (2006 - $3,300; 2005 - $3,000) to the Vice President of
  the Company and management fees of $22,500 (2006 - $20,545; 2005 - $26,750) to
  company owned by the President of the Company.
- We also paid $18,000 (2006 - $1,400; 2005  2,550) consulting fees to
  Stephen Chi, a former director of the Company.
- As at December 31, 2007, we owed $1,155 (2006 - $6,760) to various
  directors and officers of the Company which is included in accounts payable.

These transactions are in the normal course of operations and
are measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.

C.          
Interests of Experts and Counsel

Not applicable.

- 59 -

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ITEM
8           FINANCIAL
INFORMATION

A.          
Consolidated Statements and Other Financial Information

Financial Statements

The financial statements required as part of this Annual Report
are filed under Item 17 of this Annual Report.

Legal Proceedings

We are not a party to any legal or arbitration proceedings nor,
to our knowledge, are any such proceedings contemplated.

Dividends

We have not paid any dividends on our common shares since
incorporation. Our management anticipates that we will retain all future
earnings and other cash resources for the future operation and development of
our business. We do not intend to declare or pay any cash dividends in the
foreseeable future. Payment of any future dividends will be at our board of
directors discretion after taking into account many factors including our
operating results, financial condition and current and anticipated cash needs.

B.          
Significant Changes

We have not experienced any significant changes since the date
of the financial statements included herein except as disclosed in Annual
Report.

- 60 -

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ITEM
9           THE OFFER AND
LISTING

A.          
Offer and Listing Details

This Form 20-F is filed as an annual report under the Exchange
Act and does not relate to a new offer of securities and accordingly the
information called for is not required, other than the price history information
below.

The our common shares are quoted on the Over The Counter
Bulletin Board (OTCBB) in the United States of America. Over the counter
quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission and may not necessarily represent actual transactions. Our common
shares are quoted under the symbol LGCPF.

B.          
Plan of Distribution

This Form 20-F is filed as an annual report under the Exchange
Act and does not relate to a new offer of securities and accordingly, the
information called for is not required.

C.          
Markets

Our common shares are traded in United States on the OTCBB.

D.          
Selling Shareholders

This Form 20-F is filed as an annual report under the Exchange
Act and accordingly the information called for in Item 9.D is not required.

E.          
Dilution

This Form 20-F is filed as an annual report under the Exchange
Act and accordingly the information called for in Item 9.E is not required.

F.          
Expenses of the Issue

This Form 20-F is filed as an annual report under the Exchange
Act and accordingly the information called for in Item 9.F is not required.

- 61 -

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ITEM 10        
ADDITIONAL INFORMATION

A.          
Share Capital

This Form 20-F is filed as an annual report under the Exchange
Act and accordingly the information called for in Item 10.A is not required.

B.          
Memorandum and Articles of Incorporation

We incorporated on February 17, 1999 as Braden Technologies,
Inc. under the laws of the State of Nevada, USA. We changed our name to Lincoln
Gold Corporation following the completion of our acquisition of and merger with
Lincoln Gold Corp., a Nevada corporation, on March 26,2004 under Chapter 92A of
the Nevadas Revised Statutes. On November 20, 2007, we changed our jurisdiction
of incorporation from Nevada to the Canadian federal jurisdiction under the
Canada Business Corporation Act.Our corporate constituting documents are
comprised of our Articles of Association ("Articles") and our By-Laws
(By-Laws). A copy of the Articles and By-laws are filed with this Initial
Registration Statement on Form 20-F as exhibits (See Item 19).

The following is a summary of certain material provisions of
our Articles:

*1.*         
*Objects and Purposes*

Our Articles do not specify objects or purposes. We are
entitled under the CBCA to carry on all lawful businesses which can be carried
on by a natural person.

*2.*         
*Directors*

Director's power to vote on a proposal, arrangement or
contract in which the director is interested.

According to the CBCA, a director or an officer of a
corporation shall disclose to the corporation, in writing or by requesting to
have it entered in the minutes of meetings of directors or of meetings of
committees of directors, the nature and extent of any interest that he or she
has in a material contract or material transaction, whether made or proposed,
with the corporation, if the director or officer

| | (a) | is a party to the contract or transaction;                                                                                     
| | --- | -------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                
| | (b) | is a director or an officer, or an individual acting in a
      similar capacity, of a party to the contract or transaction; or
| |     |                                                                                                                                
| | (c) | has a material interest in a party to the contract or
      transaction.                                                       

The CBCA requires that the above disclosure shall be made, in
the case of a director,

| | (a) | at the meeting at which a proposed contract or
      transaction is first considered;                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                               
| | (b) | if the director was not, at the time of the meeting,
      interested in a proposed contract or transaction, at the first meeting
      after he or she becomes so interested;
| |     |                                                                                                                                                                               
| | (c) | if the director becomes interested after a contract or
      transaction is made, at the first meeting after he or she becomes so
      interested; or                        
| |     |                                                                                                                                                                               
| | (d) | if an individual who is interested in a contract or
      transaction later becomes a director, at the first meeting after he or she
      becomes a director.                

- 62 -

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Under the CBCA, if a material contract or transaction is one
that, in the ordinary course of our business, would not require approval by the
directors or shareholders, a director or officer shall disclose, in writing to
us or request to have it entered into the minutes of meetings of directors or of
meetings of committees of directors, the nature and extent of his interest
immediately after he or she becomes aware of the interest.

Under the CBCA, a general notice to the directors declaring
that a director or officer is to be regarded as interested, for any of the
following, is a sufficient declaration of interest:

| | (a) | the director or officer is a director or officer, or
      acting in a similar capacity, of a party to the contract or transaction,
      or has a material interest in a party to the contract or
    transaction;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                    
| | (b) | the director or officer has a material interest in the
      party; or                                                                                                                                             
| |     |                                                                                                                                                                                                                    
| | (c) | there has been a material change in the nature of the
      directors or the officer s interest in the
party.                                                                                                    

The CBCA further provides that a director required to make the
above disclosure shall not vote on any resolution to approve the contract or
transaction unless the contract or transaction:

| | 1. | relates primarily to his or her remuneration as a
      director, officer, employee or agent of the corporation or an
      affiliate;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                       
| | 2. | is for indemnity or insurance, as provided for in the
      CBCA; or                                                                  
| |    |                                                                                                                                       
| | 3. | is with an affiliate.                                                                                                                 

The CBCA provides that if a director or an officer fails to
comply with the provisions of the CBCA related to disclosure of interests, a
court may set aside the contract or transaction on any terms that it thinks fit,
or may require the director or officer to account to the corporation for any
profit or gain realized on it.

Under the CBCA, a contract or transaction, for which disclosure
is required, is not invalid, and the director or officer is not accountable for
any profit realized, if the disclosure requirements of the CBCA are met, the
directors approved the transaction and the contract or transaction was
reasonable and fair to the corporation. Even if these requirements are not met
the contract or transaction is not invalid, and the director or officer is not
accountable for any profit realized, if the director or officer acted in good
faith, the contract or transaction was reasonable and fair to the corporation,
and after sufficient disclosure to the shareholders, the contract or transaction
is approved or confirmed by special resolution at a meeting of the
shareholders.

Directors' power, in the absence of an independent
quorum, to vote compensation to themselves or any members of their
body.

Our By-Laws provide that, subject to any unanimous shareholder
agreements, the directors shall be paid such remuneration for their services as
the board may determine from time to time. The CBCA provides that directors of a
corporation may fix the remuneration of the directors, officers and employees of
the corporation.

Borrowing powers exercisable by the directors.

Under our By-Laws, our board may, from time to time:

- 63 -

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| | 1. | borrow money upon our credit;                                                                                                                                                                                                                                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | 2. | issue, reissue, sell, pledge or hypothecate bonds,
      debentures, notes or other evidence of indebtedness or guarantee of ours,
      whether secured or unsecured;                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | 3. | give a guarantee on our behalf to secure performance of
      an obligation of any person; and                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                        
| | 4. | mortgage, hypothecate, pledge or otherwise create a
      security interest in or charge upon all or any of our real or personal
      property, owned or subsequently acquired by way of mortgage, hypothec,
      pledge or otherwise, to secure payment of any such evidence of
      indebtedness or guarantee whether present or future of
  ours.

Retirement and non-retirement of directors under an age
limit requirement.

There are no such provisions applicable to us under our
Articles or the CBCA.

Number of shares required for a director's
qualification.

Directors need not own any of our shares in order to qualify as
directors.

*3.*         
  *Rights, Preferences and Restrictions Attaching to Each Class of Shares*

*Dividends*

Dividends may be declared by our Board and paid to our
shareholders according to their respective rights and interests in us. The CBCA
provides that no dividend may be declared or paid if we are, or would after the
payment , be unable to pay our liabilities as they become due; or if the
realizable value of our assets would thereby be less than the aggregate of our
liabilities and stated capital of all classes.

Voting Rights

Each of our shares is entitled to one vote on matters to which
common shares ordinarily vote including the annual election of directors, the
appointment of auditors and the approval of corporate changes. Our directors are
elected yearly to hold office until the close of the next annual meeting of
shareholders. Where directors fail to be elected at any such meeting then the
incumbent directors will continue in office until there successors are elected.
We do not permit cumulative voting rights.

Rights to Profits and Liquidation Rights

All of our common shares participate rateably in any of our net
profit or loss and shares participate rateably in any of our available assets in
the event of a winding up or other liquidation.

Redemption

We currently have no redeemable securities authorized or
issued.

Sinking Fund Provisions

We have no sinking fund provisions or similar obligations.

Shares Fully Paid

All of our shares must, by applicable law, be issued as fully
paid for cash, property or services. They are therefore non-assessable and not
subject to further calls for payment.

- 64 -

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Pre-emptive Rights

We do not have any pre-emptive rights which provide a right to
any person to participate in any equity or other securities offering.

With respect to the rights, preferences and restrictions
attaching to our common shares, there are generally no significant differences
between Canadian and United States law as the shareholders, or the applicable
corporate statute, will determine the rights, preferences and restrictions
attaching to each class of our shares.

*4.*         
*Changes to Rights and Restrictions to Shares*

The CBCA provides that we may by a special resolution amend our
articles to:

| | (a) | change any maximum number of shares that we are
      authorized to issue;                                                                                                                                                                                     
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                
| | (b) | create new classes of shares;                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                
| | (c) | reduce or increase our stated capital, if our stated
      capital is set out in our Articles;                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                
| | (d) | change the designation of all or any of our shares, and
      add, change or remove any rights, privileges, restrictions and conditions,
      including rights to accrued dividends, in respect of all or any of our
      shares, whether issued or unissued;
| |     |                                                                                                                                                                                                                                                                
| | (e) | change the shares of any class or series, whether issued
      or unissued, into a different number of shares of the same class or series
      or into the same or a different number of shares of other classes or
      series;                             
| |     |                                                                                                                                                                                                                                                                
| | (f) | divide a class of shares, whether issued or unissued,
      into series and fix the number of shares in each series and the rights,
      privileges, restrictions and conditions thereof;                                                                     
| |     |                                                                                                                                                                                                                                                                
| | (g) | authorize the directors to divide any class of unissued
      shares into series and fix the number of shares in each series and the
      rights, privileges, restrictions and conditions thereof;                                                            
| |     |                                                                                                                                                                                                                                                                
| | (h) | authorize the directors to change the rights, privileges,
      restrictions and conditions attached to unissued shares of any
    series.                                                                                                                     

The CBCA also provides that we may, with respect to any of our
issued shares which remain outstanding and are held by more than one person, by
special resolution, amend our articles to constrain:

| | (a) | the issue or transfer of shares of any class or series to
      persons who are not resident Canadians;                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                    
| | (b) | the issue or transfer of shares of any class or series to
      enable us or any of our affiliates or associates to qualify under any
      prescribed law of Canada or a province:
| |     |                                                                                                                                                                                    
| |     | (i)                                                                                                                                                                                
| |     |                                                                                                                                                                                    
| |     | (ii)                                                                                                                                                                               
| |     |                                                                                                                                                                                    
| |     | (iii)                                                                                                                                                                              

- 65 -

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| | (c) | the issue, transfer or ownership of shares of any class
      or series in order to assist us any of our affiliates or associates to
      qualify under any prescribed law of Canada or a province to receive
      licences, permits, grants, payments or other benefits by reason of
      attaining or maintaining a specified level of Canadian ownership or
      control;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                 
| | (d) | the issue, transfer or ownership of shares of any class
      or series in order to assist us to comply with any prescribed law;
    or                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                 
| | (e) | the issue, transfer or ownership of shares of any class
      or series to enable us to be a registered labour-sponsored venture capital
      corporation to meet certain requirements of the Income Tax
  Act.                                                                                                                                                                

The CBCA provides that the holder of shares of a class or
series are entitled to vote separately as a class or series on a proposal to
amend the articles to increase or decrease the number of authorized shares of
such class or a class having equal or superior privileges; reclassify or cancel
all or part of such class; add, change, or remove the rights, privileges,
restrictions of such class; increase the rights or privileges of a superior
class of shares; create a new class of shares equal to or superior to such
class; effect and exchange or create a right of exchange of all or part of the
shares of another class into the shares of such class; or, constrain the issue,
transfer or ownership of such class or remove such a constraint.

A special resolution is a resolution passed by not less than
two thirds of the votes cast by the shareholders who voted in respect of that
resolution or signed by all the shareholders who were entitled to vote on that
resolution.

Generally, there are no significant differences between
Canadian and United States law with respect to changing the rights of
shareholders as most state corporation statutes require shareholder approval
(usually a majority) for any such changes that affect the rights of
shareholders.

*5.*         
*Meetings of Shareholders*

Our By-Laws provide that we must hold our annual general
meeting not more than 15 months from our last annual general meeting, but not
later than six months after the end of our preceding financial year. Our Board
also has the power to call special meetings. Our By-Laws provide that meetings
shall be held at our registered office, or elsewhere in Canada as our Board may,
from time to time, determine. Meetings may also be held at a location outside
Canada, if specified in the Articles or if all of the shareholders entitled to
vote thereat agree that the meeting is to be held at that place. Shareholder
meetings are governed by our Articles and our By-Laws but many important
shareholder protections are also contained in provincial securities legislation
and the CBCA. Our By-Laws provide that, if we are not a distributing
corporation, we will provide at least 10 days notice of a shareholder meeting.
If we are a distributing corporation the CBCA requires not less than 21 days and
not more than 60 days notice of a shareholder meeting. Our directors may fix in
advance a date, which is no fewer than 21 days prior to the date of the meeting
for the purpose of determining shareholders entitled to receive notice of and to
attend and vote at a general meeting.

The provincial securities legislation and the CBCA superimpose
requirements that generally provide that shareholder meetings require not less
than a 60 day notice period from initial public notice and that we make a
thorough advanced search of intermediary and brokerage registered shareholdings
to facilitate communication with beneficial shareholders so that meeting proxy
and information materials can be sent via the brokerages to unregistered but
beneficial shareholders. The form and content of information circulars, proxies
and like matters are governed by provincial securities legislation and the CBCA.
This legislation specifies the disclosure requirements for the proxy materials
and various corporate actions, background information on the nominees for
election for director, executive compensation paid in the previous year and full
details of any unusual matters or related party

- 66 -

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transactions. We must hold an annual shareholders meeting open
to all shareholders for personal attendance or by proxy at each shareholder's
determination.

Most state corporation statutes in the United States require a
public company to hold an annual meeting for the election of directors and for
the consideration of other appropriate matters. The state statutes also include
general provisions relating to shareholder voting and meetings. Apart from the
timing of when an annual meeting must be held and the percentage of shareholders
required to call an annual meeting, or an extraordinary meeting, there are
generally no material differences between Canadian and United States law
respecting annual meetings and extraordinary meetings.

*6.*         
*Rights to Own Securities*

There are no limitations under our Articles or in the CBCA that
address the right of persons who are not citizens of Canada to hold or vote
common shares.

*7.*         
*Restrictions on Changes in Control, Mergers, Acquisitions or Corporate
Restructuring of the Company*

Neither our Articles nor our By-Laws contain any provision that
would have the effect of delaying, deferring or preventing a change of control.
We have not implemented any shareholders' rights or other "poison pill"
protections against possible take-overs and we do not have any agreements which
are triggered by a take-over or other change of control. There are no provisions
in our Articles triggered by or affected by a change in outstanding shares which
gives rise to a change in control. There are no provisions in our material
agreements giving special rights to any person on a change in control.

The CBCA does not contain any provision that would have the
effect of delaying, deferring or preventing a change of control of a company.

Generally, there are no significant differences between
Canadian and United States law in this regard, as many state corporation
statutes also do not contain such provisions and only empower a company's board
of directors to adopt such provisions.

*8.*         
*Ownership Threshold Requiring Public Disclosure*

Neither our Articles nor our By-Laws require disclosure of
share ownership. Share ownership of director nominees must be reported annually
in proxy materials sent to our shareholders. There are no requirements under
Canadian corporate law to report ownership of shares but the provincial
securities legislation requires disclosure of trading by insiders (generally
officers, directors and holders of 10% of voting shares) within 10 days of a
trade. Controlling shareholders (generally those in excess of 20% of outstanding
shares) must provide seven days advance notice of share sales. All insider
trading reports filed by our insiders pursuant to Canadian securities
legislation are available on the Internet at www.sedi.ca.

Most state corporation statutes do not contain provisions
governing the threshold above which shareholder ownership must be disclosed.
United States federal securities laws require a company that is subject to the
reporting requirements of the Securities Exchange Act of 1934 to disclose, in
its annual reports filed with the Securities and Exchange Commission those
shareholders who own more than 5% of a corporation's issued and outstanding
shares.

*9.*         
*Differences in Law between the US and Ontario*

Differences in the law between the United States and Canada,
where applicable, have been explained above within each category.

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*10.*       
*Changes in the Capital of the Company*

There are no conditions imposed by our Articles which are more
stringent than those required by the CBCA.

Shareholder Rights Plan

The Board adopted a shareholder rights plan agreement (the
Rights Plan) effective May 28, 2008 (the Effective Date). The Rights Plan
was ratified by the shareholders of the Company effective June 26, 2008. The
objective of the Board in adopting the Rights Plan was to ensure the fair
treatment of Shareholders in connection with any take-over bid for the Common
Shares of the Company. The Rights Plan was not adopted in response to any
proposal to acquire control of the Company. The specific terms of the Rights
Plan will be reflected in an agreement to be finalized between the Company and
Pacific Corporate Trust Company, as Rights Agent, and expected to be dated
effective as of the Effective Date. The principal terms of the Rights Plan are
summarized below. The full text of the Rights Plan is attached to this Annual
Report as an exhibit.

The primary objective of the Rights Plan is to ensure that all
Shareholders of the Company are treated fairly in connection with any take-over
bid for the Company by (a) providing shareholders with adequate time to properly
assess a take-over bid without undue pressure and (b) providing the Board with
more time to fully consider an unsolicited take-over bid, and, if applicable, to
explore other alternatives to maximize shareholder value.

The following summary of the Rights Plan does not purport to be
complete and is qualified in its entirety by reference to the Rights Plan.

Issue of Rights

The Company will issue one right (a Right) in respect of each
Common Share outstanding at the Effective Date (the Record Time). The Company
will issue Rights on the same basis for each Common Share issued after the
Record Time but prior to the earlier of the Separation Time and the Expiration
Time (both defined below).

The Rights

Each Right will entitle the holder, subject to the terms and
conditions of the Rights Plan, to purchase additional Common Shares of the
Company after the Separation Time.

Rights Certificates and Transferability

Before the Separation Time, the Rights will be evidenced by
certificates for the Common Shares, and are not transferable separately from the
Common Shares. From and after the Separation Time, the Rights will be evidenced
by separate Rights Certificates, which will be transferable separately from and
independent of the Common Shares.

Exercise of Rights

The Rights are not exercisable before the Separation Time.
After the Separation Time and before the Expiration Time, each Right entitles
the holder to acquire one Common Share for the exercise price of $5.00 per share
(subject to certain anti-dilution adjustments). This exercise price is expected
to be in excess of the estimated maximum value of the Common Shares during the
term of the Rights Plan. Upon the occurrence of a Flip-In Event (defined below)
prior to the Expiration Time (defined below), each Right (other than any Right
held by an Acquiring Person, which will become null and void as a result of
such Flip-In Event) may be exercised to purchase that number of Common Shares
which have an aggregate market price equal to twice the exercise price of the
Rights for a price equal to the exercise price (subject to adjustment).
Effectively, this means a Shareholder of the Company (other than the Acquiring
Person) can acquire additional Common Shares from treasury at half their market
price.

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Definition of Acquiring Person

Subject to certain exceptions, an Acquiring Person is a person
who becomes the Beneficial Owner (defined below) of 20% or more of the Companys
outstanding Common Shares.

Definition of Beneficial Ownership

A person is a Beneficial Owner of securities if such person or
its affiliates or associates or any other person acting jointly or in concert
with such person, owns the securities in law or equity, and has the right to
acquire (immediately or within 60 days) the securities upon the exercise of any
convertible securities or pursuant to any agreement, arrangement or
understanding.

However, a person is not a Beneficial Owner under the Rights
Plan where:

| | (a) | the securities have been deposited or tendered pursuant
      to a tender or exchange offer or take-over bid, unless those securities
      have been taken up or paid for;                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                             
| | (b) | such person has agreed to deposit or tender the
      securities to a take-over bid pursuant to a permitted lock-up
      agreement;                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                             
| | (c) | such person (including a fund manager, trust company,
      pension fund administrator, trustee or non-discretionary client accounts
      of registered brokers or dealers) is engaged in the management of mutual
      funds, investment funds or public assets for others, as long as that
      person:

| | (i)   | holds those Common Shares in the ordinary course of its
      business for the account of others;                                                         
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                           
| | (ii)  | is not making a take-over bid or acting jointly or in
      concert with a person who is making a take-over bid; or                                       
| |       |                                                                                                                                                           
| | (iii) | such person is a registered holder of securities as a
      result of carrying on the business of or acting as a nominee of a
      securities depository.

Definition of Separation Time

Separation Time occurs on the tenth trading day after the
earlier of:

| | (a) | the first date of public announcement that a person has
      become an Acquiring Person;                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                            
| | (b) | the date of the commencement or announcement of the
      intent of a person to commence a take-over bid (other than a Permitted Bid
      or Competing Permitted Bid); and
| |     |                                                                                                                                                                            
| | (c) | the date on which a Permitted Bid or Competing Permitted
      Bid ceases to qualify as such;                                                                              

or such later date as determined by the Board.

Definition of Expiration Time

Expiration Time occurs on the date being the earlier of:

| | (a) | the time at which the right to exercise Rights is
      terminated under the terms of the Rights Plan;                                                           
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                  
| | (b) | immediately after the Companys annual meeting of
      Shareholders to be held in 2011 unless at such meeting the duration of the
      Rights Plan is extended.

Definition of a Flip-In Event

A Flip-In Event occurs when a person becomes an Acquiring
Person, provided the Flip-In Event is deemed to occur at the close of business
on the 10th day after the first date of a public announcement of facts
indicating that an Acquiring Person has become such. Upon the occurrence of a
Flip-In Event, any Rights that are beneficially owned by an Acquiring Person, or
any of its related parties to whom the Acquiring Person has transferred its
Rights, will become null and void and, as a result, the Acquiring

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Persons investment in the Company will be greatly diluted if a
substantial portion of the Rights are exercised after a Flip-In Event occurs.

Definition of Permitted Bid

A Permitted Bid is a take-over bid made by a person (the
Offeror) pursuant to a take-over bid circular that complies with the following
conditions:

| | (a) | the bid is made to all registered holders of Common
      Shares (other than the Offeror);                                                                                                                                                                                                                                                                                                                                                 
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (b) | the Offeror agrees that no Common Shares will be taken up
      or paid for under the bid for at least 60 days following the commencement
      of the bid and that no Common Shares will be taken up or paid for unless
      at such date more than 50% of the outstanding Common Shares held by
      Shareholders, other than the Offeror and certain related parties, have
      been deposited pursuant to the bid and not withdrawn;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (c) | the Offeror agrees that the Common Shares may be
      deposited to and withdrawn from the take-over bid at any time before such
      Common Shares are taken up and paid for; and                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (d) | if, on the date specified for take-up and payment, the
      condition in paragraph (b) above is satisfied, the bid shall remain open
      for an additional period of at least 10 business days to permit the
      remaining Shareholders to tender their Common
Shares.                                                                                                                                                                

Definition of Competing Permitted Bid

A Competing Permitted Bid is a take-over bid that:

| | (a) | is made while another Permitted Bid or Competing
      Permitted Bid has been made and prior to the expiry of that Permitted Bid
      or Competing Permitted Bid;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (b) | satisfies all the requirements of a Permitted Bid other
      than the requirement that no Common Shares will be taken up or paid for
      under the bid for at least 60 days following the commencement of the bid
      and that no Common Shares will be taken up or paid for unless at such date
      more than 50% of the outstanding Common Shares held by Shareholders, other
      than the Offeror and certain related parties, have been deposited pursuant
      to the bid and not withdrawn; and                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | contains the conditions that no Common Shares be taken up
      or paid for pursuant to the Competing Permitted Bid prior to the close of
      business on a date that is not earlier than the later of 35 days after the
      date of the Competing Permitted Bid and the earliest date on which the
      Common Shares may be taken up or paid for under any prior bid in existence
      at the date of such Competing Permitted Bid; and then only if, at the time
      that such Common Shares are first taken up or paid for, more than 50% of
      then outstanding Common Shares held by Shareholders, other than the
      Offeror and certain related parties, have been deposited pursuant to the
      Competing Permitted Bid and not withdrawn.

Redemption of Rights

All (but not less than all) of the Rights may be redeemed by
the Board with the prior approval of the Shareholders at any time before a
Flip-In Event occurs at a redemption price of $0.0001 per Right (subject to
adjustment). In addition, in the event of a successful Permitted Bid, Competing
Permitted Bid or a bid for which the Board has waived the operation of the
Rights Plan, the Company will immediately upon such acquisition and without
further formality, redeem the Rights at the redemption price. If the Rights are
redeemed pursuant to the Rights Plan, the right to exercise the Rights will,
without further action and without notice, terminate and the only right
thereafter of the Rights holders is to receive the redemption price.

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Waiver

Before a Flip-In Event occurs, the Board may waive the
application of the Flip-In provisions of the Rights Plan to any prospective
Flip-In Event which would occur by reason of a take-over bid made by a take-over
bid circular to all registered holders of Common Shares. However, if the Board
waives the Rights Plan with respect to a particular bid, it will be deemed to
have waived the Rights Plan with respect to any other take-over bid made by
take-over bid circular to all registered holders of Common Shares before the
expiry of that first bid. The Board may also waive the Flip-In provisions of
the Rights Plan in respect of any Flip-In Event provided that the Board has
determined that the Acquiring Person became an Acquiring Person through
inadvertence and has reduced its ownership to such a level that it is no longer
an Acquiring Person.

Term of the Rights Plan

Unless otherwise terminated, the Rights Plan will expire at the
Expiration Time (defined above).

Amending Power

Except for amendments to correct clerical or typographical
errors and amendments to maintain the validity of the Rights Plan as a result of
a change of applicable legislation or applicable rules or policies of securities
regulatory authorities, Shareholder (other than the Offeror and certain related
parties) or Rights holder majority approval is required for supplements or
amendments to the Rights Plan. In addition, any supplement or amendment to the
Rights Plan will require the written concurrence of the Rights Agent.

Rights Agent

The Rights Agent under the Rights Plan will be Pacific
Corporate Trust Company.

C.         Material
Contracts

For the two years immediately preceding December 31, 2007,
there were no material contracts entered into, other than contracts entered into
in the ordinary course of business, to which we were a party. For a description
of those contracts entered into in the ordinary course of business refer to Item
4B  Business Overview.

D.         Exchange
Controls

We are incorporated pursuant to the laws of the Canada
Business Corporations Act. There is no law or governmental decree or
regulation in Canada that restricts the export or import of capital, or affects
the remittance of dividends, interest or other payments to a non-resident holder
of our securities, other than withholding tax requirements. Any such remittances
to United States residents are generally subject to withholding tax; however, no
such remittances are likely in the foreseeable future. See Taxation, below.

There is no limitation imposed by the laws of Canada or by our
Articles on the right of a non-resident to hold or vote his or its common
shares, other than as provided in the Investment Canada Act (Canada) (the
Investment Act). The following discussion summarizes the material features of
the Investment Act for a non-resident who proposes to acquire a controlling
number of our common shares. It is general only, it is not a substitute for
independent advice from an investors own advisor, and it does not anticipate
statutory or regulatory amendments. We do not believe the Investment Act will
have any affect on us or on our non-Canadian shareholders due to a number of
factors including the nature of our operations and our relatively small
capitalization.

The Investment Act generally prohibits implementation of a
reviewable investment by an individual, government or agency thereof,
corporation, partnership, trust or joint venture (each an entity) that is not
a Canadian as defined in the Investment Act (i.e. a non-Canadian), unless
after review the

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Director of Investments (the Director) appointed by the
Minister responsible for the Investment Act is satisfied that the investment is
likely to be of net benefit to Canada. The size and nature of a proposed
transaction may give rise to an obligation to notify the Director to seek
approval for the transaction. An investment in our securities by a non-Canadian
(other than a WTO Investor as that term is defined in the Investment Act and
which term includes entities which are nationals of, or are controlled by
nationals of, member states of the World Trade Organization) when we were not
controlled by a WTO Investor, would be reviewable under the Investment Act if it
was an investment to acquire control of us and the value of our assets, as
determined in accordance with the regulations promulgated under the Investment
Act, was over CDN$5 million, or if an order for review was made by the federal
cabinet on the grounds that the investment related to Canadas cultural heritage
or national identity, regardless of the value of our assets. An investment in
our securities by a WTO Investor, or by a non-Canadian when we were controlled
by a WTO Investor, would be reviewable under the Investment Act if it was an
investment to acquire control of us and the value of our assets, as determined
in accordance with the regulations promulgated under the Investment Act, was not
less than a specified amount, which for 2007 was CDN$281 million. A non-Canadian
would acquire control of us for the purposes of the Investment Act if the
non-Canadian acquired a majority of our common shares. The acquisition of less
than a majority but one-third or more of our common shares would be presumed to
be an acquisition of control of us unless it could be established that, on the
acquisition, we were not controlled in fact by the acquirer through the
ownership of the common shares.

Certain transactions relating to our common shares would be
exempt from the Investment Act, including:

|(a) | an acquisition of our common shares by a person in the
      ordinary course of that persons business as a trader or dealer in
      securities;                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                         
|(b) | an acquisition of control of us in connection with the
      realization of security granted for a loan or other financial assistance
      and not for a purpose related to the provisions of the Investment Act;
      and                                            
|    |                                                                                                                                                                                                                                                                         
|(c) | an acquisition of control of us by reason of an
      amalgamation, merger, consolidation or corporate reorganization following
      which the ultimate direct or indirect control in fact of us, through the
      ownership of our common shares, remained
unchanged.

E.         Taxation

Material Canadian Federal Income Tax Consequences for United
States Residents

The following summarizes the material Canadian federal income
tax consequences generally applicable to the holding and disposition of our
shares by a holder (in this summary, a U.S. Holder) who, (a) for the purposes
of the Income Tax Act (Canada) (the Tax Act) and at all relevant times, is not
resident in Canada, deals at arms length with us, holds our shares as capital
property and does not use or hold our shares in the course of carrying on, or
otherwise in connection with, a business in Canada, and (b) for the purposes of
the Canada-United States Income Tax Convention, 1980 (the Treaty) and at all
relevant times, is a resident solely of the United States, has never been a
resident of Canada, and has not held or used (and does not hold or use) our
shares in connection with a permanent establishment or fixed base in Canada.
This summary does not apply to traders or dealers in securities, limited
liability companies, tax-exempt entities, insurers, financial institutions
(including those to which the mark-to-market provisions of the Tax Act apply),
or any other holder in special circumstances.

This summary is based on the current provisions of the Tax Act
including all regulations thereunder, the Treaty, all proposed amendments to the
Tax Act, the regulations and the Treaty publicly announced by the Government of
Canada to the date hereof, and our understanding of the current administrative
practice of the Canada Revenue Agency. It has been assumed that all currently
proposed amendments

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will be enacted as proposed and that there will be no other
relevant change in any governing law or administrative practice, although no
assurances can be given in these respects. The summary does not take into
account Canadian provincial, U.S. federal (which follows further below), state
or other foreign income tax law or practice. The tax consequences to any
particular U.S. Holder will vary according to the status of that holder as an
individual, trust, corporation, partnership or other entity, the jurisdictions
in which that holder is subject to taxation, and generally according to that
holders particular circumstances. Accordingly, this summary is not, and is not
to be construed as, Canadian tax advice to any particular U.S. Holder. All U.S.
Holders are advised to consult with their own tax advisors regarding their
particular circumstances. The discussion below is qualified accordingly.

Dividends

Dividends paid or deemed to be paid to a U.S. Holder by us will
be subject to Canadian withholding tax. The Tax Act requires a 25% withholding
unless reduced under a tax treaty. Under the Treaty, provided that a holder can
demonstrate that it is a qualifying U.S. Holder, the rate of withholding tax on
dividends paid to a U.S. Holder is generally limited to 15% of the gross amount
of the dividend (or 5% if the U.S. Holder is a corporation and beneficially owns
at least 10% of our voting shares). We will be required to withhold the
applicable withholding tax from any dividend and remit it to the Canadian
government for the U.S. Holders account.

Disposition

For purposes of the following discussion, we have assumed that
our shares will remain listed on the TSX. A U.S. Holder is not subject to tax
under the Tax Act in respect of a capital gain realized on the disposition of
our shares in the open market unless the shares are taxable Canadian property
to the holder thereof and the U.S. Holder is not entitled to relief under the
Treaty. Our shares will be taxable Canadian property to a U.S. Holder (a) if, at
any time during the 60 months preceding the disposition, the U.S. Holder or
persons with whom the U.S. Holder did not deal at arms length alone or together
owned 25% or more of our issued shares of any class or series, or (b) in other
specific circumstances, including where shares were acquired for other
securities in a tax-deferred transaction. If our shares constitute taxable
Canadian property to the holder, the holder will (unless relieved under the
Treaty) be subject to Canadian income tax on any gain. The taxpayers capital
gain or loss from a disposition of the share is the amount, if any, by which the
proceeds of disposition exceed (or are exceeded by) the aggregate of the
adjusted cost base and reasonable expenses of disposition. One-half of the
capital gain is included in income and one-half of the capital loss is
deductible from capital gains realized in the same year. Unused capital losses
may be carried back three taxation years or forward indefinitely and applied to
reduce capital gains realized in those years.

A U.S. Holder whose shares do constitute taxable Canadian
property, and who would therefore be liable for Canadian income tax under the
Tax Act, may be relieved from such liability under the Treaty if the value of
such shares at the time of disposition is not derived principally from real
property situated in Canada. However, as the application of this potential
Treaty relief is quite uncertain, a U.S. Holder to whom Treaty relief may be
relevant should consult in this regard with their own tax advisors at the
relevant time.

United States Tax Consequences

United States Federal Income Tax Consequences

The following is a discussion of all material United States
federal income tax consequences, under current law, generally applicable to a
U.S. Holder (as hereinafter defined) of our common shares. This discussion does
not address all potentially relevant federal income tax matters and it does not
address consequences peculiar to persons subject to special provisions of
federal income tax law, such as those

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described below as excluded from the definition of a U.S.
Holder. In addition, this discussion does not cover any state, local or foreign
tax consequences. (See Taxation - Canadian Federal Income Tax Consequences
above). Accordingly, we urge holders and prospective holders of our common
shares to consult their own tax advisors about the specific federal, state,
local and foreign tax consequences to them of purchasing, owning and disposing
of our common shares, based upon their individual circumstances.

The following discussion is based upon the sections of the
Internal Revenue Code of 1986, as amended (the Code), Treasury Regulations,
published Internal Revenue Service (IRS) rulings, published administrative
positions of the IRS and court decisions that are currently applicable, any or
all of which could be materially and adversely changed, possibly on a
retroactive basis, at any time and which are subject to differing
interpretations. This discussion does not consider the potential effects, both
adverse and beneficial, of any proposed legislation which, if enacted, could be
applied, possibly on a retroactive basis, at any time.

U.S. Holders

As used herein, a U.S. Holder means a holder of our common
shares who is a citizen or individual resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof, an entity created or
organized in or under the laws of the United States or of any political
subdivision thereof which has elected to be treated as a corporation for United
States federal income tax purposes (under Treasury Regulation Section 301.7701
-3), an estate whose income is taxable in the United States irrespective of
source or a trust subject to the primary supervision of a court within the
United States and control of a United States fiduciary as described in Section
7701(a)(30) of the Code. This summary does not address the tax consequences to,
and U.S. Holder does not include, persons subject to specific provisions of
federal income tax law, such as tax-exempt organizations, qualified retirement
plans, individual retirement accounts and other tax-deferred accounts, financial
institutions, insurance companies, real estate investment trusts, regulated
investment companies, broker-dealers, non-resident alien individuals, persons or
entities that have a functional currency other than the U.S. dollar,
shareholders subject to the alternative minimum tax, shareholders who hold
common shares as part of a straddle, hedging or conversion transaction, and
shareholders who acquired their common shares through the exercise of employee
stock options or otherwise as compensation for services. This summary is limited
to U.S. Holders who own our common shares as capital assets and who own
(directly and indirectly, pursuant to applicable rules of constructive
ownership) no more than 5% of the value of our total outstanding stock. This
summary does not address the consequences to a person or entity holding an
interest in a shareholder or the consequences to a person of the ownership,
exercise or disposition of any options, warrants or other rights to acquire
common shares. In addition, this summary does not address special rules
applicable to United States persons (as defined in Section 7701(a)(30) of the
Code) holding common shares through a foreign partnership or to foreign persons
holding common shares through a domestic partnership.

Distribution on Our Common Shares

In general, U.S. Holders receiving dividend distributions
(including constructive dividends) with respect to our common shares are
required to include in gross income for United States federal income tax
purposes the gross amount of such distributions, equal to the U.S. dollar value
of such distributions on the date of receipt (based on the exchange rate on such
date), to the extent that we have current or accumulated earnings and profits,
without reduction for any Canadian income tax withheld from such distributions.
Such Canadian tax withheld may be credited, subject to certain limitations,
against the U.S. Holders federal income tax liability or, alternatively, may be
deducted in computing the U.S. Holders federal taxable income by those who
itemize deductions. (See more detailed discussion at Foreign Tax Credit
below). To the extent that distributions exceed our current or accumulated
earnings and profits, they will be treated first as a return of capital up to
the U.S. Holders adjusted basis

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in the common shares and thereafter as gain from the sale or
exchange of property. Preferential tax rates for long-term capital gains are
applicable to a U.S. Holder which is an individual, estate or trust. There are
currently no preferential tax rates for long-term capital gains for a U.S.
Holder which is a corporation.

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

Dividends paid on our common shares generally will not be
eligible for the dividends received deduction provided to corporations receiving
dividends from certain United States corporations. A U.S. Holder which is a
corporation and which owns shares representing at least 10% of our voting power
and value may, under certain circumstances, be entitled to a 70% (or 80% if the
U.S. Holder owns shares representing at least 20% of our voting power and value)
deduction of the United States source portion of dividends received from us
(unless we qualify as a passive foreign investment company, as defined below).
We do not anticipate that we will earn any United States income, however, and
therefore we do not anticipate that any U.S. Holder will be eligible for the
dividends received deduction.

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

Foreign Tax Credit

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

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Disposition of Our Common Shares

In general, U.S. Holders will recognize gain or loss upon the
sale of our common shares equal to the difference, if any, between (i) the
amount of cash plus the fair market value of any property received, and (ii) the
shareholders tax basis in our common shares. Preferential tax rates apply to
long-term capital gains of U.S. Holders which are individuals, estates or
trusts. In general, gain or loss on the sale of our common shares will be
long-term capital gain or loss if the common shares are a capital asset in the
hands of the U.S. Holder and are held for more than one year. Deductions for net
capital losses are subject to significant limitations. For U.S. Holders that are
not corporations, any unused portion of such net capital loss may be carried
over to be used in later tax years until such net capital loss is thereby
exhausted. For U.S. Holders that are corporations (other than corporations
subject to Subchapter S of the Code), an unused net capital loss may be carried
back three years and carried forward five years from the loss year to be offset
against capital gains until such net capital loss is thereby exhausted.

Other Considerations

Set forth below are certain material exceptions to the
above-described general rules describing the United States federal income tax
consequences resulting from the holding and disposition of common shares:

Foreign Investment Company

If 50% or more of the combined voting power or total value of
our outstanding shares is held, directly or indirectly, by citizens or residents
of the United States, United States domestic partnerships or corporations, or
estates or trusts other than foreign estates or trusts (as defined by the Code
Section 7701(a)(31)), and we are found to be engaged primarily in the business
of investing, reinvesting, or trading in securities, commodities, or any
interest therein, it is possible that we may be treated as a foreign investment
company as defined in Section 1246 of the Code, causing all or part of any gain
realized by a U.S. Holder selling or exchanging common shares to be treated as
ordinary income rather than capital gain. We do not believe that we currently
qualify as a foreign investment company. However, there can be no assurance that
we will not be considered a foreign investment company for the current or any
future taxable year.

Passive Foreign Investment Company

United States income tax law contains rules governing passive
foreign investment companies (PFIC) which can have significant tax effects on
U.S. Holders of foreign corporations. These rules do not apply to non-U.S.
Holders. Section 1297 of the Code defines a PFIC as a corporation that is not
formed in the United States if, for any taxable year, either (i) 70% or more of
its gross income is passive income, which includes interest, dividends and
certain rents and royalties or (ii) the average percentage, by fair market value
(or, if the corporation is not publicly traded and either is a controlled
foreign corporation or makes an election, by adjusted tax basis), of its assets
that produce or are held for the production of passive income is 50% or more.
We appear to have been a PFIC for the fiscal year ended August 31, 2006, and at
least certain prior fiscal years. In addition, we expect to qualify as a PFIC
for the fiscal year ending August 31, 2007 and we may also qualify as a PFIC in
future fiscal years. Each of our U.S. Holders is urged to consult a tax advisor
with respect to how the PFIC rules affect such U.S. Holders tax situation.

Each of our U.S. Holders who holds stock in a foreign
corporation during any year in which such corporation qualifies as a PFIC is
subject to United States federal income taxation under one of three alternative
tax regimes at the election of such U.S. Holder. The following is a discussion
of such alternative tax regimes applied to such U.S. Holders of our stock. In
addition, special rules apply if a foreign corporation qualifies as both a PFIC
and a controlled foreign corporation (as defined below) and a U.S. Holder
owns, actually or constructively, 10% or more of the total combined voting power
of

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all classes of stock entitled to vote of such foreign
corporation (See more detailed discussion at Controlled Foreign Corporation
below).

A U.S. Holder who elects to treat us as a qualified electing
fund (QEF) will be subject, under Section 1293 of the Code, to current federal
income tax for any taxable year to which the election applies in which we
qualify as a PFIC on his pro rata share of our (i) net capital gain (the
excess of net long-term capital gain over net short-term capital loss), which
will be taxed as long-term capital gain, and (ii) ordinary earnings (the
excess of earnings and profits over net capital gain), which will be taxed as
ordinary income, in each case, for the shareholders taxable year in which (or
with which) our taxable year ends, regardless of whether such amounts are
actually distributed. A U.S. Holders tax basis in the common shares will be
increased by any such amount that is included in income but not distributed.

The procedure a U.S. Holder must comply with in making an
effective QEF election, and the consequences of such election, will depend on
whether the year of the election is the first year in the U.S. Holders holding
period in which we are a PFIC. If the U.S. Holder makes a QEF election in such
first year, i.e., a timely QEF election, then the U.S. Holder may make the QEF
election by simply filing the appropriate documents at the time the U.S. Holder
files his tax return for such first year. If, however, we qualified as a PFIC in
a prior year during the U.S. Holders holding period, then, in order to avoid
the Section 1291 rules discussed below, in addition to filing documents, the
U.S. Holder must elect to recognize under the rules of Section 1291 of the Code
(discussed herein) (i) any gain that he would otherwise recognize if the U.S.
Holder sold his stock on the qualification date or (ii) if we are a controlled
foreign corporation, the U.S. Holders pro rata share of our post-1986 earnings
and profits as of the qualification date. The qualification date is the first
day of our first tax year in which we qualified as a QEF with respect to such
U.S. Holder. For purposes of this discussion, a U.S. Holder who makes (i) a
timely QEF election or (ii) an untimely QEF election and either of the
above-described gain-recognition elections under Section 1291 is referred to
herein as an Electing U.S. Holder. A U.S. Holder who holds common shares at
any time during a year in which we are a PFIC and who is not an Electing U.S.
Holder (including a U.S. Holder who makes an untimely QEF election and makes
neither of the above-described gain-recognition elections) is referred to herein
as a Non-Electing U.S. Holder. An Electing U.S. Holder (i) generally treats
any gain realized on the disposition of his common shares as capital gain and
(ii) may either avoid interest charges resulting from PFIC status altogether or
make an annual election, subject to certain limitations, to defer payment of
current taxes on his share of our annual realized net capital gain and ordinary
earnings subject, however, to an interest charge. If the U.S. Holder is not a
corporation, any interest charge imposed under the PFIC regime would be treated
as personal interest that is not deductible.

In order for a U.S. Holder to make (or maintain) a valid QEF
election, we must provide certain information regarding our net capital gains
and ordinary earnings and permit our books and records to be examined to verify
such information. We intend to make the necessary information available to U.S.
Holders to permit them to make (and maintain) QEF elections with respect to us.
We urge each U.S. Holder to consult a tax advisor regarding the availability of,
and procedure for making, the QEF election.

A QEF election, once made with respect to us, applies to the
tax year for which it was made and to all subsequent tax years, unless the
election is invalidated or terminated, or the IRS consents to revocation of the
election. If a QEF election is made by a U.S. Holder and we cease to qualify as
a PFIC in a subsequent tax year, the QEF election will remain in effect,
although not applicable, during those tax years in which we do not qualify as a
PFIC. Therefore, if we again qualify as a PFIC in a subsequent tax year, the QEF
election will be effective and the U.S. Holder will be subject to the rules
described above for Electing U.S. Holders in such tax year and any subsequent
tax years in which we qualify as a PFIC. In addition, the QEF election remains
in effect, although not applicable, with respect to an Electing U.S. Holder even
after such U.S. Holder disposes of all of his or its direct and indirect
interest in our shares. Therefore, if such U.S. Holder reacquires an interest in
us, that U.S. Holder will be

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subject to the rules described above for Electing U.S. Holders
for each tax year in which we qualify as a PFIC.

In the case of a Non-Electing U.S. Holder, special taxation
rules under Section 1291 of the Code will apply to (i) gains realized on the
disposition (or deemed to be realized by reasons of a pledge) of his common
shares and (ii) certain excess distributions, as defined in Section 1291(b),
by us.

A Non-Electing U.S. Holder generally would be required to pro
rate all gains realized on the disposition of his common shares and all excess
distributions on his common shares over the entire holding period for the common
shares. All gains or excess distributions allocated to prior years of the U.S.
Holder (excluding any portion of the holders period prior to the first day of
the first year (i) which began after December 31, 1986, and (ii) for which we
were a PFIC) would be taxed at the highest tax rate for each such prior year
applicable to ordinary income. The Non-Electing U.S. Holder also would be liable
for interest on the foregoing tax liability for each such prior year calculated
as if such liability had been due with respect to each such prior year. A
Non-Electing U.S. Holder that is not a corporation must treat this interest
charge as personal interest which, as discussed above, is wholly
non-deductible. The balance, if any, of the gain or the excess distribution will
be treated as ordinary income in the year of the disposition or distribution,
and no interest charge will be incurred with respect to such balance. In certain
circumstances, the sum of the tax and the PFIC interest charge may exceed the
amount of the excess distribution received, or the amount of proceeds of
disposition realized, by the U.S. Holder.

If we are a PFIC for any taxable year during which a
Non-Electing U.S. Holder holds our common shares, then we will continue to be
treated as a PFIC with respect to such common shares, even if we are no longer
definitionally a PFIC. A Non-Electing U.S. Holder may terminate this deemed PFIC
status by electing to recognize gain (which will be taxed under the rules
discussed above for Non-Electing U.S. Holders) as if such common shares had been
sold on the last day of the last taxable year for which we were a PFIC.

Effective for tax years of U.S. Holders beginning after
December 31, 1997, U.S. Holders who hold (actually or constructively) marketable
stock of a foreign corporation that qualifies as a PFIC may elect to mark such
stock to the market annually (a mark-to-market election). If such an election
is made, such U.S. Holder will generally not be subject to the special taxation
rules of Section 1291 discussed above. However, if the mark-to-market election
is made by a Non-Electing U.S. Holder after the beginning of the holding period
for the PFIC stock, then the Section 1291 rules will apply to certain
dispositions of, distributions on and other amounts taxable with respect to our
common shares. A U.S. Holder who makes the mark-to-market election will include
in income for each taxable year for which the election is in effect an amount
equal to the excess, if any, of the fair market value of our common shares as of
the close of such tax year over such U.S. Holders adjusted basis in such common
shares. In addition, the U.S. Holder is allowed a deduction for the lesser of
(i) the excess, if any, of such U.S. Holders adjusted tax basis in the common
shares over the fair market value of such shares as of the close of the tax
year, or (ii) the excess, if any, of (A) the mark-to-market gains for our common
shares included by such U.S. Holder for prior tax years, including any amount
which would have been treated as a mark-to-market gain for any prior tax year
but for the Section 1291 rules discussed above with respect to Non-Electing U.S.
Holders, over (B) the mark-to-market losses for shares that were allowed as
deductions for prior tax years. A U.S. Holders adjusted tax basis in our common
shares will be adjusted to reflect the amount included in or deducted from
income as a result of a mark-to-market election. A mark-to-market election
applies to the taxable year in which the election is made and to each subsequent
taxable year, unless our common shares cease to be marketable, as specifically
defined, or the IRS consents to revocation of the election. Because the IRS has
not established procedures for making a mark-to-market election, U.S. Holders
should consult their tax advisor regarding the manner of making such an
election. No view is expressed regarding whether our common shares are
marketable for these purposes or whether the election will be available.

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Under Section 1291(f) of the Code, the IRS has issued Proposed
Treasury Regulations that, subject to certain exceptions, would treat as taxable
certain transfers of PFIC stock by Non-Electing U.S. Holders that are generally
not otherwise taxed, such as gifts, exchanges pursuant to corporate
reorganizations, and transfers at death. Generally, in such cases the basis of
our common shares in the hands of the transferee and the basis of any property
received in the exchange for those common shares would be increased by the
amount of gain recognized. Under the Proposed Treasury Regulations, an Electing
U.S. Holder would not be taxed on certain transfers of PFIC stock, such as
gifts, exchanges pursuant to corporate reorganizations, and transfers at death.
The transferees basis in this case will depend on the manner of the transfer.
In the case of a transfer by an Electing U.S. Holder upon death, for example,
the transferees basis is generally equal to the fair market value of the
Electing U.S. Holders common shares as of the date of death under Section 1014
of the Code. The specific tax effect to the U.S. Holder and the transferee may
vary based on the manner in which the common shares are transferred. Each U.S.
Holder of our shares is urged to consult a tax advisor with respect to how the
PFIC rules affect his or its tax situation.

Whether or not a U.S. Holder makes a timely QEF election with
respect to our common shares, certain adverse rules may apply in the event that
we are a PFIC and any foreign corporation in which we directly or indirectly
hold shares is a PFIC (a lower-tier PFIC). Pursuant to certain Proposed
Treasury Regulations, a U.S. Holder would be treated as owning his or its
proportionate amount of any lower-tier PFIC shares, and generally would be
subject to the PFIC rules with respect to such indirectly-held PFIC shares
unless such U.S. Holder makes a timely QEF election with respect thereto. We do
not currently have any subsidiaries. If we obtain any subsidiaries, we intend to
make the necessary information available to U.S. Holders to permit them to make
(and maintain) QEF elections with respect to each subsidiary of ours that is a
PFIC.

Under the Proposed Treasury Regulations, a U.S. Holder who does
not make a timely QEF election with respect to a lower-tier PFIC generally would
be subject to tax (and the PFIC interest charge) on (i) any excess distribution
deemed to have been received with respect to his or its lower-tier PFIC shares
and (ii) any gain deemed to arise from a so-called indirect disposition of
such shares. For this purpose, an indirect disposition of lower-tier PFIC shares
would generally include (i) a disposition by us (or an intermediate entity) of
lower-tier PFIC shares, and (ii) any other transaction resulting in a diminution
of the U.S. Holders proportionate ownership of the lower-tier PFIC, including
an issuance of additional common shares by us (or an intermediate entity).
Accordingly, each prospective U.S. Holder should be aware that he or it could be
subject to tax even if such U.S. Holder receives no distributions from us and
does not dispose of its common shares. We strongly urge each prospective U.S.
Holder to consult a tax advisor with respect to the adverse rules applicable,
under the Proposed Treasury Regulations, to U.S. Holders of lower-tier PFIC
shares.

Certain special, generally adverse, rules will apply with
respect to our common shares while we are a PFIC unless the U.S. Holder makes a
timely QEF election. For example under Section 1298(b)(6) of the Code, a U.S.
Holder who uses PFIC stock as security for a loan (including a margin loan)
will, except as may be provided in regulations, be treated as having made a
taxable disposition of such shares.

Controlled Foreign Corporation

If more than 50% of the total combined voting power of all our
of shares entitled to vote or the total value of our shares is owned, actually
or constructively, by citizens or residents of the United States, United States
domestic partnerships or corporations, or estates or trusts other than foreign
estates or trusts (as defined by the Code Section 7701(a)(31)), each of which
own, actually or constructively, 10% or more of the total combined voting power
of all of our classes of shares entitled to vote (each, a United States
Shareholder), we could be treated as a controlled foreign corporation (CFC)
under Subpart F of the Code. This classification would effect many complex
results, one of which is the inclusion of certain income of a CFC which is
subject to current U.S. tax. The United States generally

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taxes United States Shareholders of a CFC currently on their
pro rata shares of the Subpart F income of the CFC. Such United States
Shareholders are generally treated as having received a current distribution out
of the CFCs Subpart F income and are also subject to current U.S. tax on their
pro rata shares of increases in the CFCs earnings invested in U.S. property.
The foreign tax credit described above may reduce the U.S. tax on these amounts.
In addition, under Section 1248 of the Code, gain from the sale or exchange of
shares by a U.S. Holder of our common shares which is or was a United States
Shareholder at any time during the five-year period ending on the date of the
sale or exchange is treated as ordinary income to the extent of earnings and
profits attributable to the shares sold or exchanged. If a foreign corporation
is both a PFIC and a CFC, the foreign corporation generally will not be treated
as a PFIC with respect to United States Shareholders of the CFC. This rule
generally will be effective for taxable years of United States Shareholders
beginning after 1997 and for taxable years of foreign corporations ending with
or within such taxable years of United States Shareholders. Special rules apply
to United States Shareholders who are subject to the special taxation rules
under Section 1291 discussed above with respect to a PFIC. Because of the
complexity of Subpart F, a more detailed review of these rules is outside of the
scope of this discussion. We do not believe that we currently qualify as a CFC.
However, there can be no assurance that we will not be considered a CFC for the
current or any future taxable year.

F.         Dividends
and Paying Agents

This Form 20-F is filed as an annual report under the Exchange
Act and accordingly the information called for in Item 10.F is not required.

G.         Statement
by Experts

This Form 20-F is filed as an annual report under the Exchange
Act and accordingly the information called for in Item 10.G is not required.

H.         Documents
on Display

Exhibits attached to this Annual Report are also available for
viewing at our offices, Suite 350, 885 Dunsmuir Street, Vancouver, British
Columbia, Canada, V6C 1N5, or you may request them by calling our office at
(604) 688-7377. Copies of our financial statements and other continuous
disclosure documents required under securities rules are available for viewing
on the internet at www.sedar.com.

I.        
Subsidiary Information

Not applicable.

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ITEM 11        
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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ITEM 12        
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A.         Debt
Securities

Not applicable.

B.         Warrants
and Rights

Not applicable.

C.         Other
Securities

Not applicable.

D.         American
Depository Shares

Not applicable.

PART II

ITEM 13        
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

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

Not applicable.

ITEM 15        
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our general
manager and chief financial officer, our management conducted an evaluation of
the effectiveness of our Companys disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) of the U.S. Securities Exchange
Act of 1934, as amended (the Exchange Act)), as of December 31, 2007. Based on
such evaluation, our general manager and chief financial officer concluded that,
as of December 31, 2007, our Companys disclosure controls and procedures were
not effective due to the identification of a material weakness in our internal
control over financial reporting described below.

Managements Report on Internal Control over Financial
Reporting; Changes in Internal Control over Financial Reporting

Under the Exchange Act, our management is responsible for
establishing and maintaining adequate internal control over financial reporting
as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles ("GAAP"). Our controls include policies and
procedures that:

- Pertain to the maintenance of records that, in reasonable
      detail, accurately and fairly reflect the transactions and dispositions
      of our assets;

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- Provide reasonable assurance that transactions are recorded
      as necessary to permit preparation of financial statements-in accordance
      with generally accepted accounting principles, and receipts and expenditures
      are made only in accordance with authorizations of our management and directors;
      and
- Provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use or disposition of our assets
      that could have a material effect on the annual financial statements or
      inter financial statements.

Because of its inherent limitations, internal control over
financial reporting may not be able to prevent or detect misstatements on a
timely basis, which may be a product of collusion, failure to abide by controls,
error or fraud. In addition, projections of any evaluation of the internal
controls effectiveness to future periods are subject to the risk that the
control may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of our annual or interim
financial statement will not be prevented or detected on a timely basis. In its
assessment of the effectiveness of internal control over financial reporting as
of December 31, 2007, our management identified the following material weakness:

During the year end procedures a number of misstatements and
disclosure deficiencies were identified in the draft financial statements for
the year ended December 31, 2007 prepared by us. These misstatements and
disclosure deficiencies were subsequently corrected by our management and such
corrections are reflected in our consolidated financial statements. Our
management determined that these adjustments had resulted from control
deficiencies because we do not have sufficient accounting and finance personnel
with adequately comprehensive accounting knowledge to properly address certain
non-routine accounting and financial reporting matters and this control
deficiency constitutes a material weakness.

As at December 31, 2007, other areas of control deficiencies
that could result in misstatements are noted as follows:

- a lack of segregation of duties. Due to the small size of our Company there
  is no effective way to completely segregate tasks and as a result there is the
  chance of misstatement. However, managements oversight and approval of
  transactions and disbursements limits the scope for inappropriate
  transactions;
- the audit committee did not have an independent member with financial expertise.
      The Company has addressed this problem by appointing a director subsequent
      to year end with this expertise;
- we had not formalized a code of ethics;
- we had not implemented a whistleblower policy. We plan to address this
  weakness by implementing a whistleblower policy in 2008;
- we do not have any personnel with adequate understanding of US and Canadian
  tax;

During the reporting period and subsequent to the identification
  of the material weaknesses in internal control over financial reporting, we
  have made certain changes in our internal control over financial reporting.
  These changes include:

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- we have engaged and appointed a chief financial officer with a certified
  management accountant designation who has extensive experience in Canadian and
  US GAAP in the mining exploration area;
- we have appointed an independent director with financial expertise who
  serves on the audit committee;
- we have adopted a code of ethics;
- we have undergone a systematic analysis of our internal controls over
  financial reporting based on the COSO model;
- we have documented our corporate governance policies.

Our management has worked, and will continue to work to
strengthen the Companys internal controls over financial reporting. Except for
the actions described above, there was no change to our internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

ITEM 16A       AUDIT COMMITTEE
FINANCIAL EXPERTS

Effective February 28, 2008, the audit committee of our board
  has an audit committee financial expert, namely Mr. Marc LeBlanc. Our board
  of directors has determined that Mr. LeBlanc is an independent director using
  the definition of independent director of the American Stock Exchange. We believe
  that the members of our audit committee are collectively capable of analyzing
  and evaluating our financial statements and understanding internal controls
  and procedures for financial reporting. Our board of directors believes that
  the cost of retaining a financial expert at this time would be prohibitive and
  that, given our limited operations, is not currently warranted.

ITEM 16B       CODE OF ETHICS

We have adopted a written code of ethics. A copy of the code
  of ethics has been filed as an exhibit to this Annual Report.

ITEM 16C       PRINCIPAL
ACCOUNTANT FEES AND SERVICES

The following table sets forth information regarding the amount
  billed to us by our independent auditors, Davidson & Company LLP for our
  fiscal year ended December 31, 2007 and Manning Elliott LLP, for our fiscal
  year ended December 31, 2006.

Years
        ended December 312007
      2006Audit Fees:
      $45,720
      $15,350Audit Related Fees:
      Nil
      NilTax Fees:
      Nil
      NilAll Other Fees:
      Nil
      NilTotal:
      $45,720
      $15,350


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Audit Fees

Audit Fees are the aggregate fees billed by our independent
auditor for the audit of our consolidated annual financial statements, reviews
of interim financial statements and attestation services that are provided in
connection with statutory and regulatory filings or engagements.

Policy on Pre-Approval by Audit Committee of Services
Performed by Independent Auditors

The policy of our Audit Committee is to pre-approve all audit
and permissible non-audit services to be performed by our independent auditors
during the fiscal year.

ITEM 16D       EXEMPTIONS FROM
THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E       PURCHASE OF
EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

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PART III

ITEM 17        
FINANCIAL STATEMENTS

The following attached financial statements are incorporated
herein:

Consolidated Financial Statements of Lincoln Gold Corporation
for the year ended December 31, 2007, comprised of the following:

|(a) | Independent Auditors Report of Davidson & Company
      LLP, Chartered Accountants;                                             
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                  
|(b) | Consolidated Balance Sheets as at December 31, 2007 and
      2006;                                                              
|    |                                                                                                                                  
|(c) | Consolidated Statements of Operations, Comprehensive Loss
      and Deficit for the years ended December 31, 2007, 2006 and
2005;
|    |                                                                                                                                  
|(d) | Consolidated Statements of Cash Flows for the years ended
      December 31, 2007, 2006 and 2005;                                
|    |                                                                                                                                  
|(e) | Notes to Consolidated Financial
  Statements.                                                                                    

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LINCOLN GOLD CORPORATION(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS 
  (Expressed in United States dollars)

December 31, 2007

---

|DAVIDSON &
      COMPANY LLP |                       |  | A Partnership of Incorporated Professionals
|---------------------------- | --------------------- |  | -------------------------------------------
|                             | Chartered Accountants | 

**INDEPENDENT AUDITORS’ REPORT**

To the Shareholders of
  Lincoln Gold Corporation

We have audited the consolidated balance sheets of Lincoln Gold
  Corporation as at December 31, 2007 and 2006 and the consolidated statements
  of operations, comprehensive loss and deficit and cash flows for the years ended
  December 31, 2007, 2006 and 2005. These financial statements are the responsibility
  of the Company's management. Our responsibility is to express an opinion on
  these financial statements based on our audits.

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

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  December 31, 2007 and 2006 and the results of its operations and cash flows
  for the years ended December 31, 2007, 2006 and 2005 in accordance with Canadian
  generally accepted accounting principles.

|                                                                                | DAVIDSON & COMPANY LLP
|------------------------------------------------------------------------------- | ------------------------
|                                                                                |                         
|                                                                                |                         
|Vancouver, Canada                                                               | Chartered Accountants   
|                                                                                |                         
|April 21, 2008 
      (except as to Note 15, which
      is as of July 9, 2008) |                         

**COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA –
  U.S. REPORTING DIFFERENCE**

In the United States, reporting standards for auditors require
  the addition of an explanatory paragraph (following the opinion paragraph) when
  the financial statements are affected by conditions and events that cast substantial
  doubt on the Company's ability to continue as a going concern, such as those
  described in Note 1 to the financial statements. Our report to the shareholders
  dated April 21, 2008 (except as to Note 15, which is as of July 9, 2008) is
  expressed in accordance with Canadian reporting standards which do not permit
  a reference to such events and conditions in the auditors' report when these
  are adequately disclosed in the financial statements.

|                                                                                | DAVIDSON & COMPANY LLP
|------------------------------------------------------------------------------- | ------------------------
|                                                                                |                         
|                                                                                |                         
|Vancouver, Canada                                                               | Chartered Accountants   
|                                                                                |                         
|April 21, 2008 
      (except as to Note 15, which
      is as of July 9, 2008) |                         

1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, BC,
  Canada, V7Y 1G6 
  Telephone (604) 687-0947 Fax (604) 687-6172

---

LINCOLN GOLD CORPORATION(An Exploration Stage Company) Consolidated Balance Sheets(Expressed in United States dollars)

|                                                        |   |              |   |   |              |  
|------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                        |   | December 31, |   |   | December 31, |  
|                                                        |   | 2007         |   |   | 2006         |  
|                                                        |   |              |   |   |              |  
|ASSETS                                                  |   |              |   |   |              |  
|                                                        |   |              |   |   |              |  
|Current                                                 |   |              |   |   |              |  
|Cash                                                    | $ | 123,201      |   | $ | 21,961       |  
|Receivables                                             |   | 3,131        |   |   | -            |  
|Loan receivable (Note 4(e)(iii))                        |   | 5,000        |   |   | -            |  
|Prepaids and advances                                   |   | 107,900      |   |   | 4,893        |  
|                                                        |   | 239,232      |   |   | 26,854       |  
|                                                        |   |              |   |   |              |  
|Equipment(Note 3)                                       |   | 27,602       |   |   | 4,440        |  
|Deferred financing costs(Note 14)                       |   | 19,900       |   |   | -            |  
|                                                        |   |              |   |   |              |  
|                                                        | $ | 286,734      |   | $ | 31,294       |  
|                                                        |   |              |   |   |              |  
|LIABILITIES AND SHAREHOLDERS' DEFICIENCY                |   |              |   |   |              |  
|                                                        |   |              |   |   |              |  
|Current                                                 |   |              |   |   |              |  
|Accounts payable and accrued liabilities                | $ | 210,897      |   | $ | 57,217       |  
|Note payable (Note 5)                                   |   | 100,000      |   |   | 100,000      |  
|                                                        |   | 310,897      |   |   | 157,217      |  
|                                                        |   |              |   |   |              |  
|Shareholders' deficiency                                |   |              |   |   |              |  
|Share capital (Note 6)                                  |   |              |   |   |              |  
|Authorized                                              |   |              |   |   |              |  
|Unlimited common shares without par value               |   |              |   |   |              |  
|Issued and outstanding                                  |   |              |   |   |              |  
|51,391,666 (2006 - 42,990,000)                          |   | 3,120,827    |   |   | 2,308,790    |  
|Share subscriptions received in advance (Note
      14) |   | 197,482      |   |   | -            |  
|Obligation to issue shares (Note
      6)               |   | -            |   |   | 73,333       |  
|Contributed surplus (Note 6)                            |   | 1,273,367    |   |   | 1,029,063    |  
|Deficit                                                 |   | (4,615,839   | ) |   | (3,537,109   | )
|                                                        |   |              |   |   |              |  
|                                                        |   | (24,163      | ) |   | (125,923     | )
|                                                        |   |              |   |   |              |  
|                                                        | $ | 286,734      |   | $ | 31,294       |  
|                                                        |   |              |   |   |              |  
|Nature and continuance of operations(Note
      1)      |   |              |   |   |              |  
|Subsequent events(Note 14)                              |   |              |   |   |              |  

On behalf of the Board:

|Paul Saxton | Director | Andrew Milligan | Director
|------------- | -------- | ----------------- | --------
|Paul Saxton   |          | Andrew Milligan   |         

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

---

LINCOLN GOLD CORPORATION(An Exploration Stage Company)Consolidated Statements of Operations, Comprehensive Loss and Deficit(Expressed in United States dollars)

|                                                     |   |            |   |   |            |   |   |            |  
|---------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|Years ended December
      31                        |   | 2007       |   |   | 2006       |   |   | 2005       |  
|                                                     |   |            |   |   |            |   |   |            |  
|Exploration Expenses(Note 4)                         | $ | 319,375    |   | $ | 102,030    |   | $ | 558,904    |  
|                                                     |   |            |   |   |            |   |   |            |  
|Administrative Expenses                              |   |            |   |   |            |   |   |            |  
|Advertising and promotion                            |   | -          |   |   | 428        |   |   | 13,307     |  
|Administrative support                               |   | 22,403     |   |   | -          |   |   | -          |  
|Amortization                                         |   | 4,309      |   |   | 2,888      |   |   | 1,978      |  
|Consulting fees                                      |   | 29,864     |   |   | 2,293      |   |   | 8,663      |  
|Foreign exchange loss                                |   | 4,645      |   |   | 2,043      |   |   | 2,115      |  
|Investor relations                                   |   | 151,419    |   |   | 128,590    |   |   | 419,900    |  
|Management fees                                      |   | 25,850     |   |   | 62,795     |   |   | 102,838    |  
|Office                                               |   | 31,651     |   |   | 28,467     |   |   | 69,153     |  
|Professional fees                                    |   | 190,420    |   |   | 48,924     |   |   | 79,923     |  
|Property investigation and due
      diligence       |   | 5,145      |   |   | 3,822      |   |   | 25,113     |  
|Regulatory and shareholder services                  |   | 28,026     |   |   | 5,068      |   |   | 12,130     |  
|Stock-based compensation (Note
      7)              |   | 244,304    |   |   | -          |   |   | -          |  
|Travel and entertainment                             |   | 13,721     |   |   | 18,091     |   |   | 24,519     |  
|                                                     |   |            |   |   |            |   |   |            |  
|Loss before other items                              |   | (1,071,132 | ) |   | (405,439   | ) |   | (1,318,543 | )
|                                                     |   |            |   |   |            |   |   |            |  
|Other items                                          |   |            |   |   |            |   |   |            |  
|Accounts payable written off                         |   | -          |   |   | -          |   |   | 33,564     |  
|Interest income                                      |   | 4,213      |   |   | 2,591      |   |   | 8,414      |  
|Interest expense (Note 5)                            |   | (11,811    | ) |   | (10,693    | ) |   | (17,981    | )
|                                                     |   |            |   |   |            |   |   |            |  
|Loss and Comprehensive Loss for the year             |   | (1,078,730 | ) |   | (413,541   | ) |   | (1,294,546 | )
|                                                     |   |            |   |   |            |   |   |            |  
|Deficit, beginning of year                           |   | (3,537,109 | ) |   | (3,123,568 | ) |   | (1,829,022 | )
|                                                     |   |            |   |   |            |   |   |            |  
|Deficit, end of year                                 | $ | (4,615,839 | ) | $ | (3,537,109 | ) | $ | (3,123,568 | )
|                                                     |   |            |   |   |            |   |   |            |  
|                                                     |   |            |   |   |            |   |   |            |  
|Basic and diluted
      loss per common share        | $ | (0.02      | ) | $ | (0.01      | ) | $ | (0.03      | )
|                                                     |   |            |   |   |            |   |   |            |  
|                                                     |   |            |   |   |            |   |   |            |  
|Weighted average number of common shares outstanding |   | 47,172,000 |   |   | 42,366,000 |   |   | 41,079,000 |  

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

---

LINCOLN GOLD CORPORATION(An Exploration Stage Company) Consolidated Statements of Cash Flows(Expressed in United States dollars)

|                                                                      |   |            |   |   |          |   |   |            |  
|--------------------------------------------------------------------- | - | ---------- | - | - | -------- | - | - | ---------- | -
|Years ended December 31                                               |   | 2007       |   |   | 2006     |   |   | 2005       |  
|                                                                      |   |            |   |   |          |   |   |            |  
|Cash Flows From Operating Activities                                  |   |            |   |   |          |   |   |            |  
|Loss for the year                                                     | $ | (1,078,730 | ) | $ | (413,541 | ) | $ | (1,294,546 | )
|Items not affecting cash:                                             |   |            |   |   |          |   |   |            |  
|Accounts payable written
      off                                    |   | -          |   |   | -        |   |   | (33,564    | )
|Amortization                                                          |   | 4,309      |   |   | 2,888    |   |   | 1,978      |  
|Shares issued for mineral
      property costs                        |   | 14,250     |   |   | 10,000   |   |   | 55,000     |  
|Shares issued
      for services                                      |   | -          |   |   | -        |   |   | 108,000    |  
|Services in exchange for
      share issuance obligation              |   | -          |   |   | 73,333   |   |   | -          |  
|Stock-based
      compensation                                        |   | 244,304    |   |   | -        |   |   | -          |  
|                                                                      |   |            |   |   |          |   |   |            |  
|Changes in non-cash working capital
      items                       |   |            |   |   |          |   |   |            |  
|Increase in receivables                                               |   | (3,131     | ) |   | -        |   |   | -          |  
|Increase
      in loan receivable                                     |   | (5,000     | ) |   | -        |   |   | -          |  
|Decrease (increase) in prepaids
      and advances                    |   | (103,007   | ) |   | 6,409    |   |   | (11,302    | )
|Decrease
      (increase) in accounts payable and accrued liabilities |   | 163,280    |   |   | 16,566   |   |   | (47,349    | )
|                                                                      |   |            |   |   |          |   |   |            |  
|Net cash used in operating activities                                 |   | (763,725   | ) |   | (304,345 | ) |   | (1,221,783 | )
|                                                                      |   |            |   |   |          |   |   |            |  
|Cash Flows From Financing Activities                                  |   |            |   |   |          |   |   |            |  
|Repayment of advances from related parties                            |   | -          |   |   | -        |   |   | (4,180     | )
|Repayment of loan payable                                             |   | -          |   |   | -        |   |   | (46,000    | )
|Repayment of note payable                                             |   | -          |   |   | -        |   |   | (100,000   | )
|Shares issued for cash                                                |   | 752,500    |   |   | 215,000  |   |   | 1,483,500  |  
|Share subscriptions received in advance                               |   | 197,482    |   |   | -        |   |   | -          |  
|Share issue costs                                                     |   | (37,646    | ) |   | (21,500  | ) |   | (42,210    | )
|Deferred financing fee                                                |   | (19,900    | ) |   | -        |   |   | -          |  
|                                                                      |   |            |   |   |          |   |   |            |  
|Net cash provided by financing activities                             |   | 892,436    |   |   | 193,500  |   |   | 1,291,110  |  
|                                                                      |   |            |   |   |          |   |   |            |  
|Cash Flows From Investing Activities                                  |   |            |   |   |          |   |   |            |  
|Acquisition of equipment                                              |   | (27,471    | ) |   | -        |   |   | (9,306     | )
|Mineral property expenditures                                         |   | -          |   |   | -        |   |   | (55,000    | )
|                                                                      |   |            |   |   |          |   |   |            |  
|Net cash used in investing activities                                 |   | (27,471    | ) |   | -        |   |   | (64,306    | )
|                                                                      |   |            |   |   |          |   |   |            |  
|Change in cash during the year                                        |   | 101,240    |   |   | (110,845 | ) |   | 5,021      |  
|                                                                      |   |            |   |   |          |   |   |            |  
|Cash, beginning of year                                               |   | 21,961     |   |   | 132,806  |   |   | 127,785    |  
|                                                                      |   |            |   |   |          |   |   |            |  
|Cash, end of year                                                     | $ | 123,201    |   | $ | 21,961   |   | $ | 132,806    |  
|                                                                      |   |            |   |   |          |   |   |            |  
|Supplementary disclosure with respect to cash flows (Note
      11)   |   |            |   |   |          |   |   |            |  
|Cash paid for interest                                                | $ | -          |   | $ | -        |   | $ | 35,000     |  
|Cash paid for income taxes                                            | $ | -          |   | $ | -        |   | $ | -          |  

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

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|1. | NATURE AND CONTINUANCE OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Lincoln Gold Corporation (the Company) was
        incorporated in the State of Nevada, USA, on February 17, 1999 under the
        name of Braden Technologies Inc. Effective March 26, 2004, the Company
        acquired 100% of the issued and outstanding shares of Lincoln Gold Corp.,
        a private company incorporated in the State of Nevada, USA, on September
        25, 2003. On April 6, 2004, the Company and its subsidiary, Lincoln Gold
        Corp., merged to form Lincoln Gold Corporation.                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On November 20, 2007, the Company completed a continuation
        changing its corporate jurisdiction from Nevada to Canada under the Canada
        Business Corporations Act (CBCA). Unlike the Nevada jurisdiction,
        the Company chose under the CBCA to not have par value shares and, accordingly,
        prior period share capital amounts have been revised to reflect this change.
        In addition, the Company changed its authorized share capital from 100,000,000
        to unlimited.                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company is engaged in the acquisition and exploration
        of mineral properties, with the primary aim of developing properties to
        a stage where they can be exploited for a profit. To date, the Company
        and its subsidiary have not earned any revenues and are considered to
        be in the exploration stage.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These financial statements have been prepared in accordance
        with generally accepted accounting principles in Canada ("Canadian GAAP")
        under the assumption that the Company will be able to realize its assets
        and discharge its liabilities in the normal course of business rather
        than through a process of forced liquidation. While the Company has a
        history of operating losses and has a working capital deficiency of $71,665
        at December 31, 2007 (December 31, 2006  deficiency $130,363), it
        intends to undertake exploration programs that will require that the Company
        raise further funds. These financial statements do not include any adjustments
        to the amounts and classifications of assets and liabilities that might
        be necessary should the Company be unable to continue as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The operations of the Company have been primarily funded
        by the issuance of share capital and debt. Continued operations of the
        Company is dependent on the Company's ability to complete additional equity
        financings or generates profitable operations in the future. Such financings
        may not be available or may not be available on reasonable terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company's significant accounting policies are as
        follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Basis of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These consolidated financial statements include the
        accounts of the Company and its wholly-owned subsidiary, Minera Lincoln
        de Mexico, S.A. de C.V. (Lincoln Mexico), from the date of
        formation. All significant intercompany transactions and balances have
        been eliminated upon consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The preparation of financial statements in accordance
        with Canadian GAAP requires management to make estimates and assumptions
        that affect the reported amount of assets and liabilities and disclosure
        of contingent assets and liabilities at the date of the financial statements
        and the reported amount of revenues and expenses during the reporting
        period. Significant areas requiring the use of management estimates relate
        to the determination of impairment of assets, stock-based compensation,
        asset retirement obligations, the useful lives estimate and valuation
        allowances on future income tax assets. Actual results could differ from
        these estimates.                                                                                                                                                  

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|2. | SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Where applicable, comparative figures have been reclassified
        to conform with the presentation used in the current year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Equipment is recorded at cost and amortization is
        provided at a straight line bases over the following periods: Office equipment
         five years; computer software  two years; computer equipment
         three years; and vehicles  three years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Mineral property interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company charges to operations all exploration
        and development expenses incurred prior to the determination of economically
        recoverable reserves. These costs would also include periodic fees such
        as license and maintenance fees and advance royalty payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company capitalizes direct mineral property acquisition
        costs and those exploration and development expenditures incurred following
        the determination that the property has economically recoverable reserves.
        Mineral property acquisition costs include cash consideration and the
        fair value of common shares and warrants issued for mineral property interests,
        pursuant to the terms of the relevant agreement. These costs are amortized
        over the estimated life of the property following commencement of commercial
        production, or written off if the property is sold, allowed to lapse or
        abandoned, or when impairment in value has been determined to have occurred.
        An exploration property is reviewed for impairment whenever events or
        changes in circumstances indicate that its carrying amount may not be
        recoverable.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company recognizes the fair value of a liability
        for an asset retirement obligation in the year in which it is incurred
        when a reasonable estimate of fair value can be made. The carrying amount
        of the related long-lived asset is increased by the same amount as the
        liability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Changes in the liability for an asset retirement obligation
        due to the passage of time will be measured by applying an interest method
        of allocation. The amount will be recognized as an increase in the liability
        and an accretion expense in the statement of operations. Changes resulting
        from revisions to the timing or the amount of the original estimate of
        undiscounted cash flows are recognized as an increase or a decrease to
        the carrying amount of the liability and the related long-lived asset.                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company does not have any significant asset retirement
        obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company uses the treasury stock method to compute
        the dilutive effect of options, warrants and similar instruments. Under
        this method the dilutive effect on earnings per share is recognized on
        the use of the proceeds that could be obtained upon exercise of options,
        warrants and similar instruments. It assumes that the proceeds would be
        used to purchase common shares at the average market price during the
        period. For the years presented, this calculation proved to be anti-dilutive.
        At December 31, 2007, 2006 and 2005 the total number of potentially dilutive
        shares excluded from loss per share was 11,587,500, 7,147,500 and 7,835,000,
        respectively.                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Loss per share is calculated using the weighted average
        number of shares outstanding during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|2. | SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The operations of the Company's subsidiary, which
        is considered to be an integrated foreign operation, are translated into
        United States dollars using the temporal method. Under this method, monetary
        assets and liabilities are translated at year-end exchange rates. Non-monetary
        assets and liabilities are translated using historical rates of exchange.
        Revenues and expenses are translated at exchange rates approximating those
        in effect on the date of the transactions. Exchange gains and losses on
        translation are included in operating results.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The fair value of stock options granted is determined
        using the Black-Scholes option pricing model and recorded as stock-based
        compensation over the vesting period of the stock options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Future income taxes are recorded using the asset and
        liability method, whereby future tax assets and liabilities are recognized
        for the future tax consequences attributable to differences between the
        financial statement carrying amounts of existing assets and liabilities
        and their respective tax bases. Future tax assets and liabilities are
        measured using the enacted or substantively enacted tax rates expected
        to apply when the asset is realized or the liability settled. The effect
        on future tax assets and liabilities of a change in tax rates is recognized
        in income in the period that substantive enactment or enactment occurs.
        To the extent that the Company does not consider it more likely than not
        that a future tax asset will be recovered, it provides a valuation allowance
        against the excess.                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Deferred financing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Costs directly identifiable with the raising of capital
        will be charged against the related capital stock. Costs related to shares
        not yet issued are recorded as deferred financing costs. These costs will
        be deferred until the issuance of the shares to which the costs relate,
        at which time the costs will be charged against the related capital stock
        or charged to operations if the shares are not issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Deferred financing costs consist primarily of corporate
        finance fees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Adoption of new accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Effective January 1, 2007, the Company adopted the
        new recommendations of the Canadian Institute of Chartered Accountants
        (CICA) under CICA Handbook Section 1530 Comprehensive
        Income (Section 1530), Section 3251 Equity,
        Section 3855 Financial Instruments  Recognition and Measurement
        (Section 3855), Section 3861 Financial Instruments 
        Disclosure and Presentation and Section 3865 Hedges.
        These new sections, which apply to fiscal years beginning on or after
        October 1, 2006, provide requirements for the recognition and measurement
        of financial instruments and on the use of hedge accounting. Section 1530
        establishes standards for reporting and presenting comprehensive income
        which is defined as the change in equity from transactions and other events
        from non-owner sources. Other comprehensive income refers to items recognized
        in comprehensive income but that are excluded from net income calculated
        in accordance with Canadian generally accepted accounting principles.

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|2. | SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Under Section 3855, all financial instruments are
        classified into one of five categories: held-for-trading, held-to- maturity
        investments, loans and receivables, available-for-sale financial assets
        or other financial liabilities. All financial instruments and derivatives
        are measured in the balance sheet at fair value except for loans and receivables,
        held-to maturity investments and other financial liabilities which are
        measured at amortized cost. Subsequent measurement and changes in fair
        value will depend on their initial classification as follows: (1) held-for-
        trading financial assets are measured at fair value and changes in fair
        value are recognized in net income; (2) available-for-sale financial instruments
        are measured at fair value with changes in fair value recorded in other
        comprehensive income until the instrument is derecognized or impaired;
        and (3) all derivative instruments, including embedded derivatives, are
        recorded in the balance sheet at fair value unless they qualify for the
        normal sale normal purchase exemption and changes in their fair value
        are recorded in income unless cash flow hedge accounting is used, in which
        case changes in fair value are recorded in other comprehensive income.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | As a result of the adoption of these new standards,
        the Company has classified its cash as held-for-trading. Receivables are
        classified as loans and receivables. Accounts payable and accrued liabilities
        as well as note payable are classified as other financial liabilities,
        all of which are measured at amortized cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Section 3855 also provides guidance on accounting
        for transaction costs incurred upon the issuance of debt instruments or
        modification of a financial liability. Transaction costs are now deducted
        from the financial liability and are amortized using the effective interest
        method over the expected life of the related liability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | There was no adjustment to opening balances as a result
        of the adoption of these standards.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Accounting Changes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The AcSB issued CICA Handbook Section 1506. The main
        features of this new standard are (a) voluntary changes in accounting
        policy are made only if they result in the financial statements providing
        reliable and more relevant information; (b) changes in accounting policy
        are applied retrospectively unless doing so is impracticable (as defined
        in the section); (c) prior period errors are corrected retrospectively;
        and (d) new disclosures are required in respect of changes in accounting
        policies, changes in accounting estimates and correction of errors. This
        new standard was effective for fiscal years beginning on or after January
        1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Assessing Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Accounting Standards Board ("AcSB") amended CICA
        Handbook Section 1400, to include requirements for management to assess
        and disclose an entity's ability to continue as a going concern. This
        section applies to interim and annual financial statements relating to
        fiscal years beginning on or after January 1, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The AcSB issued CICA Handbook Section 3862, Financial
        Instruments - Disclosures, which requires entities to provide disclosures
        in their financial statements that enable users to evaluate (a) the significance
        of financial instruments for the entity's financial position and performance;
        and (b) the nature and extent of risks arising from financial instruments
        to which the entity is exposed during the period and at the balance sheet
        date, and how the entity manages those risks. The principles in this section
        complement the principles for recognizing, measuring and presenting financial
        assets and financial liabilities in Section 3855, Financial Instruments
        - Recognition and Measurement, Section 3863, Financial Instruments - Presentation,
        and Section 3865, Hedges. This section applies to interim and annual
        financial statements relating to fiscal years beginning on or after October
        1, 2007.                                                                                                                                                                                                                                                                                                                                                                         

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|2. | SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The AcSB issued CICA Handbook Section 3863, Financial
        Instruments - Presentation, which is to enhance financial statement
        users' understanding of the significance of financial instruments to an
        entity's financial position, performance and cash flows. This section
        establishes standards for presentation of financial instruments and non-
        financial derivatives. It deals with the classification of financial instruments,
        from the perspective of the issuer, between liabilities and equity, the
        classification of related interest, dividends, losses and gains, and the
        circumstances in which financial assets and financial liabilities are
        offset. This section applies to interim and annual financial statements
        relating to fiscal years beginning on or after October 1, 2007.                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Capital Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The AcSB issued CICA Handbook Section 1535, which establishes
        standards for disclosing information about an entity's capital and how
        it is managed. This section applies to interim and annual financial statements
        relating to fiscal years beginning on or after October 1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company is currently assessing the impact of the
        above new accounting standards on its consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | International Financial Reporting Standards (IFRS)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In 2006, the Canadian Accounting Standards Board (AcSB)
        published a new strategic plan that will significantly affect financial
        reporting requirements for Canadian companies. The AcSB strategic plan
        outlines the convergence of Canadian GAAP with IFRS over an expected five
        year transitional period. In February 2008, the AcSB announced that 2011
        is the changeover date for publicly-listed companies to use IFRS, replacing
        Canadas own GAAP. The date is for interim and annual financial statements
        relating to fiscal years beginning on or after January 1, 2011. The transition
        date of January 1, 2011 will require the restatement for comparative purposes
        of amounts reported by the Company for the year ended December 31, 2010.
        While the Company has begun assessing the adoption of IFRS for 2011, the
        financial reporting impact of the transition to IFRS cannot be reasonably
        estimated at this time
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3. | EQUIPMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

December
        31, 2007
      
      
      December
        31, 2006Accumulated
      
      
      Net
      
      
      
      
      
      Accumulated
      
      
      NetCost
      
      
      Amortization
      
      
      Book
        Value
      
      
      Cost
      
      
      Amortization
      
      
      Book
        ValueComputer equipment
      $
      7,610
      
      $
      4,181
      
      $
      3,429
      
      $
      4,676
      
      $
      2,461
      
      $
      2,215Computer software
      
      1,345
      
      
      1,345
      
      
      -
      
      
      1,345
      
      
      1,289
      
      
      56Office equipment
      
      4,225
      
      
      1,868
      
      
      2,357
      
      
      3,285
      
      
      1,116
      
      
      2,169Vehicle
      
      23,597
      
      
      1,781
      
      
      21,816
      
      
      -
      
      
      -
      
      
      -$
      36,777
      
      $
      9,175
      
      $
      27,602
      
      $
      9,306
      
      $
      4,866
      
      $
      4,440


---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|4. | MINERAL PROPERTY INTERESTS                                                                                                                                                                        
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                   
|   | The Companys mineral property interests are comprised
        of properties located in the United States and in Mexico. The Company
        incurred exploration expenditures as follows in 2007:

| |                                          |   | United
      States |  |   | Mexico |  |   |                  | 
| | ---------------------------------------- | - | ------------------- |  | - | ------ |  | - | ---------------- | 
| |                                          |   | Hannah              |  |   | JDS    |  |   | Jenny
      Hill | 
| |                                          |   |                     |  |   |        |  |   |                  | 
| | Exploration and related expenditures     |   |                     |  |   |        |  |   |                  | 
| | Option, lease and advance                |   |                     |  |   |        |  |   |                  | 
| | royalty payments                         | $ | 15,000              |  | $ | -      |  | $ | -                | 
| | Geochemistry                             |   | -                   |  |   | -      |  |   | -                | 
| | Contractors                              |   | 4,625               |  |   | 134    |  |   | 400              | 
| | General administration                   |   | 33                  |  |   | -      |  |   | 12               | 
| | Maintenance                              |   | 3,075               |  |   | -      |  |   | -                | 
| | Field supplies                           |   | -                   |  |   | -      |  |   | -                | 
| | Resource estimation                      |   | -                   |  |   | -      |  |   | -                | 
| | Imagery                                  |   | -                   |  |   | -      |  |   | -                | 
| | Shipping                                 |   | -                   |  |   | -      |  |   | -                | 
| | Travel and accommodation                 |   | 109                 |  |   | -      |  |   | 148              | 
| |                                          |   |                     |  |   |        |  |   |                  | 
| | Total mineral property expenditures 2007 | $ | 22,842              |  | $ | 134    |  | $ | 560              | 

The Company incurred exploration expenditures
  as follows in 2006:

| |                                          |   | United
      States |  |   | Mexico |  |   |                  | 
| | ---------------------------------------- | - | ------------------- |  | - | ------ |  | - | ---------------- | 
| |                                          |   | Hannah              |  |   | JDS    |  |   | Jenny
      Hill | 
| |                                          |   |                     |  |   |        |  |   |                  | 
| | Exploration and related expenditures     |   |                     |  |   |        |  |   |                  | 
| | Option, lease and advance                |   |                     |  |   |        |  |   |                  | 
| | royalty payments                         | $ | -                   |  | $ | -      |  | $ | -                | 
| | Geochemistry                             |   | -                   |  |   | 4,365  |  |   | -                | 
| | Contractors                              |   | 2,258               |  |   | 492    |  |   | -                | 
| | General administration                   |   | 32                  |  |   | 42     |  |   | -                | 
| | Geophysics                               |   | 1,000               |  |   | -      |  |   | -                | 
| | Maintenance                              |   | 13,078              |  |   | -      |  |   | -                | 
| | Field supplies                           |   | 5                   |  |   | -      |  |   | -                | 
| | Imagery                                  |   | -                   |  |   | -      |  |   | -                | 
| | Travel and accommodation                 |   | 418                 |  |   | -      |  |   | -                | 
| |                                          |   |                     |  |   |        |  |   |                  | 
| | Total mineral property expenditures 2006 | $ | 16,791              |  | $ | 4,899  |  | $ | -                | 

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|4. | MINERAL PROPERTY INTERESTS (continued)                                  
|-- | -------------------------------------------------------------------------
|   |                                                                          
|   | The Company incurred exploration expenditures as follows
        in 2005:

| |                                          |   | United
      States |  |   | Mexico   |     |  |                  | 
| | ---------------------------------------- | - | ------------------- |  | - | -------- | --- |  | ---------------- | 
| |                                          |   |                     |  |   |          |     |  |                  | 
| |                                          |   | Hannah              |  |   | JDS      |     |  | Jenny
      Hill | 
| |                                          |   |                     |  |   |          |     |  |                  | 
| | Exploration and related expenditures     |   |                     |  |   |          |     |  |                  | 
| | Geochemistry                             | $ | 3,699               |  | $ | (1,091   | ) $ |  | 9,628            | 
| | Drilling and metallurgical               |   | 112,749             |  |   | -        |     |  | -                | 
| | Contractors                              |   | 31,492              |  |   | 6,168    |     |  | 41,475           | 
| | General administration                   |   | -                   |  |   | 175      |     |  | 336              | 
| | Geologic mapping                         |   | 794                 |  |   | 794      |     |  | 751              | 
| | Maintenance                              |   | 10,363              |  |   | 11,526   |     |  | 62,957           | 
| | Field supplies                           |   | 1,109               |  |   | -        |     |  | 1,237            | 
| | Geophysics                               |   | -                   |  |   | 5,775    |     |  | 28,489           | 
| | Imagery                                  |   | -                   |  |   | -        |     |  | -                | 
| | Reclamation                              |   | 1,729               |  |   | -        |     |  | -                | 
| | Travel and accommodation                 |   | 8,014               |  |   | 646      |     |  | 7,473            | 
| |                                          |   |                     |  |   |          |     |  |                  | 
| | Total mineral property expenditures 2005 | $ | 169,949             |  | $ | 23,993 $ |     |  | 152,346          | 

United States

| | a) | Hannah Property                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | On December 24, 2003, the Company entered
        into an option agreement to acquire a 100% interest in certain unpatented
        lode claims situated in Churchill County, Nevada, USA. The option agreement
        called for net smelter royalties of 1% to 4% upon production. Pursuant
        to the option agreement, the Company is required to make option payments
        totaling $210,000 as follows:
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | •                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | •                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | •                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | •                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | •                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | •                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | On January 7, 2007 the Company amended the
        agreement whereby the $15,000 due on January 10, 2007 would be paid in
        equal quarterly installments of $3,750 quarterly (paid).                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | On January 10, 2008 the Company amended the
        Hannah agreement whereby the $25,000 due on January 10, 2008 would be
        lowered to $20,000 and be paid in equal quarterly installments throughout
        2008 ($5,000 paid).                                                                                                                                                                              

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|4. | MINERAL PROPERTY INTERESTS (continued)
|-- | ---------------------------------------
|   |                                        
|   | b)                                     
|   |                                        
|   |                                        
|   |                                        
|   | c)                                     
|   |                                        
|   |                                        
|   |                                        
|   |                                        
|   |                                        
|   | d)                                     
|   |                                        
|   |                                        
|   |                                        
|   |                                        
|   |                                        
|   | e)                                     
|   |                                        
|   |                                        
|   |                                        
|   |                                        
|   |                                        
|   |                                        

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|4. | MINERAL PROPERTY INTERESTS (continued)
|-- | ---------------------------------------

The following non-refundable advance
  net smelter royalty payments must be made by the Company:

| | • | $10,000 upon signing the agreement (paid); and                
| | - | --------------------------------------------------------------
| | • | $30,000 prior to each one year anniversary of
      the lease.

| | ii)  | On July 30, 2007 the Company entered into
        an agreement with Votipka to acquire three claims located within the Pine
        Grove Mining District in Lyon County, Nevada in return for a payment of
        $12,000 (paid). Upon commencement of commercial production, the Company
        will pay a 5% net smelter royalty to Votipka.                                                                                                                                                      
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | iii) | On August 1, 2007 the Company entered into
        an agreement with Lyon Grove to lease the Wilson Mining Claim Group located
        in Lyon County, Nevada from August 1, 2007 to July 31, 2022, with an option
        to purchase. The Company can extend the term of the lease for up to ten
        additional one year terms providing the Company is conducting exploration
        mining activities at the expiration of the term immediately preceding
        the proposed extension term.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | The following lease payments must be made
        by the Company:                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | The Company advanced a loan of $5,000 bearing
        an interest rate of 5% per annum to be repaid by July 31, 2008. The loan
        and interest will either be repaid at the maturity date or be offset against
        the lease payment due on August 1, 2008.                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | The lease payment made for any one calendar
        year may be credited against any net smelter royalty due and payable during
        the same calendar year.                                                                                                                                                                                                                                                                                                                                        
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | The following work commitments must be made
        by the Company:                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | Upon commencement of production the Company
        must pay a net smelter royalty of 3% - 7% based on gold prices.                                                                                                                                                                                                                                                                                                                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | Lyon Grove retains the right to require the
        Company to purchase the property any time after the Company has made application
        to permit and develop a mine on the property, subject to the Companys
        continued obligation to pay the royalties, for $1,000.                                                                                                                                                                                                                     

| | f) | Lincoln Flat Property                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                
| |    | During fiscal 2005, the Company determined not to proceed
        with further exploration and terminated the option agreement.

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|4. | MINERAL PROPERTY INTERESTS (continued)
      Mexico
|-- | ----------------------------------------------------

La Bufa Property

On August 5, 2005, the Company entered
  into a Letter of Intent with Almaden Minerals Ltd. (Almaden) to
  form a joint venture for the exploration and development of the La Bufa property,
  located in Chihuahua, Mexico. Under the Letter of Intent, the Company may acquire
  a 51% interest in the La Bufa property by spending $2,000,000 on the property
  over four years and by issuing 350,000 shares of the Company to Almaden over
  a five year period (50,000 shares issued at a value of $10,000 on March 15,
  2006). The Company issued 60,000 shares, valued at $9,600 on April 16, 2007,
  which was recorded as a payable during the year ended December 31, 2006.

On April 12, 2007, the Company entered
  into an option agreement with Almaden to acquire a 60% interest in the La Bufa
  property located in Chihuahua, Mexico. This agreement replaces the prior Letter
  of Intent. The agreement calls for the Company to undertake a work program on
  the property aggregating $3,500,000 and issuing an aggregate of 1,550,000 shares
  as follows:

Work Program:

| | • | By April 12, 2008 | $ 500,000 which must include drilling
| | - | ----------------- | -------------------------------------
| | • | By April 12, 2009 | $ 750,000                            
| | • | By April 12, 2010 | $1,000,000                           
| | • | By April 12, 2011 | $1,250,000                           

Share issuances:

| | • | By April 19, 2007 | 150,000 shares (issued April 16, 2007)
| | - | ----------------- | --------------------------------------
| | • | By April 12, 2008 | 200,000 shares (issued April 8, 2008) 
| | • | By April 12, 2009 | 200,000 shares                        
| | • | By April 12, 2011 | 1,000,000 shares                      

|   | At December 31, 2007 $101,150 has been advanced to a
        drilling company which is included in prepaids and advances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|5. | NOTE PAYABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | On January 28, 2004, the Company issued a $200,000 convertible
        note with 5,000,000 warrants to purchase common stock of the Company at
        $0.04 per share which expired on January 28, 2006. The note carried an
        interest rate of 10% compounded monthly and was due on January 28, 2006.
        The interest was payable annually with the second year interest payment
        due with the principal amount. The holder could convert any portion of
        the debt to common stock at the value of $0.04 per share until January
        28, 2006. Warrants could be exercised in minimum amounts of 1,000 shares
        at a conversion price of $0.04 per share.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | On September 15, 2005 the Company completed an agreement
        whereby the Company repaid $100,000 of the convertible note along with
        $35,000 accrued interest and agreed to repay the remaining $100,000 within
        sixty days - (outstanding). With the completion of the first payment,
        both the conversion feature of debt to common stock and the share purchase
        warrants were cancelled. The note is currently in default and the Company
        has accrued interest expense of $11,811 (2006 - $10,693; 2005 - $17,981)
        during the year.                                                                                                        

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|6. | SHARE CAPITAL AND CONTRIBUTED SURPLUS
|-- | -------------------------------------

| |                                          |  | Number     |  |   | Share     |   |   | Contributed |  
| | ---------------------------------------- |  | ---------- |  | - | --------- | - | - | ----------- | -
| |                                          |  | of Shares  |  |   | Capital   |   |   | Surplus     |  
| |                                          |  |            |  |   |           |   |   |             |  
| | Balance, December 31, 2004               |  | 38,400,000 |  | $ | 1,075,400 |   | $ | 1,037,663   |  
| | Private placement                        |  | 3,145,000  |  |   | 943,500   |   |   | -           |  
| | Exercise
      of options                |  | 20,000     |  |   | 20,600    |   |   | (8,600      | )
| | Shares issued for services               |  | 300,000    |  |   | 108,000   |   |   | -           |  
| | Share issue
      costs                  |  | -          |  |   | (42,210   | ) |   | -           |  
| |                                          |  |            |  |   |           |   |   |             |  
| | Balance, December 31, 2005               |  | 41,865,000 |  |   | 2,105,290 |   |   | 1,029,063   |  
| | Shares issued for mineral
      property |  | 50,000     |  |   | 10,000    |   |   | -           |  
| | Private placement                        |  | 1,075,000  |  |   | 215,000   |   |   | -           |  
| | Share issue costs                        |  | -          |  |   | (21,500   | ) |   | -           |  
| |                                          |  |            |  |   |           |   |   |             |  
| | Balance, December 31, 2006               |  | 42,990,000 |  |   | 2,308,790 |   |   | 1,029,063   |  
| | Shares issued
      for obligation       |  | 666,666    |  |   | 73,333    |   |   | -           |  
| | Shares issued for mineral
      property |  | 210,000    |  |   | 23,850    |   |   | -           |  
| | Private placement                        |  | 7,525,000  |  |   | 752,500   |   |   | -           |  
| | Share issue costs                        |  | -          |  |   | (37,646   | ) |   | -           |  
| | Stock-based
      compensation           |  | -          |  |   | -         |   |   | 244,304     |  
| |                                          |  |            |  |   |           |   |   |             |  
| | Balance, December 31, 2007               |  | 51,391,666 |  | $ | 3,120,827 |   | $ | 1,273,367   |  

Share issuances

| | a) | During fiscal 2006, the Company entered into a one year
        consulting agreement for investor relations services whereby the Company
        paid a monthly fee of $2,000 and was required to issue 1,250,000 shares.
        As of December 31, 2006, the Company recorded a share issuance obligation
        of $73,333 pursuant to the agreement. In fiscal 2007, the Company issued
        666,666 shares to settle this obligation. The Company and consultant subsequently
        agreed to amend the terms of the agreement whereby the Company was released
        from the remaining share issuance obligations in exchange for a cash payment
        of $87,500 that has been recorded in accounts payable at December 31,
        2007.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | b) | On April 16, 2007 the Company issued 210,000 shares
        of common stock at a value of $23,850 pursuant to a mineral option agreement
        of which 60,000 shares with a value of $9,600 relate to a mineral property
        payable recorded at December 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | c) | On May 29, 2007 the Company completed a private placement
        and issued 3,275,000 units at $0.10 per unit for proceeds of $327,500.
        Each unit consisted of one common share and one share purchase warrant
        with each warrant exercisable to acquire one common share at $0.15 per
        share for a term of two years. The Company incurred share issuance costs
        of $19,425 in connection with this private placement.                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | d) | On August 23, 2007 the Company completed a private placement
        and issued 4,250,000 units at $0.10 per unit for gross proceeds of $425,000.
        Each unit consisted of one common share and one share purchase warrant
        with each warrant exercisable to acquire one common share at $0.15 per
        share for a term of two years. The Company incurred share issuance costs
        of $15,000 in connection with this private placement.                                                                                                                                                                                                                                                                                             

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|6. | SHARE CAPITAL AND CONTRIBUTED SURPLUS
        (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | g)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|7. | STOCK OPTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In fiscal 2004, the Board of Directors approved
        the 2004 Stock Option Plan for a maximum of 2,500,000 shares available
        to be granted to directors, officers, employees and consultants. The stock
        option exercise price is set at the fair market value of the shares at
        the date of grant. The term of the stock options, once granted, is not
        to exceed ten years. The vesting period of the stock options is set at
        the discretion of the Board of Directors.      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On February 23, 2005, the Board of Directors
        approved the 2005 Stock Option Plan for a maximum of 2,000,000 shares
        available to be granted to directors, officers, employees and consultants.
        The stock option exercise price is set at the fair market value of the
        shares at the date of grant. The term of the stock options, once granted,
        is not to exceed ten years. The vesting period of the stock options is
        set at the discretion of the Board of Directors.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On September 25, 2007 the Company amended
        the 2005 Stock Option Plan adjusting the maximum number of shares available
        to be granted from 2,000,000 to 2,500,000.                                                                                                                                                                                                                                                                                                                                      

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|7. | STOCK OPTIONS (continued)                            
|-- | ------------------------------------------------------
|   |                                                       
|   | The change in stock options outstanding is as follows:

2007
      
      
      2006
      
      
      2005Weighted
      
      
      
      
      
      Weighted
      
      
      
      
      
      WeightedAverage
      
      
      
      
      
      Average
      
      
      
      
      
      AverageNumber
      
      
      Exercise
      
      
      Number
      
      
      Exercise
      
      
      Number
      
      
      ExerciseOf Options
      
      
      Price
      
      
      Of Options
      
      
      Price
      
      
      Of Options
      
      
      PriceAt January 1
      
      2,390,000
      
      $
      0.60
      
      
      2,390,000
      
      $
      0.60
      
      
      2,410,000
      
      $
      0.60Granted
      
      2,450,000
      
      
      0.25
      
      
      -
      
      
      -
      
      
      -
      
      
      -Excercised
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (20,000
      )
      
      0.60Expired or forfeited
      
      (2,390,000
      )
      
      (0.60
      )
      
      -
      
      
      -
      
      
      -
      
      
      -At December 31
      
      2,450,000
      
      $
      0.25
      
      
      2,390,000
      
      
      0.60
      
      
      2,390,000
      
      
      0.60


As at December 31, 2007 the following
  options are outstanding:

Number
      ExerciseOf Options
      Price
      Expiry
        Date2,450,000
      $ 0.25
      September 25, 2010


Stock-based compensation

During 2007, the Company granted 2,450,000
  fully vested stock options, 2,000,000 to officers and directors and 450,000
  to contractors, with a fair value of $244,304 that has been recorded as contributed
  surplus and stock-based compensation in the results of operations. The fair
  value of the stock options was estimated using the Black-Scholes option pricing
  model assuming a dividend yield of 0%, expected volatility of 97%, risk free
  interest rate of 3.99% and weighted average expected life of 3 years. The weighted
  average grant date fair value of the stock options was $0.10 per option.

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|8. | WARRANTS                                                       
|-- | ---------------------------------------------------------------
|   |                                                                
|   | As at December 31, 2007 the following warrants are outstanding:

Number
      
      ExerciseOf Warrants
      
      Price
      Expiry
        Date537,500
      *
      $      0.35
      January 27, 20081,075,000
      
      $      1.35
      July 27, 20103,275,000
      
      $      0.15
      May 28, 20094,250,000
      
      $      0.15
      August 23, 20099,137,500


* During the 2007 fiscal year, the expiry
  date of these warrants was extended from July 27, 2007 to January 27, 2008.
  These warrants have since expired unexercised.

Share purchase warrant transactions are
  summarized as follows:

| |                            |  |            |   |   |          | 
| | -------------------------- |  | ---------- | - | - | -------- | 
| |                            |  |            |   |   | Weighted | 
| |                            |  |            |   |   | Average  | 
| |                            |  | Number     |   |   | Exercise | 
| |                            |  | Of Shares  |   |   | Price    | 
| |                            |  |            |   |   |          | 
| | Balance, December 31, 2004 |  | 7,300,000  |   | $ | 0.16     | 
| | Issued                     |  | 3,145,000  |   |   | 0.40     | 
| | Cancelled                  |  | (5,000,000 | ) |   | 0.04     | 
| |                            |  |            |   |   |          | 
| | Balance, December 31, 2005 |  | 5,445,000  |   |   | 0.44     | 
| | Issued                     |  | 1,612,500  |   |   | 1.02     | 
| | Expired                    |  | (2,300,000 | ) |   | 0.50     | 
| |                            |  |            |   |   |          | 
| | Balance, December 31, 2006 |  | 4,757,500  |   |   | 0.68     | 
| | Issued                     |  | 7,525,000  |   |   | 0.15     | 
| | Expired                    |  | (3,145,000 | ) |   | 0.50     | 
| |                            |  |            |   |   |          | 
| | Balance, December 31, 2007 |  | 9,137,500  |   | $ | 0.30     | 

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|9.  | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | During the year ended December 31, 2007, the Company
        paid management fees and consulting fees of $13,800 (2006  $42,250;
        2005 - $49,098) and rent, included in office, of $2,700 (2006 - $3,300;
        2005 - $3,000) to the Vice President of the Company and management fees
        of $22,500 (2006 - $20,545; 2005 - $26,750) to company owned by the President
        of the Company. The Company also paid $18,000 (2006 - $1,400; 2005 - $2,550)
        consulting fees to a former director of the Company
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | As at December 31, 2007, the Company owed $1,155 (2006
        - $6,760) to various directors and officers of the Company which is included
        in accounts payable.                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | These transactions are in the normal course of operations
        and are measured at the exchange amount, which is the amount of consideration
        established and agreed to by the related parties.                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10. | INCOME TAX                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | A reconciliation of income tax recovery at statutory
        rates with the reported income tax recovery is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                 

| |                                            |   | 2007       |   |   | 2006     |   |   | 2005       |  
| | ------------------------------------------ | - | ---------- | - | - | -------- | - | - | ---------- | -
| |                                            |   |            |   |   |          |   |   |            |  
| | Loss for the year                          | $ | (1,078,730 | ) | $ | (413,541 | ) | $ | (1,294,546 | )
| |                                            |   |            |   |   |          |   |   |            |  
| | Income tax recovery at statutory rates     | $ | (371,000   | ) | $ | (145,000 | ) | $ | (453,000   | )
| | Amortization for tax purposes              |   | (43,000    | ) |   | (39,000  | ) |   | (24,000    | )
| | Non-deductible items                       |   | 178,000    |   |   | 34,000   |   |   | 224,000    |  
| | Unrecognized benefit of non-capital losses |   | 236,000    |   |   | 150,000  |   |   | 253,000    |  
| |                                            |   |            |   |   |          |   |   |            |  
| | Total income tax
      recovery            | $ | -          |   | $ | -        |   | $ | -          |  

The significant components of the Company's
  future income tax assets and liabilities are as follows:

| |                                                                 |   | 2007     |   |   | 2006     |   |   | 2005     |  
| | --------------------------------------------------------------- | - | -------- | - | - | -------- | - | - | -------- | -
| | Future income tax assets:                                       |   |          |   |   |          |   |   |          |  
| | Mineral property interests and deferred
      exploration costs | $ | 227,000  |   | $ | 215,000  |   | $ | 220,000  |  
| | Non-capital losses carried
      forward                        |   | 58,000   |   |   | 415,000  |   |   | 344,000  |  
| |                                                                 |   | 285,000  |   |   | 690,000  |   |   | 564,000  |  
| | Valuation allowance                                             |   | (285,000 | ) |   | (690,000 | ) |   | (564,000 | )
| | Net future income
      tax assets                              | $ | -        |   | $ | -        |   | $ | -        |  

The Company has Canadian non-capital
  losses of approximately $170,000 which may be carried forward and applied against
  taxable income in future years. These losses, if unutilized, will expire through
  to 2026. Subject to certain restrictions, the Company has further resource development
  and exploration expenditures totalling approximately $840,000 available to reduce
  taxable income of future years. The future income tax benefits of these losses,
  resource deductions and other tax assets have not been reflected in these financial
  statements and have been offset by a valuation allowance.

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|11. | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS                              
|--- | --------------------------------------------------------------------------------
|    |                                                                                 
|    | Significant non-cash financing or investing transactions
        are as follows:

| |                                                    |   | 2007   |  |   | 2006   |  |   | 2005    | 
| | -------------------------------------------------- | - | ------ |  | - | ------ |  | - | ------- | 
| |                                                    |   |        |  |   |        |  |   |         | 
| | Shares issued for mineral property costs           | $ | 14,250 |  | $ | 10,000 |  | $ | -       | 
| | Shares issued for services                         |   | -      |  |   | -      |  |   | 108,000 | 
| | Services in exchange for share issuance obligation |   | -      |  |   | 73,333 |  |   | -       | 
| | Shares used to settle share issuance obligation    |   | 73,333 |  |   | -      |  |   | -       | 
| | Shares to settle accounts payable                  |   | 9,600  |  |   | -      |  |   | -       | 

|    | There were no significant non-cash financing or investing
        transactions for the period ended December 31, 2007.                                                                                                                                                                                                                                                                                                                                      
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|12. | FINANCIAL INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company's financial instruments consist of cash,
        receivables, accounts payable and accrued liabilities and note payable.
        Unless otherwise noted, it is management's opinion that the Company is
        not exposed to significant interest, currency or credit risks arising
        from these financial instruments. The fair value of these financial instruments
        approximates their carrying value, unless otherwise noted.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|13. | SEGMENTED INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company has one reportable operating segment, being
        the acquisition and exploration of mineral properties. Geographical information
        is as follows:                                                                                                                                                                                                                                                                                      

| |                      |   |              |  |   |              | 
| | -------------------- | - | ------------ |  | - | ------------ | 
| |                      |   | December 31, |  |   | December 31, | 
| |                      |   | 2007         |  |   | 2006         | 
| |                      |   |              |  |   |              | 
| | Identifiable assets: |   |              |  |   |              | 
| | Mexico               | $ | 21,816       |  | $ | -            | 
| | Canada               |   | 5,786        |  |   | 4,440        | 
| |                      |   |              |  |   |              | 
| |                      | $ | 27,602       |  | $ | 4,440        | 

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|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|14. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|15. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
        GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
      These consolidated financial statements have been prepared in accordance
        with generally accepted accounting principles in Canada (“Canadian
        GAAP”). There are no material variations in the accounting principles,
        practices and methods used in preparing these consolidated financial statements
        from principles, practices and methods accepted in the United States (“U.S.
        GAAP”).

---

|LINCOLN GOLD CORPORATION                      
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|(Expressed in United States dollars)          
|                                              

|15. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
        GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued...)
      Adoption of new accounting policies
      In June 2006, the FASB issued Interpretation No.48,
        “Accounting for Uncertainty in Income Taxes – an interpretation
        of FASB Statement 109” (“FIN 48”). This interpretation
        clarifies the recognition threshold and measurement of a tax position
        taken or expected to be taken on a tax return, and requires expanded disclosure
        with respect to the uncertainty in income taxes. FIN 48 also provides
        guidance on derecognition, classification, interest and penalties, accounting
        in interim periods, disclosures and transition. The Company adopted the
        provisions of FIN 48 on January 1, 2007 and the adoption of this policy
        does not result in an adjustment to the Company’s financial statements.
      Recent accounting pronouncement
      In September 2006, FASB issued SFAS No. 157, “Fair
        Value Measurements.”  Among other requirements, SFAS 157 defines
        fair value and establishes a framework for measuring fair value and also
        expands disclosure about the use of fair value to measure assets and liabilities. 
        SFAS 157 is effective for fiscal years beginning after November 15, 2007.
      In February 2007, the FASB issued SFAS No. 159, “The
        Fair Value Option for Financial Assets and Financial Liabilities,”
        including an amendment of FASB Statement No. 115.  This pronouncement
        permits entities to choose to measure eligible financial instruments at
        fair value as of specified dates.  Such election, which may be applied
        on an instrument by instrument basis, is typically irrevocable once elected. 
        SFAS 159 is effective for fiscal years beginning November 15, 2007, and
        early application is allowed under certain circumstances.
      In December 2007, the FASB issued SFAS No. 141R, “Business
        Combinations” which changes how business acquisitions are accounted. 
        SFAS 141R requires the acquiring entity in a business combination to recognize
        all (and only) the assets acquired and liabilities assumed in the transaction
        and establishes the acquisition-date fair value as the measurement objective
        for all assets acquired and liabilities assumed in a business combination. 
        Certain provisions of this standard will, among other things, impact the
        determination of acquisition-date fair value of consideration paid in
        a business combination (including contingent considerations); exclude
        transaction costs from acquisition accounting; and change accounting practices
        for acquired contingencies, acquisition-related restructuring costs, in-process
        research and development, indemnification assets and tax benefits. 
        SFAS No. 141R is effective for business combinations and adjustments to
        an acquired entity’s deferred tax asset and liability balances occurring
        after December 31, 2008.
      In December 2007, the FASB issued SFAS No. 160, “Noncontrolling
        Interests in Consolidated Financial Statement, an amendment of ARB No.
        51,” which establishes new standards governing the accounting for
        and reporting of noncontrolling interests (NCI) in partially owned consolidated
        subsidiaries and the loss of control of subsidiaries. Certain provisions
        of this standard indicate, among other things, that NCIs (previously referred
        to as minority interests) be treated as a separate component of equity,
        not as a liability; that increases and decreases in the parent’s
        ownership interest that leave control intact be treated as equity transactions,
        rather than as step acquisitions or dilution gains or losses; and that
        losses of a partially owned consolidated subsidiary be allocated to the
        NCI even when such allocation might result in a deficit balance. 
        This standard also requires changes to certain presentation and disclosure
        requirements.  SFAS No. 160 is effective beginning January 1, 2009. 
        The provisions of the standard are to be applied to all NCI’s prospectively,
        except for the presentation and disclosure requirements, which are to
        be applied retrospectively to all periods presented.
      The adoption of these new pronouncements is not expected
        to have a material effect on the Company’s financial position or
        results of operations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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ITEM 18        
FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to
Item 17.





- 87 -

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ITEM 19        
EXHIBITS

Exhibit Number
      Description of Exhibit1.01
    Articles of Conversion (4)1.02
    Articles of Continuance of Lincoln Gold Corporation, a
      Canadian federal corporation (4)1.03
    Bylaws of Lincoln Gold Corporation, a Canadian federal
      corporation (4)2.01
    Shareholder Rights Plan (5)4.01
    2005 Stock Option Plan, as amended
          (6)4.02
    Option Agreement between the Corporation and Almaden
      dated April 12, 2007 (1)4.03
    Form of Regulation S Subscription Agreement for May 2007
      Unit Offering (2)4.04
    Lease agreement dated July 13,
          2007 between Lincoln Gold Corporation and Wheeler Mining Company (6)4.05
    Lease agreement dated August
          1, 2007 between Lincoln Gold Corporation and Lyon Grove, PLC (6)4.06
    Form of Regulation D Subscription Agreement for August
      2007 Unit Offering (3)4.07
    Form of Regulation S Subscription Agreement for August
      2007 Unit Offering (3)11.01
    Code of Ethics (6)12.01
    Certification of Chief Executive
          Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
          302 of the Sarbanes-Oxley Act of 2002 (6)12.02
    Certification of Chief Financial
          Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
          302 of the Sarbanes-Oxley Act of 2002 (6)13.01
    Certification of Chief Executive
          Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
          906 of the Sarbanes-Oxley Act of 2002 (6)13.02
    Certification of Chief Financial
          Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
          906 of the Sarbanes-Oxley Act of 2002 (6)


|(1) | Previously filed as an exhibit to our Current Report on
      Form 8-K filed on April 18, 2007. 
|--- | ------------------------------------------------------------------------------------------------
|(2) | Previously filed as an exhibit to our Current Report on
      Form 8-K filed on May 18, 2007.   
|(3) | Previously filed as an exhibit to our Current Report on
      Form 8-K filed on August 28, 2007.
|(4) | Previously filed as an exhibit to our Current report on
      Form 8-K on November 23, 2007.    
|(5) | Previously filed as an exhibit to our Current report on
      Form 6-K on July 9, 2008.         
|(6) | Filed as an Exhibit to this Annual Report on Form
      20-F.                                   

__________

- 88 -

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SIGNATURES

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 on its behalf.

LINCOLN GOLD CORP.



|Per:   | /s/
      Paul Saxton                 | 
|------ | ------------------------------------- | 
|Name:  | Paul Saxton                           | 
|Title: | President and Chief Executive Officer | 
|       |                                       | 
|Date:  | July 14, 2008                         | 

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