**Platinum
      Group Metals
      Ltd.**


*(Exploration
      Stage
      Company)*




Consolidated
      Financial
      Statements


For
      the year ended August 31,
      2007





Filed:
      November 29, 2007














*A
      copy of this report will be provided to any shareholder who requests
      it.*


See
            accompanying notes to the consolidated financial
            statements.


**Management’s
      responsibility for the Financial Statements**





The
      preparation and presentation of the accompanying consolidated financial
      statements, Management’s Discussion and Analysis (“MD&A”) and all financial
      information in the Annual Report are the responsibility of management and have
      been approved by the Board of Directors.





The
      consolidated financial statements have been prepared in accordance with Canadian
      generally accepted accounting principles. Financial statements, by nature are
      not precise since they include certain amounts based upon estimates and
      judgments. When alternative methods exist, management has chosen those it deems
      to be the most appropriate in the circumstances. The financial information
      presented elsewhere in the Annual Report is consistent with that in the
      consolidated financial statements.





Management,
      under the supervision of and the participation of the Chief Executive Officer
      and the Chief Financial Officer, have a process in place to evaluate disclosure
      controls and procedures and internal control over financial reporting as
      required by Canadian and U.S. securities regulations. We, as Chief Executive
      Officer and Chief Financial Officer, will certify our annual filings with the
      CSA and SEC as required in Canada by Multilateral Instrument 52-109 and in
      the
      United States as required by the Securities Exchange Act of 1934.





The
      board
      of Directors is responsible for ensuring that management fulfills its
      responsibilities for financial reporting and is ultimately responsible for
      reviewing and approving the consolidated financial statements. The Board carries
      out this responsibility principally through its Audit Committee which is
      independent from management.





The
      Audit
      Committee is appointed by the Board of Directors and reviews the consolidated
      financial statements and MD&A; considers the report of the external
      auditors; assesses the adequacy of our internal controls, including management’s
      assessment described below; examines and approves the fees and expenses for
      the
      audit services; and recommends the independent auditors to the Board for the
      appointment by the shareholders. The independent auditors have full and free
      access to the Audit Committee and meet with it to discuss their audit work,
      our
      internal control over financial reporting and financial reporting matters.
      The
      Audit Committee reports its findings to the Board for consideration when
      approving the consolidated financial statements for issuance to the shareholders
      and management’s assessment of the internal control over financial
      reporting.





**Management’s
      Report on Internal Control over Financial Reporting**





Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting.





Management
      has assessed the effectiveness of our internal control over financial reporting
      as of August 31, 2007 using criteria established in *Internal Control –
Integrated Framework* issued by the Committee of Sponsoring Organizations of
      the Treadway Commission. Based on this evaluation, management concluded that
      our
      internal control over financial reporting was effective as of August 31,
      2007.




*"R.
                Michael Jones"*
              Chief
                Executive Officer
            *"Frank
                Hallam"*
              Chief
                Financial Officer




November
      16, 2007


Report
      of
      Independent Auditors


To
      the
      Shareholders of


Platinum
      Group Metals Ltd.





We
      have
      completed an integrated audit of the consolidated financial statements and
      internal control over financial reporting of Platinum Group Metals Ltd. as
      of
      August 31, 2007. Our opinions, based on our audits, are presented
      below.





**Consolidated
      financial statements**




We
      have
      audited the accompanying consolidated balance sheet of Platinum Group Metals
      Ltd. as of August 31, 2007, and the related consolidated statements of
      operations, shareholders’ equity and cash flows for the year ended August 31,
      2007. These financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these financial
      statements based on our audit.





We
      conducted our audit of the Company’s financial statements as of August 31, 2007
      and for the year then ended in accordance with Canadian generally accepted
      auditing standards and 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 about whether the financial statements are free
      of material misstatement. An audit of financial statements includes examining,
      on a test basis, evidence supporting the amounts and disclosures in the
      financial statements. A financial statement audit also includes assessing the
      accounting principles used and significant estimates made by management, and
      evaluating the overall financial statement presentation. We believe that our
      audit provides a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of the Company as of August
      31,
      2007 and the results of its operations and its cash flows for the year then
      ended in accordance with Canadian generally accepted accounting
      principles.





The
      consolidated financial statements of the Company as of August 31, 2006 and
      the
      results of its operations and its cash flows for the years ended August 31,
      2006
      and 2005 were audited by other auditors who expressed an opinion without
      reservation on those statements in their report dated November 8,
      2006.





**Internal
      control over financial reporting**




We
      have
      also audited Platinum Group Metals Ltd.’s internal control over financial
      reporting as of August 31, 2007, based on criteria established in*Internal
      Control - Integrated Framework* issued by the Committee of Sponsoring
      Organizations of the Treadway Commission (COSO). The Company’s management is
      responsible for maintaining effective internal control over financial reporting
      and for its assessment of the effectiveness of internal control over financial
      reporting. Our responsibility is to express an opinion on the effectiveness
      of
      the Company’s internal control over financial reporting based on our
      audit.





We
      conducted our audit of internal control over financial reporting in accordance
      with the standards of the Public Company Accounting Oversight Board (United
      States). Those standards require that we plan and perform the audit to obtain
      reasonable assurance as to whether effective internal control over financial
      reporting was maintained in all material respects. An audit of internal control
      over financial reporting includes obtaining an understanding of internal control
      over financial reporting, assessing the risk that a material weakness exists,
      and testing and evaluating the design and operating effectiveness of internal
      control based on the assessed risk. Our audit also included performing such
      other procedures as we consider necessary in the circumstances. We believe
      that
      our audit provides a reasonable basis for our opinion.





A
      company’s 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. A company’s internal control over
      financial reporting includes those policies and procedures that (i) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (ii)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (iii) provide reasonable assurance regarding prevention or
      timely detection of the unauthorized acquisition, use, or disposition of the
      company’s assets that could have a material effect on the financial
      statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





In
      our
      opinion, the Company maintained, in all material respects, effective internal
      control over financial reporting as of August 31, 2007 based on criteria
      established in *Internal Control — Integrated Framework*issued by the
      COSO.













PricewaterhouseCoopers
      LLP


Vancouver,
      British Columbia


November
      16, 2007





See
            accompanying notes to the consolidated financial
            statements.


**Independent
      Auditors’ Report**


**Report
      of Independent Registered Public Accounting Firm**




To
      the
      Board of Directors of Platinum Group Metals Ltd.







We
      have
      audited the consolidated balance sheets of Platinum Group Metals Ltd. (an
      exploration stage company) as at August 31, 2006 and 2005 and the consolidated
      statements of operations, shareholders’ equity and cash flows for each of the
      years in the three year period ended August 31, 2006 and the cumulative period
      from March 16, 2000 to August 31, 2006. These financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audits.




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




In
      our
      opinion, these consolidated financial statements present fairly, in all material
      respects, the financial position of the Company as at August 31, 2006 and 2005
      and the results of its operations and its cash flows for each of the years in the
      three year period ended August 31, 2006 and the cumulative period from March
      16,
      2000 to August 31, 2006 in accordance with Canadian generally accepted
      accounting principles.




The
      Company is not required to have, nor were we engaged to perform, an audit of
      its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion.







Independent
      Registered Chartered Accountants


Vancouver,
      Canada


November
      8, 2006










**Comments
      by auditors on Canada - United States of America reporting
      differences**




The
      standards of the Public Company Accounting Oversight Board (United States)
      require the addition of an explanatory 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 consolidated financial statements. Although we conducted our
      audits in accordance with both Canadian generally accepted auditing standards
      and the standards of the Public Company Accounting Oversight Board (United
      States), our report to the Shareholders dated November 8, 2006 is expressed
      in
      accordance with Canadian reporting standards which do not permit a reference
      to
      such conditions and events in the auditors’ report when these are adequately
      disclosed in the consolidated financial statements.




The
      standards of the Public Company Accounting Oversight Board (United States)
      require the addition of an explanatory paragraph (following the opinion
      paragraph) when there are changes in accounting principles that have a material
      effect on the comparability of the Company’s consolidated financial statements,
      such as the change described in Note 2 (f) to the consolidated financial
      statements. Our report to the shareholders, dated November 8, 2006, is expressed
      in accordance with Canadian reporting standards which do not require a reference
      to such changes in accounting principles in the auditors’ report when the change
      is properly accounted for and adequately disclosed in the consolidated financial
      statements.







Independent
      Registered Chartered Accountants


Vancouver,
      Canada


November
      8, 2006






































**1.           NATURE
      OF OPERATIONS**




The
      Company is a British Columbia corporation incorporated on February 18, 2002
      by
      an order of the Supreme Court of British Columbia approving an amalgamation
      between Platinum Group Metals Ltd. (“Old Platinum”) and New Millennium Metals
      Corporation (“New Millennium”). The Company is an exploration company conducting
      work on mineral properties it has staked or acquired by way of option agreements
      principally in Ontario, Canada and the Republic of South Africa. The Company
      has
      not yet determined whether its mineral properties contain ore reserves that
      are
      economically recoverable. The Company defers all acquisition, exploration and
      development costs related to mineral properties. The recoverability of these
      amounts is dependant upon the discovery of economically recoverable reserves,
      the ability of the Company to obtain the necessary financing to complete the
      development of the property, and future profitable production, or alternatively,
      upon the Company’s ability to dispose of its interests on an advantageous
      basis.





The
      Company has incurred losses from inception and does not currently have the
      financial resources to sustain operations in the long-term. The Company is
      dependant upon its ability in the future to achieve profitable operations and,
      in the meantime, to obtain the necessary financing to meet its obligations
      and
      repay its liabilities arising from normal business operations when they become
      due. External financing, predominantly by the issuance of equity to the public,
      will be sought to finance the operations of the Company, however, there is
      no
      assurance that sufficient funds can or will be raised.







**2.           SIGNIFICANT
      ACCOUNTING POLICIES**




These
      financial statements have been prepared in accordance with Canadian generally
      accepted accounting principles (“Canadian GAAP”) and include the significant
      policies outlined below. These policies conform, in all material respects,
      with
      accounting principles generally accepted in the United States of America (“US
      GAAP”), except as described in Note 15.





*(a)           Basis
      of presentation and principles of consolidation*




The
      financial statements of entities which are controlled by the Company through
      voting equity interest, referred to as subsidiaries, are consolidated. Variable
      interest entities (“VIEs”), which include, but are not limited to, special
      purpose entities, trusts, partnerships and other legal structures, as defined
      by
      the Accounting Standards Board in Accounting Guideline 15, “Consolidation of
      Variable Interest Entities”, are entities in which equity investors do not have
      the characteristics of a “controlling financial interest” or there is not
      sufficient equity at risk for the entity to finance its activities without
      additional subordinated financial support. VIEs are subject to consolidation
      by
      the primary beneficiary who will absorb the majority of the entities’ expected
      losses and/or residual returns.





These
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiary, Platinum Group Metals (RSA) (Pty) Ltd. (“PTM
      RSA”). PTM RSA holds mineral rights and conducts operations in the Republic of
      South Africa. All significant intercompany balances and transactions have been
      eliminated upon consolidation.





The
      Company’s 37% working interest in the Western Bushveld Joint Venture (Note 5) is
      recorded using the equity method.





*(b)           Mineral
      properties and deferred exploration costs*




Mineral
      properties consist of exploration and mining concessions, options and contracts.
      Acquisition and leasehold costs and exploration costs are capitalized until
      such
      time as the property is put into production or disposed of either through sale
      or abandonment. If put into production, the costs of acquisition and exploration
      will be amortized over the life of the property based on the estimated economic
      reserves. Proceeds received from the sale of any interest in a property will
      first be credited against the carrying value of the property, with any excess
      included in operations for the period. If a property is abandoned, the property
      and deferred exploration costs are written off to operations.





Management
      of the Company reviews and evaluates the carrying value of each mineral property
      for impairment when events or changes in circumstances indicate that the
      carrying amounts of the related asset may not be recoverable. Where estimates
      of
      future net cash flows are available and the total estimated future cash flows
      on
      an undiscounted basis are less than the carrying amount of the asset, an
      impairment loss is recognized and assets are written down to fair value which
      is
      normally determined using the discounted value of future cash flows. Where
      estimates of future net cash flows are not available and where other conditions
      suggest impairment, management assesses whether the carrying value can be
      recovered by considering alternative methods of determining fair value. When
      it
      is determined that a mineral property is impaired it is written down to its
      estimated fair value.





*(c)           Cash
      and cash equivalents*




Cash
      and
      cash equivalents consist of cash and short-term money market instruments, which
      are readily convertible to cash and have original maturities of 90 days or
      less.
      The Company holds no asset-backed commercial paper.





*(d)           Income
      taxes*




Future
      income taxes relate to the expected future tax consequences of differences
      between the carrying amount of balance sheet items and their corresponding
      tax
      values. Future tax assets, if any, are recognized only to the extent that,
      in
      the opinion of management, it is more likely than not that the future income
      tax
      assets will be realized. Future income tax assets and liabilities are adjusted
      for the effects of changes in tax laws and rates on the date of enactment or
      substantive enactment.








*(e)           Marketable
      securities and investments*




Marketable
      securities are recorded at the lower of cost or market value.





Short-term
      investments comprise guaranteed investment certificates with original maturities
      of more than 90 days.





Investments
      where the Company has the ability to exercise significant influence, generally
      where the Company has a 20% to 50% equity and voting interest, are accounted
      for
      using the equity method. Under this method, the Company’s share of the
      investee’s earnings or losses is included in operations and its investment
      therein is adjusted by a like amount.





Provisions
      for impairment of investments are made, where necessary, to recognize other
      than
      temporary declines in value.





*(f)           Fixed
      assets*




Fixed
      assets are recorded at cost and are amortized on the declining balance basis
      at
      the following annual rates:




Computer
      equipment                                                            
30%


Computer
      software                                                                30%


Office
      furniture and
      equipment                                            20%





The
      leasehold improvements are depreciated on a straight-line basis to amortize
      the
      costs over the three year term of the related lease.





*(g)           Reclamation
      and closure costs*




The
      Company recognizes the estimated fair value of liabilities for asset retirement
      obligations including reclamation and closure costs in the period in which
      they
      are incurred. A corresponding increase to the carrying amount of the related
      asset is recorded and amortized over the life of the asset. The amount of the
      liability is subject to re-measurement at each reporting period and is accreted
      over time to the estimated asset retirement obligation ultimately payable
      through charges to operations.





The
      estimates are based principally on legal and regulatory requirements. It is
      possible that the Company’s estimates of its ultimate reclamation and closure
      liabilities could change as a result of changes in regulations, the extent
      of
      environmental remediation required, changes in technology and the means and
      cost
      of reclamation. Based on management’s estimates, the Company has determined that
      there are no reclamation liabilities as at year end.





*(h)           Earnings
      (loss) per common share*




Basic
      earnings per share is calculated using the weighted average number of common
      shares outstanding.





The
      Company uses the treasury stock method for the calculation of diluted earnings
      per share. Diluted earnings per share are computed using the weighted average
      number of common and common equivalent shares outstanding during the year.
      Common equivalent shares consist of the incremental common shares arising upon
      the assumed exercise of stock options and warrants, but are excluded from the
      computation if their effect is anti-dilutive.





*(i)           Financial
      instruments*




The
      carrying values of cash and cash equivalents, short-term investments, amounts
      receivable, performance bonds, due to and from WBJV partners, accounts payable
      and capital lease obligations reflected in the balance sheet approximate their
      respective fair values. The fair value of marketable securities is disclosed
      in
      note 4.





Currency
      risk is the risk that the value of the Company’s financial instruments will vary
      from fluctuations in foreign exchange rates and the degree of volatility of
      these rates. The Company does not use any derivative instruments to reduce
      its
      exposure to fluctuations in foreign exchange rates.





*(j)           Measurement
      uncertainty*




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amount of assets and liabilities and disclosure of
      contingent liabilities at the date of the financial statements, and the reported
      amounts of expenditures during the reporting period. Significant items where
      management’s judgement is applied include the assessment of impairment of
      long-lived assets, amortization, income tax provisions, contingent liabilities,
      stock-based compensation and asset retirement obligations. Actual results could
      differ from those estimates.





*(k)*
            *Translation
                of foreign currencies*




The
                Company’s functional currency is the Canadian dollar. For integrated
                foreign operations, monetary assets and liabilities are translated
                at year
                end exchange rates and other assets and liabilities are translated
                at
                historical rates. Revenues, expenses and cash flows are translated
                at
                average exchange rates. Gains and losses on translation of monetary
                assets
                and monetary liabilities are charged to
                operations.







The
      accounts of self-sustaining foreign operations are translated at year end
      exchange rates, and revenues and expenses are translated at average exchange
      rates. Differences arising from these foreign currency translations are recorded
      in shareholders’ equity as a cumulative translation adjustment until they are
      realized by a reduction in the investment.





*(l)           Stock-based
      compensation*




The
      Company follows the recommendations of the Canadian Institute of Chartered
      Accountants (“CICA”) Handbook Section 3870, *Stock-based Compensation and
      Other Stock-based Payments*. Accordingly, the fair value of all stock-based
      awards granted are estimated using the Black-Scholes model and are recorded
      in
      operations over their vesting periods. The compensation cost related to stock
      options granted is recorded in operations.





Cash
                received on the exercise of stock options is credited to share capital
                and
                the amount previously recognized in contributed surplus is also
                transferred to share capital.





*(m)*
            *Capital
                leases*




Leases
      of
      fixed assets which transfer substantially all the benefits and risks incident
      to
      ownership of property to the Company are classified as capital
      leases.





Capital
      leases are capitalized by recording an asset and a liability at the lower of
      the
      amounts equal to the fair value of the leased property or the present value
      of
      the minimum lease payments. Lease payments are allocated between the reduction
      of the lease liability and the lease interest expense for the
      period.





*(n)*
            *New
                accounting pronouncements*




**Financial
      instruments – recognition and measurement**




In
      January 2005, the CICA issued new Handbook Section 3855 *Financial
      Instruments**– Recognition and Measurement*, effective for annualand
      interim periods beginning on or after October 1, 2006. CICA3855 establishes
      standards for recognizing and measuring financialassets and liabilities and
      non-financial derivatives. All financial assets,except those classified as
      held
      to maturity, and derivative financialinstruments, must be measured at fair
      value. All financial liabilitiesmust be measured at fair value when they are
      classified as held for trading,otherwise, they are measured at amortized cost.
      Investments available for salewill be recorded at fair value with the unrealized
      gains or losses recordedthrough comprehensive income. For the interim period
      endingNovember 30, 2007, the Company expects a material impact on itsfinancial
      statements similar to the impact on comprehensive income forU.S. GAAP purposes
      (See note 15).





**Comprehensive
      income**




In
      January 2005, the CICA issued new Handbook Section 1530*Comprehensive
      Income* and Handbook Section 3251*Equity,* effective for interim and
      annual period beginningon or after October 1, 2006. CICA 1530 establishes
      standards forreporting and presenting certain gains and losses normally not
      includedin net earnings or losses, such as unrealized gains and losses relatedto
      available-for-sale securities, in a statement of comprehensive income.CICA
      3251
      establishes standards for the presentation of equity andchanges in equity as
      a
      result of the new requirements in CICA 1530.The Company will include a statement
      of comprehensive income uponadoption of these sections from September 1,
      2007.










**3.           AMOUNTS
      RECEIVABLE**









Expenditure
      advances receivable consist of funds advanced to officers, directors and
      consulting geologists for exploration and corporate activities conducted in
      the
      normal course of business and bear no interest.







**4.           MARKETABLE
      SECURITIES**










*(a)           MAG
      Silver Corp.*




In
      2003
      the Company earned a finders’ fee of 200,000 shares of MAG Silver Corp. (“MAG”),
      a company with two directors and one officer in common with the Company, with
      an
      assigned value of $0.50 per share for introducing MAG to certain individuals
      and
      mineral properties located in Mexico. During 2003 the Company sold 100,000
      of
      these shares for proceeds of $67,630. The remaining 100,000 MAG shares owned
      by
      the Company had a market value of $1,300,000 at August 31, 2007 ($300,000 at
      August 31, 2006).





*(b)           West
      Timmins Mining Inc.*




In
      2002
      New Millennium granted Sydney Resource Corporation (“SYR”), a company with three
      directors in common with the Company, an option to earn a 50% interest in New
      Millennium’s 100% owned Simlock Creek gold project, located in the Cariboo
      Mining District of British Columbia. On December 2, 2003 the Company and SYR
      agreed to terminate the Option and the Company then sold the property to SYR
      outright in exchange for 1,200,000 shares of SYR at a value of $0.20 per share.
      At August 31, 2006 the Company held 800,001 SYR shares with an aggregate cost
      of
      $160,000. Market value for these 800,001 shares at August 31, 2007 was $784,001
      ($264,000 at August 31, 2006). SYR was reorganized and named West Timmins Mining
      Inc. on September 14, 2006.













**5.**  **INVESTMENT
      IN WESTERN BUSHVELD JOINT VENTURE (THE “WBJV”)**







**Aug.
                31, 2007**
            **Aug.
                31, 2006**Opening
                Balance
            $10,861,834
            $5,770,020Additional
                investment
            3,917,468
            5,091,814Balance
                before translation
            14,779,302
            10,861,834Translation
                adjustment
            (2,365,876)
            (658,381)Ending
                Balance
            $12,413,426
            $10,203,453





Details
      of the assets of the WBJV excluding the property rights contributed by the
      other
      venture partners are as follows:











From
      inception of the joint venture to August 31, 2007 there have been no material
      earnings or losses as all activities of the joint venture have been in
      connection with acquiring mineral rights and exploring the properties for
      minerals.





On
      October 26, 2004 the Company, through a subsidiary, entered into the Western
      Bushveld Joint Venture (the “WBJV”) with a subsidiary of Anglo Platinum Limited
      (“Anglo Platinum”) and Africa Wide Mineral Prospecting and Exploration (Pty)
      Limited (“Africa Wide”) to pursue platinum exploration and development on
      combined mineral rights covering approximately 67 square kilometres on the
      Western Bushveld Complex of South Africa. The transaction closed effective
      January 26, 2005. The Company contributed all of its interests in portions
      of
      the farms Onderstepoort 98JQ and Elandsfontein 102JQ (see (ii) (1) and
      (ii) (2) below). Anglo Platinum contributed its interests in portions of
      the farms Koedoesfontein 94JQ, Elandsfontein 102JQ and Frischgewaagd 96JQ.
      The
      Company and Anglo Platinum each acquired an initial 37% working interest in
      the
      WBJV, while Africa Wide acquired an initial 26% working interest.





The
      Company was required to operate and fund an exploration program in the amount
      of
      Rand 35 million (Cdn$6.44 million at August 31, 2005) over five years in order
      to earn its 37% interest in the WBJV. As of April 2006 this requirement had
      been
      completed. After Rand 35 million in expenditures were funded by the Company,
      the
      parties are required to fund their portion of further expenditures in excess
      of
      Rand 35 million pro-rata based on their working interest in the
      WBJV.





Once
      a
      bankable feasibility study has been completed, the respective deemed capital
      contribution of each party will be credited by adding their contribution of
      measured, indicated, and inferred PGE ounces from the original contributed
      properties comprising the WBJV, determined in accordance with the South African
      SAMREC code. Inferred ounces will be credited at US$0.50 per ounce, indicated
      ounces will be credited at US$3.20 per ounce and measured ounces will be
      credited at US$6.20 per ounce. Ounces contributed to the WBJV by Anglo Platinum
      in 2007 from a 50% interest in Portion 11 of the Farm Frischgewaagd 96 JQ will
      receive an equalization credit of US$0.62 per inferred ounce, US$10.37 per
      indicated ounce and US$39.55 per measured four element or “4E” ounce of combined
      platinum, palladium, rhodium and gold.  Each party will then have the
      opportunity to contribute additional capital in order to catch up any resulting
      shortfall in their contributed capital and thereby maintain their respective
      working interest in the JV. Should a party not wish to participate, the JV
      agreement provides a mechanism whereby the parties may elect to become
“non-contributory” to the JV and by doing so they would be subject to
      dilution.





The
      Company has concluded that it has significant influence over the operations
      of
      WBJV but not joint control and is therefore recording the investment using
      the
      equity method.





The
      initial exchange of the Company’s pre-existing interests in the Elandsfontein
      and Onderstepoort properties for the interest in WBJV has been recorded at
      cost
      as it represents a non-monetary exchange. The balance paid to date under the
      Company’s commitment to spend up to Rand 35 million in exploration costs has
      also been recorded as a cost of the investment.





In
      September 2006 the Company and WBJV participants Anglo Platinum and Africa
      Wide
      approved a cash budget for the WBJV totalling Rand 54,791,662 (approximately
      C$8.39 million at September 30, 2006). Each party was to fund their pro-rata
      share of the approved budget by way of three separate cash calls. At August
      31,
      2007 Anglo Platinum had an unspent contribution balance to the WBJV of Rand
      24,517,766 (C$3,613,919) which will be used to fund their pro-rata share of
      further expenditures on the WBJV. At August 31, 2007 Africa Wide was due to
      contribute approximately Rand 20,296,777 (C$2,991,745). This amount was recorded
      as a receivable by the Company at August 31, 2007.





To
      August
      31, 2007 the joint venture does not maintain separate books and records for
      the
      WBJV. All receipts, disbursements and net assets, excluding mineral properties
      contributed by other venturers’, are recorded in the books and records of the
      Company on behalf of the joint venture. Of the $2,288,934 in accounts payable
      at
      August 31, 2007, an amount of $1,724,000 (approximately Rand 11.7 million)
      was
      incurred on behalf of the WBJV.





Effective
      May 31, 2006 the Company concluded that the functional currency of WBJV was
      the
      South African Rand as expenditures in the WBJV were principally being incurred
      in Rand and funded by advances from the venturers which were denominated in
      Rand. The Company therefore considers its equity investment in the WBJV to
      be
      self sustaining and it translates its share of net equity of WBJV using the
      current rate method with translation gains and losses included in cumulative
      translation adjustment as a separate component of shareholder’s
      equity.





*(a)*
            *Elandsfontein
                interest*




In
      December 2002 the Company acquired an option to purchase 100% of the surface
      and
      mineral rights to 365.64 hectares of the farm Elandsfontein 102 JQ located
      in
      the Western Bushveld area. The Company made an initial payment to the Vendors
      of
      Rand 150,000 (approx. C$29,500) and agreed to terms for the purchase of
      both mineral and surface rights.





The
      Company exercised its option to purchase the Elandsfontein property by way
      of
      written notice on June 26, 2003. A dispute arose with the Vendors as to the
      purchase price and the matter was referred for Expert Determination as provided
      for in the option agreement.





In
      2005
      the Company and the Vendors reached agreement whereby the Company purchased
      all
      surface and mineral rights to the property in exchange for Rand 7.0 million
      (approximately C$1.4 million). In September 2005 the Company was granted a
“New
      Order” prospecting permit under the new Mineral and Petroleum Resources
      Development Act (2002) over the Elandsfontein property.





*(b)*
            *Onderstepoort
                interest*




During
      2003 the Company entered into several option agreements to acquire mineral
      rights on seven portions of the farm Onderstepoort 98 JQ located in the Western
      Bushveld. The Company could earn 100% of the mineral rights over certain
      portions and 50% of the mineral rights over the balance. To earn its interests
      the Company was required to make aggregate prospecting and option payments
      over
      time to the vendors of Rand 12.44 million (approximately C$2.24 million) ending
      April 2008. Of this amount Rand 834,000 was paid. The Company now holds New
      Order prospecting permits on all of these farm portions.





During
      2007 the Company negotiated and executed the buy-out and cancellation of one
      of
      the option agreements described above to acquire a 50% undivided interest in
      two
      farm portions in exchange for 50,000 common shares of the Company valued at
      $230,000. The Company also negotiated an agreement in principle to buy-out
      and
      cancel all of the remaining option agreements for all remaining farm portions
      for one additional payment of 50,000 shares. The documentation to execute this
      second agreement has still to be finalized. By negotiating the buy-out and
      cancellation of these option agreements the Company will eliminate all future
      option payments for this property while keeping the property under its control
      with regard to the mineral rights as granted to it by the Government of South
      Africa under New Order prospecting permits.




**6.           MINERAL
      PROPERTIES**













*(a)           Republic
      of South Africa*




*(i)           War
      Springs and Tweespalk*




On
      June
      3, 2002, the Company entered an option agreement whereby it may earn a 100%
      interest in the 2,396 hectare War Springs property and the 2,177 hectare
      Tweespalk property both located in the Northern Limb or Platreef area of the
      Bushveld Complex north of Johannesburg. Acquisition and exploration costs on
      these properties to August 31, 2007 total $3,394,062 (August 31, 2006 -
      $3,037,933).




The
      Company may purchase 100% of these mineral rights at any time for US$690 per
      hectare. The Company has also agreed to pay prospecting fees to the vendors
      of
      US$3.25 per hectare. The vendors retain a 1% NSR Royalty on the property,
      subject to the Company’s right to purchase the NSR at any time for
      US$1.4 million. A 5% finders’ fee applies to vendor payments.





Under
      the
      new Mineral and Petroleum Resources Development Act (2002), which became
      effective in May 2004, Old Order permits were to be converted into New Order
      permits during a transition period. This process is now complete for the War
      Springs and Tweespalk properties. The June 3, 2002 option agreement
      provides for amendments as may be needed to maintain the parties in the same
      commercial position as they were in under the preceding mineral legislation
      and
      such amendments are yet to be completed.





Black
      Economic Empowerment groups Africa Wide and Taung Minerals (Pty) Ltd. each
      have
      acquired a 15% interest in the War Springs project carried to bankable
      feasibility. The Company’s retains a net 70% project interest.





Africa
      Wide also has a 30% participating interest in the Tweespalk property. The
      Company has not recorded a receivable for Africa Wide’s share of costs to date,
      which at August 31, 2007 are calculated to be $334,727 (August 31, 2006 -
      $253,783). The Company expects that Africa Wide will be able to fund their
      share
      of costs in the future and amounts recovered from Africa Wide will be treated
      as
      a reduction of costs relating to the Tweespalk property.





*(b)           Ontario*




*(i)           Lac
      des Iles River*




On
      May 5, 2000, New Millennium entered into an option agreement to acquire a
      50% interest in the Lac des Iles River property located near Thunder Bay,
      Ontario in exchange for cash payments ($43,500 paid in total) and the completion
      of exploration expenditures. On October 6, 2006, the Company and the property
      vendors entered into a termination and sale agreement whereby the option
      agreement was cancelled and the Company purchased an undivided 100% interest
      in
      the property subject only to underlying 2.0% Net Smelter Return Royalties.
      In
      settlement the Company made a one-time payment to the vendors of $50,000 in
      lieu
      of past and future exploration expenditure commitments not
      incurred.





*(ii)           South
      Legris*




In
      April
      2000, and later as amended in January 2005, the Company acquired an option
      to
      earn a 50% interest in the South Legris property located near Thunder Bay,
      Ontario in exchange for cash payments ($105,000 paid in total) and the
      completion of certain exploration expenditures. The Company wrote off $587,369
      in deferred acquisition and exploration costs related to the property at August
      31, 2004. On October 13, 2006, the Company and the property vendors entered
      into
      a termination and sale agreement whereby the option agreement was cancelled
      and
      the Company purchased an undivided 100% interest in the property subject only
      to
      underlying 2.0% Net Smelter Return Royalties. In settlement the Company made
      a
      one-time payment of $50,000 in lieu of past and future exploration expenditure
      commitments not incurred.





*(iii)           Moss
      Lake*




On
      August
      5, 2004 the Company optioned a 100% property interest in the Moss Lake property
      located near Thunder Bay, Ontario for optional cash payments of $85,000 over
      3
      years ($25,000 paid) and optional share payments of 40,000 common shares (none
      paid) over 3 years. The Company terminated the Moss Lake option as of August
      31,
      2006 resulting in a write-off of $158,855.





*(iv)           Seagull*




On
      September 24, 2004 the Company acquired an option to earn up to a 70% interest
      in the Seagull property located in the Nipigon region of Ontario by completing
      certain exploration expenditures, by making cash payments and by completing
      a
      bankable feasibility study and providing or arranging production financing.
      The
      Company terminated the Seagull option as of February 28, 2006 resulting in
      a
      write-off of $785,288.





*(v)*  *Shelby
      Lake*




On
      June
      28, 2000, New Millennium entered into an option agreement to earn up to 60%
      interest in the Shelby Lake property, located near Thunder Bay, Ontario in
      exchange for cash payments of $15,000 (paid), issue 30,303 shares (issued)
      and
      complete $500,000 in exploration expenditures over a four-year period. On
      October 18, 2006, the Company and the property vendor entered into a termination
      and sale agreement whereby the option agreement was cancelled and the Company
      purchased an undivided 100% interest in the property for a one-time payment
      of
      $5,000 subject only to an underlying 2.0% Net Smelter Return Royalty, of which
      the Company may buy back one half for $500,000.








*(vi)           Agnew
      Lake*




The
      Company has earned a 99% interest in certain claims located near Sudbury,
      Ontario known as the Agnew Lake property subject to a 2% royalty interest
      payable to the original vendor.The Company optioned the Agnew Lake property
      to
      Pacific Northwest Capital Corporation (“PFN”) on June 18, 2000. On June 22,
      2001, the Company and PFN optioned their property interests to Kaymin Resources
      Limited (“Kaymin”), a subsidiary of Anglo Platinum Limited. At August 31, 2004,
      the Company had directly performed $512,265 worth of exploration work and caused
      further work of approximately $3,140,805 to be performed through the joint
      venture arrangement with PFN and Kaymin. At August 31, 2005 the project was
      not
      active and the Company wrote off its remaining investment in the property
      amounting to $276,852. Kaymin has vested as to a 26.17% interest in the property
      in accordance with the terms of their option agreement. PFN has terminated
      their
      option on the property and retains no working interest.





*(vii)           Lakemount*




On
      November 6, 2003 the Company acquired an option to earn up to a 62% interest
      in
      the Lakemount property located near Wawa, Ontario. Exploration results on the
      project to date have been of interest, but in light of certain title
      deficiencies and a complex title chain, the Company has abandoned the project.
      During the current year, deferred acquisition and exploration costs relating
      to
      the project in the amount of $1,323,222 have been written off.





*(c)           Title
      to mineral properties*




Although
      the Company has taken steps to verify title to mineral properties in which
      it
      has an interest, in accordance with industry standards for the current stage
      of
      exploration of such properties, these procedures do not guarantee the Company’s
      title. Property title may be subject to unregistered prior agreements and
      non-compliance with regulatory requirements.










**7.           FIXED
      ASSETS**












**8.           SHARE
      CAPITAL**







*(a)           Authorized*




Unlimited
      common shares without par value





*(b)           Issued
      and outstanding*




At
      August
      31, 2007 there were 60,988,747 shares outstanding.





During
      the year ended August 31, 2007:





(i)
            6,333,194
                share purchase warrants were exercised for proceeds of $11,454,791
                and
                914,375 stock options were exercised for proceeds of
                $625,575.





(ii)
            the
                Company issued 50,000 common shares in connection with the acquisition
                of
                mineral properties at a fair value of $230,000. A filing fee of $2,258
                related to this issue of shares was paid by the
                Company.








During
      the year ended August 31, 2006:





(iii)
            the
                Company issued 25,000 common shares in connection with the acquisition
                of
                mineral properties at a fair value of
                $40,000.





(iv)
            843,047
                share purchase warrants were exercised for proceeds of $1,181,305
                and
                164,500 stock options were exercised for proceeds of
                $117,750.





(v)
            the
                Company closed non-brokered private placements for 2.2 million units
                at a
                price of $1.45 per unit. Each unit consisted of one common share
                and one
                half a common share purchase warrant, with each whole warrant exercisable
                into a common share at a price of $1.75 for a period of 18 months
                until
                April 13-21, 2007. Filing fees of $7,000 and a finder’s fee of $45,704
                related to this financing were paid by the Company in
                cash.





(vi)
            the
                Company closed a non-brokered private placement for 1.7 million units
                at a
                price of $1.45 per unit. Each unit consisted of one common share
                and one
                half a common share purchase warrant, with each whole warrant exercisable
                into a common share at a price of $1.75 for a period of two years
                until
                March 6, 2008. Filing fees of $7,532 related to this financing were
                paid
                by the Company in cash.





(vii)
            the
                Company closed a brokered private placement for 5.6 million units
                at a
                price of $1.80 per unit. Each unit consisted of one common share
                and one
                half a common share purchase warrant. Each whole warrant is exercisable
                to
                purchase an additional common share until March 31, 2007 at a price
                of
                $2.10 per share. Agent’s fees amounted to 7.0% of gross proceeds, which
                totalled $705,600, which was paid in cash. The Agents’ legal and other
                costs totalling $56,000 were paid by the Company. The Company also
                paid
                $23,498 as a filing fee.





During
      the year ended August 31, 2005:





(viii)
            the
                Company issued 25,000 common shares in connection with the acquisition
                of
                mineral properties at a fair value of
                $28,000.





(ix)
            2,469,949
                share purchase warrants were exercised for proceeds of $2,272,462
                and
                903,000 stock options were exercised for proceeds of
                $508,850.





(x)
            the
                Company closed brokered private placements for gross proceeds of
                $6,259,900 on April 14, 2005. Proceeds of $259,901 were from the
                sale of
                173,267 flow-through shares at $1.50 per share and $6,000,000 was
                from the
                sale of 5,000,000 non-flow-through units at $1.20 per unit. Each
                non-flow-through unit consisted of one common share and one-half
                of one
                common share purchase warrant. Each whole warrant is exercisable
                to
                purchase an additional common share until October 14, 2006 at a price
                of
                $1.50 per share. Agent’s fees amounted to 7.0% of gross proceeds, which
                totalled $438,193, which was paid in cash. The Agents’ legal and other
                costs totalling $24,229 were paid by the Company. The Company paid
                $47,000
                to its lawyers for legal costs relating to the private placement,
                $20,000
                for consulting services, and $29,500 as a filing fee. The Agents
                also
                received 517,327 compensation options exercisable into common shares
                of
                the Company at a price of $1.50 per share until October 14,
                2006.








*(c)           Incentive
      stock options*





The
      Company has entered into Incentive Stock Option Agreements (“Agreements”) with
      directors, officers and employees. Under the terms of the Agreements, the
      exercise price of each option is set at the fair value of the common shares
      at
      the date of grant. Stock options granted to certain employees of the Company
      vest on average at an amount of 25% per six month period, while stock options
      granted to other employees, directors and officers are subject only to a four
      month initial hold period.





The
      following tables summarize the Company’s outstanding stock options:














The
      weighted average exercise price of the exercisable options at year end was
      $1.49.











(i)
            During
                the year ended August 31, 2007 the Company granted 1,265,000 stock
                options
                to employees. The Company has recorded $1,487,661 of compensation
                expense
                relating to stock options granted or vested in this
                period.





The
      following weighted average assumptions were used in valuing stock options
      granted during the year:










(ii)
            During
                the year ended August 30, 2006 the Company granted 220,000 stock
                options
                to employees. The Company has recorded $110,176 of compensation expense
                relating to stock options granted in the year ended August 30,
                2006.





The
      following weighted average assumptions were used in valuing stock options
      granted during the year:











(iii)
            During
                the year ended August 31, 2005 the Company granted 2,046,000 stock
                options
                to directors, officers, employees and consultants, (30,000 of which
                were
                cancelled during the same period). The Company has recorded $1,283,289
                of
                compensation expense relating to stock options granted during the
                year
                ended August 31, 2005.





The
      following weighted average assumptions were used in valuing stock options
      granted during the year:







*(d)*
            *Share
                purchase warrants*










All
      of
      the outstanding warrants expire on March 6, 2008.













**9.           CONTRIBUTED
      SURPLUS**







The
      following table summarizes the Company’s Contributed Surplus:













**10.           RELATED
      PARTY TRANSACTIONS**







Transactions
      with related parties are as follows:





(a)
            Management,
                salary, consulting fees, and Director’s fees of $500,821 (2006 - $354,710,
                2005 - $278,401) were incurred with directors during the year. At
                August
                31, 2007, $21,869 was included in accounts payable (2006 -
                $7,600).





(b)
            The
                Company received $138,210 (2006 - $135,340, 2005 - $134,757) during
                the
                year from MAG Silver Corp. (“MAG”), a company with two common directors
                and a common officer, under the terms of a 2003 service agreement
                for
                administrative services.





(c)
            During
                the year the Company accrued or received payments of $67,200 (2006
–
                $27,300) from West Timmins Mining Inc. (“WTM”), a company with three
                common directors and a common officer, for administrative services.
                Accounts receivable at the end of the year includes an amount of
                $16,895
                due from WTM for both administration fees due ($9,540) and other
                trade
                receivables ($7,355).





(d)
            During
                the year ended August 31, 2005, the Company entered into an office
                lease agreement with Anthem Works Ltd. (“Anthem”), a company with a common
                director. During the year ended August 31, 2007 the Company accrued
                or
                paid Anthem $66,684 under the office lease agreement (2006 -
                $62,333).





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




**11.           INCOME
      TAXES**







The
      provision for income taxes reported differs from the amounts computed by
      applying statutory Canadian federal and provincial tax rates to the loss before
      tax provision due to the following:







The
      approximate tax effect of the temporary differences that gives rise to the
      Company’s future income tax assets and liability are as follows:









At
      August
      31, 2007, the Company has non-capital loss carryforwards available to offset
      future taxable income in Canada of $9.2 million, which expire at various dates
      from 2008 to 2027.







**12.           CONTINGENCIES
      AND COMMITMENTS**







The
      Company’s remaining minimum payments under its office and equipment lease
      agreements, which it has entered into for the years ending on August 31, as
      well
      as its South African subsidiary commitments, are as follows as at August 31,
      2007.













**13.           SUPPLEMENTARY
      CASH FLOW INFORMATION**







*(a)           Net
      change in non-cash working capital*













*(b)           Cash
      and cash equivalents*




Cash
      and
      cash equivalents consist of the following:
















**14.           SEGMENTED
      INFORMATION**







The
      Company operates in one operating segment, that being exploration on mineral
      properties. Investment in joint ventures, fixed assets, capitalized costs for
      mineral rights and deferred exploration relate to properties situated as
      follows:













**15.**
            **DIFFERENCES
                BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
                PRINCIPLES**







These
      consolidated financial statements have been prepared in accordance with Canadian
      GAAP, which differs in certain respects from US GAAP. The significant
      differences between Canadian and US GAAP affecting the Company’s consolidated
      financial statements are summarized as follows:




































*(a)           Exploration
      expenses*




Canadian
      GAAP allows exploration costs to be capitalized during the search for a
      commercially mineable body of ore if the Company considers such costs to have
      the characteristics of capital assets. Under US GAAP, exploration expenditures
      on mineral property costs can only be deferred subsequent to the establishment
      of mining reserves. For US GAAP purposes the Company has expensed exploration
      expenditures in the period incurred. The Company believes that these cash
      expenditures under US GAAP are also more appropriately classified as cash
      operating activities as they were funded by the Company in the respective
      periods.





*(b)           Investment
      in WBJV*




Under
      Canadian and US GAAP the Company accounts for this investment using the equity
      method. Under US GAAP the equity loss from the investment is higher as WBJV
      expenses exploration expenses under US GAAP, whereas under Canadian GAAP these
      expenditures are capitalized in WBJV.





During
      the year ended August 31, 2007 and 2006 the Company incurred $3,625,104 and
      $4,998,447 respectively in exploration expenditures on behalf of the WBJV and
      recorded a share of equity loss from the WBJV of a corresponding
      amount.





*(c)           Flow-through
      shares*




Under
      Canadian GAAP, flow-through shares are recorded at their face value, net of
      related issuance costs. When eligible expenditures are made, the carrying value
      of these expenditures may exceed their tax value due to the renunciation of
      the
      tax benefit by the Company. The tax effect of this temporary difference is
      recorded as a cost of issuing the shares.





The
      Financial Accounting Standards Board (“FASB”) staff has taken the view that
      under SFAS No. 109, *Accounting for Income Taxes*, the proceeds from
      issuance should be allocated between the offering of shares and the sale of
      tax
      benefits. The allocation is made based on the difference between the quoted
      price of the existing shares and the amount the investor pays for the shares.
      A
      liability is recognized for this difference. The liability is reversed when
      tax
      benefits are renounced and a deferred tax liability is recognized at that time.
      Income tax expense is the difference between the amount of deferred tax
      liability and the liability recognized on issuance.





Furthermore,
      under US GAAP, the amounts received through the issuance of flow-through shares
      and not yet expended on the related mineral exploration costs are separately
      classified as restricted cash. Such amounts unexpended at August 31, 2007 and
      2006 totalled approximately $Nil and $123,790, respectively.





*(d)           Accounting
      for stock-based compensation*




On
      September 1, 2005, the Company adopted Statement of Financial Accounting
      Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS 123 (R)), which
      requires the recognition of compensation expense for all share-based payment
      awards. SFAS 123 (R) requires the Company to measure the cost of services
      received in exchange for an award of equity instruments based on the grant-date
      fair value of the award. The cost of such award will be recognized over the
      period during which services are provided in exchange for the award, generally
      the vesting period. The Company adopted SFAS 123 (R) using the modified
      prospective transition method. Under this method, compensation expense
      recognition provisions are applicable to new awards and to any awards modified,
      repurchased or cancelled after the adoption date. Additionally, for any unvested
      awards outstanding at the adoption date, compensation cost is recognized over
      the remaining service period. Forfeitures are estimated at the time of grant
      and
      revised, if necessary, in subsequent periods if actual forfeitures differ from
      those estimates. Prior periods are not restated for comparative
      purposes.





FASB
      Interpretation 44 states that when fixed stock option awards to employees and
      directors are modified, the stock options must be accounted for as variable
      from
      the date of modification to the date the stock options are exercised, forfeited
      or expire unexercised. Consequently, 65,000 stock options issued to employees
      and directors that were repriced on March 6, 2002 are considered variable and
      any increase in the market price over the reduced exercise price must be
      recognized as compensation cost. As at August 31, 2006, the market price of
      the
      Company’s common shares was $1.80 per share (2005 - $1.15) resulting in
      compensation (recovery) expense of $50,200 (2005 - $(37,800); 2004 - $125,510).
      At August 31, 2007 none of these options remained outstanding.





*(e)           Comprehensive
      income*




SFAS
      No.
      130, *Reporting Comprehensive Income*, requires that an enterprise
      report, by major components and as a single total, the change in its net assets
      during the period from non-owner sources. The impact of SFAS No. 130 on the
      Company’s financial statements is as follows:










*(f)            Recent
      accounting pronouncements*




In
      June
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes” (FIN 48). This interpretation clarifies the recognition threshold
      and measurement of a tax position taken on a tax return, and requires expanded
      disclosure with respect to the uncertainty in income taxes. FIN 48 is effective
      for fiscal years beginning after December 15, 2006. The Company is currently
      evaluating the impact that adoption of FIN 48 will have on its financial
      condition or results of operations.




In
      September 2006, the SASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements” (“SFAS 157”). This statement defines fair value,
      establishes guidelines for measuring fair value and expands disclosures
      regarding fair value measurements. SFAS 157 does not require any new fair value
      measurements but rather eliminates inconsistencies in guidance found in various
      prior accounting pronouncements. SFAS 157 is effective for fiscal years
      beginning after November 15, 2007. The Company expects that adoption of SFAS
      157
      will not have a material effect on its financial condition or results of
      operation.






**16.
      SUBSEQUENT EVENTS**




Subsequent
      to August 31, 2007, 463,000 common shares were issued pursuant to the exercise
      of 463,000 stock options at prices between $0.50 per share and $2.57 per share
      for aggregate proceeds of $536,500. In October 2007, there were 150,000
      incentive stock options granted at a price of $4.15 per share and 1,097,500
      incentive stock options granted at a price of $4.40 per share.