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UNITED STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the fiscal year ended March 31, 2010

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from ______to ______

Commission File Number 001-34023

|U.S.
      GEOTHERMAL INC.                            
|------------------------------------------------------
|(Exact name of Registrant as specified in its charter)

|Delaware                        | 84-1472231         
|------------------------------- | -------------------
|(State or Other Jurisdiction of | (I.R.S. Employer   
|Incorporation or Organization)  | Identification No.)

|1505 Tyrell Lane                         |           
|---------------------------------------- | ----------
|Boise, Idaho                             | 83706     
|(Address of Principal Executive Offices) | (Zip Code)

Registrants Telephone Number, Including Area
Code   208-424-1027

Securities registered under Section 12(b) of the Exchange
Act:

|Title of Each Class            | Name of Each Exchange on Which Registered
|------------------------------ | -----------------------------------------
|Common Stock, $0.001 par value | NYSE Amex                                

Securities registered pursuant to Section 12(g) of the Act:
NONE

Indicate by check mark if the registrant is well-known seasoned
issuer, as defined in Rule 405 of the Securities Act

[  ] Yes              [X] No

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Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act.

[  ] Yes               
[X] No

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 at least the past 90 days.

[X] Yes              
[  ] No

Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Website, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).

[  ] Yes             
[  ] No

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [  ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large accelerated filer [  ]                      | Accelerated filer [X]         
|------------------------------------------------- | ------------------------------
|                                                  |                               
|Non-accelerated filer [  ]                        | Smaller reporting company [  ]
|(Do not check if a smaller reporting
    company) |                               

Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Act).

[  ] Yes               [X] No

The aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of June 8, 2010: $57,412,876

Number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date.

|Class of Equity         | Shares Outstanding as of June 8, 2010
|----------------------- | -------------------------------------
|Common stock, par value | 78,647,776                           
|$ 0.001 per share       |                                      

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the Registrants
2010 Annual Meeting of Shareholders to be held on August 23, 2010 are
incorporated by reference into Part III of this Form 10-K.

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U.S. Geothermal Inc. and Subsidiaries

Form 10-K

INDEX

For the Year Ended March 31, 2010

|        |                                                    | Page
|------- | -------------------------------------------------- | ----
|PART I  |                                                    |     
|        |                                                    |     
|Item 1  | Description of Business                            | 5   
|        | General                                            | 5   
|        | Development of Business                            | 6   
|        | History                                            | 6   
|        | Plan of Operations                                 | 8   
|        | Cash Requirements                                  | 9   
|        | Material
      Acquisitions/Development            | 11  
|        | Employees                                          | 16  
|        | Principal Products                                 | 16  
|        | Sources and Availability of Raw
      Materials    | 16  
|        | Significant
      Patents, Licenses, Permits, Etc. | 17  
|        | Seasonality of Business                            | 18  
|        | Industry
      Practices/Needs for Working Capital | 18  
|        | Dependence on a Few Customers                      | 19  
|        | Competitive
      Conditions                       | 19  
|        | Environmental Compliance                           | 20  
|        | Financial Information about Geographic Areas       | 20  
|        | Available Information                              | 20  
|        | Governmental Approvals and Regulations             | 21  
|        | Environmental Credits                              | 22  
|        | Regulatory Update                                  | 23  
|Item 1A | Risk Factors                                       |     
|        | General Business Risks                             | 24  
|        | Risks Relating to the Market for Our Securities    | 31  
|Item 1B | Unresolved Staff Comments                          | 32  
|Item 2  | Description of Property                            | 33  
|        | Raft River, Idaho                                  | 34  
|        | Raft River Energy Unit I                           | 36  
|        | Neal Hot Springs, Oregon                           | 39  
|        | San Emidio, Nevada                                 | 41  
|        | Gerlach, Nevada                                    | 43  
|        | Granite Creek, Nevada                              | 44  
|        | Republic of Guatemala                              | 45  
|        | Boise Administration Office, Idaho                 | 45  
|Item 3  | Legal Proceedings                                  | 46  
|Item 4  | Removed and Reserved                               | 46  

---

U.S. Geothermal Inc. and Subsidiaries

Form 10-K

INDEX

For the Year Ended March 31, 2010

|         |                                                                                                                          | Page
|-------- | ------------------------------------------------------------------------------------------------------------------------ | ----
|PART II  |                                                                                                                          |     
|         |                                                                                                                          |     
|Item 5   | Market for Registrants Common
      Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities | 47  
|Item 6   | Selected Financial Data                                                                                                  | 49  
|Item 7   | Managements Discussion and
      Analysis of Financial Condition and Results of Operations                              | 50  
|         | Factors Affecting Our Results of Operations                                                                              | 53  
|         | Results of Operations                                                                                                    | 56  
|         | Liquidity and Capital Resources                                                                                          | 62  
|         | Potential Acquisitions                                                                                                   | 63  
|         | Critical Accounting Policies                                                                                             | 63  
|         | Contractual Obligations                                                                                                  | 65  
|         | Off Balance Sheet Arrangements                                                                                           | 66  
|Item 7A  | Quantitative and Qualitative
      Disclosures about Market Risk                                                         | 66  
|Item 8   | Financial Statements and Supplementary Data                                                                              | 67  
|Item 9   | Changes in and Disagreements
      with Accountants on Accounting And Financial Disclosure                               | 67  
|Item 9A  | Controls & Procedures                                                                                                    | 67  
|Item 9B  | Other Information                                                                                                        | 68  
|         |                                                                                                                          |     
|PART III |                                                                                                                          |     
|Item 10  | Other Information                                                                                                        | 69  
|Item 11  | Executive Compensation                                                                                                   | 69  
|Item 12  | Security Ownership of Certain Beneficial Owners
      and Management and Related Stockholder Matters                     | 70  
|Item 13  | Certain Relationships and
      Related Transactions, and Director Independence                                          | 70  
|Item 14  | Principal Accounting Fees and Services                                                                                   | 70  
|         |                                                                                                                          |     
|PART IV  |                                                                                                                          |     
|Item 15  | Exhibits, Financial Statement
      Schedules                                                                            | 71  

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Information Regarding Forward Looking
Statements

This document contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve a number of risks and uncertainties. We
caution readers that any forward-looking statement is not a guarantee of future
performance and that actual results could differ materially from those contained
in the forward-looking statement. These statements are based on current
expectations of future events. You can find many of these statements by looking
for words like believes, expects, anticipates, intend, estimates,
may, should, will, could, plan, predict, potential, or similar
expressions in this document or in documents incorporated by reference in this
document. Examples of these forward-looking statements include, but are not
limited to:

- our business and growth strategies;
- our future results of operations;
- anticipated trends in our business;
- the capacity and utilization of our geothermal resources;
- our ability to successfully and economically explore for and develop
  geothermal resources;
- our exploration and development prospects, projects and programs,
  including construction of new projects and expansion of existing projects;
- availability and costs of drilling rigs and field services;
- our liquidity and ability to finance our exploration and development
  activities;
- our working capital requirements and availability;
- our illustrative plant economics;
- market conditions in the geothermal energy industry; and
- the impact of environmental and other governmental regulation.

These forward-looking statements are based on the current
beliefs and expectations of our management and are subject to significant risks
and uncertainties. If underlying assumptions prove inaccurate or unknown risks
or uncertainties materialize, actual results may differ materially from current
expectations and projections. The following factors, among others, could cause
actual results to differ from those set forth in the forward-looking
statements:

- the failure to obtain sufficient capital resources to fund our operations;
- unsuccessful construction and expansion activities, including delays or
  cancellations;
- incorrect estimates of required capital expenditures;

-5-

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- increases in the cost of drilling and completion, or other costs of
  production and operations;
- the enforceability of the power purchase agreements for our projects;
- impact of environmental and other governmental regulation, including
  delays in obtaining permits;
- hazardous and risky operations relating to the development of geothermal
  energy;
- our ability to successfully identify and integrate acquisitions;
- our dependence on key personnel;
- the potential for claims arising from geothermal plant operations;
- general competitive conditions within the geothermal energy industry; and
- financial market conditions.

All subsequent written or oral forward-looking statements
attributable to us or any person acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained or referred to in this
section. We do not undertake any obligation to release publicly any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this document or to reflect the occurrence of unanticipated events,
except as may be required under applicable U.S. securities law. If we do update
one or more forward-looking statements, no inference should be drawn that we
will make additional updates with respect to those or other forward-looking
statements.

The U.S. dollar is the Companys functional currency; however
some transactions involved the Canadian dollar. All references to dollars or
$ are to United States dollars and all references to $ CDN are to Canadian
dollars.

U.S. Geothermal Inc. (the Company, HTM or we or us or
words of similar import) is in the renewable green energy business. Through
its subsidiary, U.S. Geothermal Inc., an Idaho corporation (Geo-Idaho,
although our references to the Company include and refer to our operations
through Geo-Idaho), we are engaged in the acquisition, development and
utilization of geothermal resources in the Western Region of the United States
of America. Geothermal energy is the natural heat energy stored within the
earths crust. In some areas of the earth, economic concentrations of heat
energy result from a combination of geological conditions that allow water to
penetrate into hot rocks at depth, become heated, and then circulate to a near
surface environment. In these settings, commercially viable extraction of the
geothermal energy and its conversion to electricity become possible and a
geothermal resource is present.

Development of Business

History

Geo-Idaho was formed as an Idaho corporation in February 2002
to conduct geothermal resource development. On March 5, 2002 Geo-Idaho entered
into a letter agreement with the previous owner, pursuant to which Geo-Idaho
agreed to acquire all of the real property, personal property and permits that comprised the owners interest in the Raft
River project located in southeastern Idaho.

-6-

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The Company and Geo-Idaho entered into a merger agreement on
February 28, 2002, which was amended and restated on November 30, 2003, and
closed on December 19, 2003. In accordance with the merger agreement, HTM
acquired Geo-Idaho through the merger of Geo-Idaho with a subsidiary, EverGreen
Power Inc., an Idaho corporation formed for that purpose. Geo-Idaho is the
surviving corporation and the subsidiary through which HTM conducts operations.
As part of this acquisition, we changed our name to U.S. Geothermal Inc. Because
the former Geo-Idaho shareholders became the majority holders of HTM, the
transaction is treated as a reverse takeover for accounting purposes.

We currently operate two power plants that include, Raft River
Unit I in Idaho (through our joint venture with Raft River I Holdings, LLC, a
subsidiary of Goldman Sachs) and a plant located in the San Emidio Desert in
Nevada. We also have several other properties under development or exploration.
Raft River Unit I (RREI) commenced commercial operations on January 3, 2008.
Raft River Unit I is currently selling an annual average of 8.8 megawatts
(MWs) of power to Idaho Power Company under a net 13 MW power purchase
agreement (PPA) which expires in 2032. Management is currently evaluating
alternatives to bring the RREI plant operations to its nameplate capacity of 13
MW.

In May 2008, we acquired the geothermal assets, including a 3.6
net MW nameplate generating capacity power plant, from Empire Geothermal Power
LLC and Michael B. Stewart, located in Washoe County, Nevada for approximately
$16.6 million which includes the Granite Creek geothermal and water rights. The
plant currently generates an approximate average net output of 2.5 MWs, which is
sold to Sierra Pacific Power Corporation. With the recent downturn in the
economy we have been focusing our efforts on maximizing the available leverage
to our existing equity investments and pursuing a development plan with lower
risks by avoidance of exploration drilling of production wells. As a result we
are planning a 35 MW development in two phases with the first phase a repower
facility at San Emidio which will use the existing geothermal fluid feeding the
existing plant to feed a new plant. The plant size is estimated to be 8.2 net
MWs and currently is expected to be on line in late 2011. The second phase is
anticipated to add 26 MW of power supplied from new production wells to be
drilled but requires a significant transmission line upgrade. The second phase
is expected to be on line late 2012.

On September 5, 2006, the Company announced the acquisition of
property for a geothermal project at Neal Hot Springs, Oregon located in eastern
Oregon near the Idaho boarder. The property is 8.5 square miles of geothermal
energy and surface water rights. On May 5, 2008, the Company announced that
drilling had begun on the first full size production well (NHS-1) which was
completed on May 23rd. In February 2009, the Company submitted an
application for the project to the U.S. Department of Energys (DOE) Energy
Efficiency, Renewable Energy and Advanced Transmission and Distribution
Solicitation loan guarantee program under Title XVII of the Energy Policy Act of
2005. On May 26, 2009, the Company announced that it had been selected by DOE to
enter into due diligence review on a project loan. Upon meeting requirements,
the loan is expected to provide up to 75% of the total estimated construction
costs. Construction on the first drill pad was completed in August 2009. In
September 2009, the Company began drilling production well number 5 (NHS-5),
which was substantially completed on October 15, 2009. Also, in September 2009, the
Company began a temperature gradient well program to expand the knowledge of the
entire geothermal resource. On December 14, the Company announced that its
wholly owned subsidiary USG Oregon LLC has signed a 25-year power purchase
agreement with Idaho Power Company that provides for the sale of up to 25 MWs.
The PPA was approved by the Idaho PUC in May of 2010.

-7-

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Plan of Operations

Our management examines different factors when assessing
potential acquisitions or projects at different stages of development, such as
the internal rate of return of the investment, technical and geological matters
and other relevant business considerations. We evaluate our operating projects
based on revenues and expenses, and our projects under development, based on
costs attributable to each project.

We have exploration and development properties located in:

| | - | Raft River, Idaho;         
| | - | ---------------------------
| | - | Neal Hot Springs, Oregon;  
| | - | San Emidio, Nevada;        
| | - | Gerlach, Nevada;           
| | - | Granite Creak, Nevada; and,
| | - | Republic of Guatemala.     

Our business strategy is to identify, evaluate, acquire,
develop and operate geothermal assets and resources economically, safely and
efficiently. We intend to execute this strategy in several steps outlined below:

- Leverage Management Team Capabilities and Experience Our strategy
  is focused on the identification and acquisition of resources that can be
  developed in a cost-effective manner to produce attractive returns. In
  particular, we seek to acquire projects that have already undergone geothermal
  resource discovery. In addition, we intend to operate and manage construction
  of the projects, while using internal personnel and third-party contractors to
  efficiently and cost-effectively develop those resources. We believe that we
  have the strategic personnel in place to determine which resources provide the
  greatest opportunity for efficient development and operation. We have
  developed relationships and employed personnel that will allow us to develop
  and utilize geothermal resources as efficiently as possible.
- Develop Our Pipeline of Quality Projects Our project pipeline
  currently consists of several projects that we believe are aligned with our
  growth strategy. These projects have consulting reports from various industry
  experts supporting our belief in those projects potential, and we have
  started PPA negotiations for power off-take with counterparties for some of
  these growth opportunities. If realized, our identified project pipeline will
  greatly expand our renewable power generation capacity.
- Utilize Production Tax Credits, Investment Tax Credits and Other
  Incentives Although geothermal power production can be cost competitive
  with fossil fuel power generating facilities without government subsidies in
  some cases, production tax credits (PTC) and Investment Tax Credits (ITC)
  available to geothermal power producers enhance the project economics and
  attract capital investment. For the Raft River Unit I project, we partnered
  with Goldman Sachs in order to fully utilize production tax credits available
  to the joint venture. Our strategy going forward is to structure project
  ownership to be the primary beneficiary of project economics. Recent
  legislation enacted as part of the stimulus funding has provided an election
  to take 30% ITC in lieu of the PTC for certain qualified investments being
  initiated before the end of 2010 and being placed in service before the end of
  2013. This ITC election may be available to us at our San Emidio and Neal Hot
  Springs projects.

-8-

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- Pursue Acquisition Strategy The geothermal market, particularly
  in the United States, is fragmented and characterized by a few large players
  and a number of smaller ones. Geothermal exploration and development is
  costly, technically challenging and requires long lead times before a project
  will produce revenue. We believe that geothermal technical and managerial
  talent is limited in the industry and that access to capital to develop
  projects will not be equally available to all participants. As a result, we
  believe that there will be opportunities in the future to pursue acquisitions
  of geothermal projects and/or geothermal development companies with attractive
  project pipelines.
- Evaluate Other Potential Revenue Streams from Geothermal Resources In addition to electricity generation, we will evaluate additional
  applications for our geothermal resources including industrial, agriculture,
  and aquaculture purposes. These uses generally constitute lower temperature
  applications where, after driving a turbine generator, residual hot water can
  be cycled for secondary processes before being returned to the geothermal
  reservoir by injection wells, which can provide incremental revenue streams.
  We will evaluate the optimal use for each geothermal resource and determine
  whether selling heat for industrial purposes or generating and subsequently
  selling power to a grid will generate the highest return on the asset.

Cash Requirements

We believe our cash and liquid investments at March 31, 2010
are adequate to fund our general operating activities through March 31, 2011
including limited drilling at Neal Hot Springs and general development support
activities at San Emidio. Additional funding will be needed to finance the
expansion of production volumes at Raft River and the development of the San
Emidio, Nevada and Neal Hot Springs, Oregon projects. In addition to government
loans and grants discussed below, we anticipate that the additional funding may
be raised through the issuance of equity and/or through the sale of ownership
interest in tax credits and benefits.

The current financial credit crisis is not anticipated to
impact the ability of our customers, Idaho Power Company and Sierra Pacific
Power, to pay for their power. This power is sold under long-term contracts at
fixed prices to large utilities. Projections for 2010 indicate that both
projects, Raft River and San Emidio, will generate positive cash flows to the
Company. However, the current status of the credit and equity markets could
delay our project development activities while the Company seeks to obtain
economic credit terms or a favorable equity market price to further the drilling
and construction activities. The Company continues discussions with potential investors to evaluate alternatives for funding at the
corporate and project levels. We are also pursuing available DOE loans and
guarantees in order to reduce interest costs for any debt instruments the
Company may require. At the current market price for the Companys stock, we do
not anticipate that additional funding will result from the exercise of current
stock options or warrants in the near future. In these difficult financial
times, the Company has also implemented procedures to conserve cash, reduce
costs and maximize revenue. At the corporate level, we have cancelled
non-essential consulting contracts and are reducing all non-critical
expenditures. At the project level, Raft River and San Emidio are increasing
efforts to reduce operating costs and look for additional cost savings.

-9-

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On March 16, 2010, the Company closed a private placement of
securities issued pursuant to a securities purchase agreement (the "Purchase
Agreement") entered into with several institutional investors, pursuant to which
the Company issued 8,209,519 shares of common stock at a price of $1.05 per
share for gross proceeds of approximately $8.6 million (the "Private
Placement"). Pursuant to the terms of the Private Placement, each investor was
also issued a common share purchase warrant (a "Warrant") exercisable for 50% of
the number of shares of common stock purchased by the investor. The Company paid
commissions to agents in connection with the Private Placement in the amount of
approximately $516,000 and issued warrants to purchase up to 246,285 shares of
common stock. The net proceeds of the offering (approximately $8.0 million) will
be used by the Company to further develop its Neal Hot Springs geothermal
project and for general working capital purposes.

On October 30, 2009, the Company was awarded $3.77 million in
Recovery Act funding for the exploration and development of its San Emidio
geothermal power project using advanced geophysical exploration techniques. This
award was categorized under the Innovative Exploration and Drilling Projects
section of the American Recovery and Reinvestment Act. The project at San Emidio
will apply innovative, seismic and satellite imagery techniques along with
state-of-the-art structural modeling, to locate large aperture fractures that
represent high-productivity geothermal drilling targets.

On August 17, 2009, the Company completed a private placement
of 8,100,000 Subscription Receipts (Receipt) at $1.35 CDN per Receipt for
aggregate gross proceeds of CDN $10,935,000. Each Receipt was exchanged on
December 17, 2009 for one share of common stock of the Company and one half of
one common stock purchase warrant (a "Warrant"). Each Warrant entitles the
holder thereof to acquire one additional share of common stock of the Company
for $1.75 for 24 months from closing. The placement agents have been paid an
aggregate cash fee of CDN $656,100, representing 6% of the aggregate gross
proceeds of the offering, and have been issued compensation options, exercisable
for 24 months, entitling the placement agents to purchase up to 243,000 shares
of common stock of the Company at US$1.22. The proceeds were used to drill up to
three production size wells at Neal Hot Springs to increase production capacity
to 22 MW and allow a 30-day flow test to verify the well reservoir capacity.
Completion of drilling is a condition precedent to the funding from the DOE loan
program, if our application is approved.

-10-

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On February 26, 2009 U.S. Geothermal submitted an application
for the Neal Hot Springs project to the DOEs Energy Efficiency, Renewable
Energy and Advanced Transmission and Distribution Solicitation loan guarantee
program under Title XVII of the Energy Policy Act of 2005. The Company was notified that its project application is
complete, the power plant technology choice qualifies as new or improved under
the program, and the project has been selected to proceed in the project loan
process. Although we have not yet received approval, the DOE guaranteed loan is
expected to provide up to 75% of the $119 million estimated capital cost of
Stage I up to a maximum loan amount of $102.2 million. The capital cost has
increased to $119 million from prior estimates of $106 million due to costs of
labor, updated vendor pricing and construction materials, project loan costs and
contingencies. Detailed design of a binary cycle power plant utilizing
significantly improved technology is currently in progress with construction
expected to begin in mid 2010. The new plant, designed to deliver approximately
22 MW of power net to the grid is scheduled to begin commercial operations in
early 2012. The DOE guaranteed loan is anticipated to be a combined construction
and term loan and provide the project with a low cost annual interest rate. We
expect that we will be required to drill up to 8 additional wells as a condition
precedent to drawing on the DOE guaranteed loan, if it is approved.

Material Acquisitions/Development

Raft River, Idaho

Raft River Energy Unit I is located in Idaho and has a 13 net
MW capacity geothermal power plant in operation.

In early January 2009, production well RRG-7 underwent a
temperature decline that has reduced the inlet fluid temperature to the power
plant over the past year by approximately 10 degrees Fahrenheit. At the same
time of the temperature change, fluid flow increased. Power generation has been
reduced by an estimated 1 MW due to the lower temperature fluid. It was
determined that the cement in a lap joint had failed so a mechanical packer was
installed to reduce the cold water inflow, but was unsuccessful. A remediation
program is planned that will squeeze cement into the lap joint and plug off
the cold water flow to return the well temperature and increase power plant
generation.

Raft River Unit I operated through the year at 95.2 percent
availability which includes a scheduled maintenance outage of 12 days in April
that was extended to replace a turbine damaged during construction. Raft River
generated in a range of 7.7 to 10.1 net MWs during the twelve month period ended
March 31, 2010 averaging 8.8 MWs. The reduction in output for the period
compared to the planned generation was due to the loss of temperature from
production well RRG-7.

The joint venture partners are evaluating a recovery plan that
includes repairing the lap joint RRG-7, drilling a new production leg on one or
two existing production wells and drilling a new injection well. We anticipate
completing the repair of well RRG-7 in the first half of the year before a
decision is made on the remainder of the recovery plan.

As shown in the table below, Raft River Unit II is estimated to
cost approximately $134 million and Raft River Unit III is anticipated to cost
approximately $166 million, 75% of which we believe may be funded by loans, with
the remainder funded through equity financing. Provided equity funding is
available to the project, Raft River Unit II is anticipated to begin
construction in the fourth calendar quarter of 2010 with commercial
operations commencing in the fourth calendar quarter of 2013. Raft River Unit
III is anticipated to begin construction in the first calendar quarter of 2014
with commercial operations commencing in the second calendar quarter of 2015.

-11-

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San Emidio, Nevada

The San Emidio geothermal power plant has been producing power
since 1987 and sells electricity to Sierra Pacific Power Corporation under an
existing power purchase agreement that extends through 2017. Deeper wells with
higher temperatures were drilled in 1994 to supply the plant after output
declined due to cooling of the original, shallow production wells. The current
configuration of the plant consists of four 1.2 gross MW Ormat Energy Converters
(OEC), five production wells (two wells in use and three on stand by), and
four injection wells (three wells in use and one on standby). A cooling tower
was added in 1998 to improve summer peak power generation. Power sales from the
San Emidio plant for the last fiscal year averaged 2.2 MWs.

Two System Feasibility Studies were initiated in July 2008 with
Sierra Pacific Power Corporation to begin the FERC mandated transmission study
process for the development of the San Emidio resource. The studies are
examining two levels of power generation, 15 MWs and 45 MWs, several
transmission routes and the costs associated with each level of generation. The
System Impact Study for the 15 MW Phase I repower, the second phase of
interconnection study process, was completed in July and confirmed that the
existing transmission system was able to handle up to 15 MWs. The third phase
study, the Interconnection Facilities Study for the 15 MW option, was completed
in October. A draft interconnection agreement is expected from Sierra Pacific
Power before the end of the second calendar quarter of 2010.

Subsequent to the end of the fiscal year, the System Impact
Study for the 45 MW option was received in April. The third phase study for the
45 MW option, the Interconnection Facilities Study, will be contracted during
the second calendar quarter and is expected to be completed before year end.

On October 30, 2009, the Company was awarded $3.77 million in
Recovery Act funding for the exploration and development of its San Emidio
geothermal power project using advanced geophysical exploration techniques. This
award was categorized under the Innovative Exploration and Drilling Projects
section of the American Recovery and Reinvestment Act. The project at San Emidio
will apply innovative, seismic and satellite imagery techniques along with
state-of-the-art structural modeling, to locate large aperture factures that
represent high-productivity geothermal drilling targets. Initial geologic
mapping under the program has been initiated and the seismic team has been
contracted.

The San Emidio expansion will take place in two phases. Phase I
will be a repower and Phase II will be the expansion. Phase I will utilize the
existing production and injection wells with a new, more efficient power plant.
As shown in the table below, the repower is anticipated to cost approximately
$30 million and the expansion is anticipated to cost $127 million, 75% of which
we believe may be funded by a Department of Energy loan guarantee, with the
remainder funded through equity financing. The Phase I repower is anticipated to
begin construction in the third calendar quarter of 2010 with commercial operations commencing
in the fourth calendar quarter of 2011 or first calendar quarter of 2012. The
Phase II expansion is anticipated to begin construction in the second calendar
quarter of 2010 with commercial operations commencing in the third calendar
quarter of 2012. The Company hopes to utilize Investment Tax Credits in
connection with both the repower and the expansion. Both phases will require an
amendment to the Sierra Pacific Power Purchase Agreement.

-12-

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Neal Hot Springs, Oregon

Neal Hot Springs is a promising geothermal resource located in
Eastern Oregon.

On February 26, 2009 U.S. Geothermal submitted an application
for the Neal Hot Springs project to the DOEs Energy Efficiency, Renewable
Energy and Advanced Transmission and Distribution Solicitation loan guarantee
program under Title XVII of the Energy Policy Act of 2005. The Company was
notified that its project application is complete, the power plant technology
choice qualifies as new or improved under the program, and the project has been
selected to proceed in the project loan process.

Although we have not yet received approval, the DOE guaranteed
loan is expected to provide up to 75% of the $119 million estimated capital cost
of Stage I up to a maximum loan amount of $102.2 million. The capital cost has
increased to $119 million from prior estimates of $106 million due to costs of
labor, updated vendor pricing and construction materials, loan costs and
contingencies. Detailed design of a binary cycle power plant utilizing
significantly improved technology is currently in progress with construction
expected to begin in mid 2010. The new plant, designed to deliver approximately
22 MWs of power net to the grid is scheduled to begin commercial operations in
early 2012. The DOE guaranteed loan is anticipated to be a combined construction
and term loan and provide the project with a low cost annual interest rate. We
expect that we will be required to drill up to 8 additional wells as a condition
precedent to drawing on the DOE guaranteed loan.

At our Neal Hot Springs project, an infill geophysical program
was carried out to increase the density of data to highlight suspected geologic
targets and structures. Applications for four additional exploration wells to
further delineate the geothermal resource with production and injection targets
were approved by the state of Oregon on September 11, 2009 and drilling of the
second production well, NHS-5, began on September 18, 2009. October 15, 2009,
the Company successfully completed well NHS-5, the second full size production
well at the Neal Hot Springs project located in eastern Oregon. NHS-5
encountered several lost circulation zones within the targeted horizon and
intercepted a large aperture fracture at 2,796 feet resulting in a total loss of
circulation. The well was completed to a depth of 2,896 feet. An initial 16 hour
flow test completed using air lift produced fluid at a rate of 1,500 gallons per
minute and resulted in a down hole flowing temperature of 286o F (141o C).

The reservoir-hosting fracture zone intersected in NHS-5 is 509
feet deeper in the geologic system than the large producing fracture intersected
by NHS-1 which is located approximately 600 feet to the southeast. Both wells
were instrumented with pressure and temperature equipment during the flow test.
Geologic information and flow data from the drilling and flow test has been incorporated into the ongoing development of a
reservoir model of the Neal Hot Springs geothermal system.

-13-

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In addition to the drilling program for production-sized wells,
the company has continued a temperature gradient (TG) drilling program
utilizing a small diameter drill hole. Eleven TG holes ranging in depth from 500
to 1,060 feet have been completed, and are providing valuable temperature
gradient data for the overall area that hosts the Neal Hot Springs reservoir.
Currently, several TG holes are being deepened and another three to five new TG
holes will be drilled with a number of the holes planned to reach a depth of
2,000 feet as the size of the geothermal anomaly is defined.

The Company received the Conditional Use Permit from the
Malheur County Planning Commission for construction of its proposed 22 net MW
power plant at Neal Hot Springs in eastern Oregon. The Conditional Use Permit
received unanimous approval at a September 24, 2009 Planning Commission meeting
and was issued on October 28, 2009. All of the Federal Energy Regulatory
Commission (FERC) mandated transmission studies have been completed by Idaho
Power Company. An interconnection agreement was signed with the Idaho Power
Company in February 2009. Private right-of-ways for the transmission line have
been acquired, the line route is surveyed and the final engineering design has
reached approximately 99% completion.

The power purchase agreement (PPA) for the project was signed
on December 11, 2009 with the Idaho Power Company. The PPA has a 25 year term
with a starting price of $96 per MW-hour and escalates at a set percentage
annually. Idaho Power Company submitted the PPA to the Idaho Public Utilities
Commission on December 28, 2009. IPUC authorized a Modified Procedure for review
of the PPA on March 17, 2010 which calls for a 45 day public comment period and
10 day reply period. Subsequent to the end of the year, approval of the PPA by
the IPUC was received on May 20, 2010.

The total development cost of Neal Hot Springs Stage II is
anticipated to be $154 million. Construction is anticipated to begin in the
third quarter of 2011 with commercial operations commencing in the third quarter
of 2013.

Gerlach, Nevada

An EA has been completed and a drill site has been permitted on
one of the BLM leases. Planning is underway to drill a 2,000 foot temperature
gradient well and a shallow, 300-700 foot deep exploration/production well in
2010. Past drilling has indicated the presence of a shallow 260 to 265° F
resource on the property in addition to a possible higher temperature, deep
resource.

Granite Creek, Nevada

The Granite Creek assets are comprised of three BLM geothermal
leases totaling approximately 5,414 acres (8.5 square miles) located about 6
miles north of Gerlach, Nevada along a geologic structure known to host
geothermal features including the Great Boiling Spring and the Fly Ranch Geyser. A first stage gravity geophysical program was
completed in the third quarter of 2008 and will be used to evaluate the resource
potential, and help determine where to drill temperature-gradient exploration
wells.

-14-

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Republic of Guatemala

Subsequent to the end of the year, the Company announced on
April 15 that it was successful in acquiring a geothermal concession in the
Republic of Guatemala. The concession consists of 24,710 acres (100 square
kilometers) and is located 14 miles southwest of Guatemala City, the capital.
Nine wells with depths ranging from 560 to 2,000 feet (170 to 610 meters) were
drilled in the El Ceibillo resource area within the concession area during the
l990s. Six of the wells have measured reservoir temperatures in the range of 365
to 400°F (185 to 204°C). Fluid sample analysis and the mineralogy associated
with drill cuttings suggest the existence of a deeper, higher permeability
reservoir with temperature potential of 410 to 446°F (210 to 230°C).

Preliminary reservoir, transmission and environmental studies
have been completed for the project. Four additional prospects containing
fumaroles and hot springs are located within the concession area. Planning is
underway for deepening and detailed testing of the El Ceibillo wells to quantify
their electrical generating capacity and to explore the other prospective areas.

|Projects in Operation |          |           |                  |                           |           
|--------------------- | -------- | --------- | ---------------- | ------------------------- | ----------
|                      |          |           | Generating       |                           | Contract  
|Project               | Location | Ownership | Capacity (MW)(1) | Power Purchaser           | Expiration
|Raft River (Unit I)   | Idaho    | JV(2)     | 13.0             | Idaho PowerCompany        | 2032      
|San Emidio(Existing)  | Nevada   | 100%      | 3.6              | Sierra PacificPower Corp. | 2017      

|(1) | Based on the designed annual average net output. The
      actual output of the Raft River Unit I plant currently varies between 7.1
      and 10.0 megawatts and output of the Empire plant is approximately 2.6
      megawatts.                                                                                                                                                                                                                                                            
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | As part of the financing package for Unit I of the Raft
      River project, we have contributed $16.5 million in cash and approximately
      $1.5 million in property to Raft River Energy I LLC, the Unit I project
      joint venture company. Raft River I Holdings, LLC, a subsidiary of The
      Goldman Sachs Group, contributed $34 million to finance the construction
      of the project. Additional investment may be required for Unit I to
      operate at design capacity.

|Projects Under Development        |          |           |             |                  |           
|--------------------------------- | -------- | --------- | ----------- | ---------------- | ----------
|                                  |          |           | Target      | Projected        | Capital   
|                                  |          |           | Development | Commercial       | Required  
|Project                           | Location | Ownership | (MW)        | Operation Date   | ($million)
|San Emidio Phase
      I(Repower) | Nevada   | 100       | 5.4         | 1stQuarter 2012  | $30       
|San Emidio Phase II(Expansion)    | Nevada   | 100       | 26          | 3rd Quarter 2012 | $127      
|Neal Hot Springs
      1          | Oregon   | 100       | 22          | 2ndQuarter 2012  | $119      
|Neal Hot Springs II               | Oregon   | 100       | 28          | 3rdQuarter 2013  | $154      
|Raft River I
      (Repower)      | Idaho    | JV        | 3           | 3rdQuarter 2010  | $7        
|Raft River
      (Unit II)        | Idaho    | 100       | 26          | 4thQuarter 2013  | $134      
|Raft River (Unit
      III)       | Idaho    | 100       | 32          | 2ndQuarter 2015  | $166      

|-15-
Additional
      Properties
|--------------------------------

|Project           | Location        | Ownership | Target Development (MW)
|----------------- | --------------- | --------- | -----------------------
|Gerlach           | Nevada          | 60%       | To be determined       
|Granite Creek     | Nevada          | 100%      | To be determined       
|El
      Ceibillo | Guatemala, S.A. | 100%      | To be determined       

|Resource Details |                     |             |           |             |           
|---------------- | ------------------- | ----------- | --------- | ----------- | ----------
|                 |                     |             | Resource  |             |           
|                 | Property
      Size | Temperature | Potential |             |           
|Property         | (square miles)      | (°F)        | (MW)      | Depth (Ft)  | Technology
|Raft River       | 10.8(1)             | 275-302(2)  | 127.0(1)  | 4,500-6,000 | Binary    
|San Emidio       | 35.8                | 289-305(2)  | 68.0(4)   | 1,500-2,000 | Binary    
|Neal Hot Springs | 9.6                 | 311-347(3)  | 50.0(5)   | 2,500-3,000 | Binary    
|Gerlach          | 5.6                 | 338-352(3)  | 18.0      | TBD         | Binary    
|Granite Creek    | 8.5                 | TBD         | 25.0(6)   | TBD         | Binary    
|El Ciebillo      | 38.6                | 410-446(3)  | TBD       | TBD         | Steam     

|(1) | Geothermex Inc.s assessment of 94 MW was based on 6.0
      square miles. The Company acquired additional acreage. The resource
      estimate of 127.0 MW is an internal estimate.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Actual production temperatures for existing
  wells.                                                                                                                                
|(3) | Probable reservoir temperature as measured with a
      geothermometer.                                                                                                             
|(4) | Black Mountain Technology Resource estimate with respect
      to 49.0 MW, remainder is an internal estimate.                                                                       
|(5) | Geothermal Science, Inc. resource estimate with respect
      to 22.0 MW, remainder is an internal estimate.                                                                        
|(6) | Internal estimate.                                                                                                                                                                  

Employees

At March 31, 2010, the Company had 33 full-time and one part
time employee (12 administrative and project development, and 22 field and plant
operations). The Company continuously considers acquisition opportunities, and
if the Company is successful in making acquisitions, additional management and
administrative staff may be added.

The Company did not experience any labor disputes or labor
stoppages during the current fiscal year.

Principal Products

The principal product is based upon activities related to the
production of electrical power from the utilization of the Companys geothermal
resources. The primary product will be the direct sale of power generated by our
interests in our geothermal power plants. Currently our principal revenues
consist of energy sales, consulting and management fees, and lease income. All
power plants currently under exploration or development are sites located in the
Western Region of the United States of America. The Company was granted a
geothermal energy rights concession in the Republic of Guatemala located in
Central America in April of 2010. Development options are currently being
explored to determine how to maximize this opportunity.

Sources and Availability of Raw Materials

-16-

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Geothermal energy is natural heat energy stored within the
Earths crust at economically accessible depth. In some areas of the Earth,
economic concentrations of heat energy result from a combination of geological
conditions that allow water to penetrate into hot rocks at depth, become heated,
and then circulate to a near surface environment. In these settings,
commercially viable extraction of the geothermal energy and its conversion to
electricity become possible and a geothermal resource is present.

There are four major components (or factors) to a geothermal
resource:

|1. | Heat source and temperature The economic
      viability of a geothermal resource is related to the amount of heat
      generated. The higher the temperature, the more valuable the geothermal
      resource.              
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                
|2. | Fluid A geothermal resource is commercially
      viable only when the system contains water and/or steam as a medium to
      transfer the heat energy to the surface.                                                       
|   |                                                                                                                                                                                                                                
|3. | Permeability The fluid present underground must
      be able to move. In general, significant porosity and permeability within
      the rock formation are needed to create a viable reservoir.                             
|   |                                                                                                                                                                                                                                
|4. | Depth The cost of development increases with
      depth, as do resource temperatures. The proximity of the reservoir to the
      surface is therefore a key factor in the economic valuation of a
      geothermal resource.

Electrical power is directly produced through the utilization
of geothermal resources; however, these resources are not a direct component of
the final product.

Raft River Energy Unit I, located in Raft River, Idaho is a
proven geothermal resource, and has a 13 net MW capacity geothermal power plant
in operation. San Emidio, Nevada is a proven geothermal resource, and has a 3.6
net MW capacity geothermal plant in operation. Unless major geological changes
occur that impact the geothermal reservoirs, the condition of the existing
resources is expected to remain consistent over time. Each power plant
constructed will have an impact on the temperature and pressure of the tapped
reservoir. The extent of this impact and the results of future drilling
exploration to determine the actual extent of the reservoir will be a limiting
factor on the number of plants that can be constructed at a particular
reservoir.

Significant Patents, Licenses, Permits, Etc.

Raft River.Five significant permits are in place for
the Raft River project and are necessary for continued operations:

|1. | Geothermal well permits for production and injection
      wells issued by the Idaho Department of Water Resources.                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                      
|2. | A Conditional Use Permit for the first two power plants
      was issued by the Cassia County Planning and Zoning Commission on April
      21, 2005.
|   |                                                                                                                                                      
|3. | The Idaho Department of Environmental Quality issued the
      Air Quality Permit to Construct on May 26, 2006.                                      

-17-

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|4. | A Wastewater Reuse Permit issued by the Idaho Department
      of Environmental Quality on February 23, 2007.
|-- | -------------------------------------------------------------------------------------------------------------

San Emidio.The San Emidio project has five significant
permits in place necessary for continued operations:

|1. | Geothermal well permits for production and injection
      wells issued by the Nevada Division of Minerals.      
|-- | -----------------------------------------------------------------------------------------------------------------
|   |                                                                                                                  
|2. | A Special Use Permit issued by the Washoe County Board of
      Commissioners on July 1, 1987.                   
|   |                                                                                                                  
|3. | An Air Quality Permit to Operate from Washoe County
      renewed on January 1, 2008.                            
|   |                                                                                                                  
|4. | A Surface Discharge Permit from Nevada Division of
      Environmental Protection issued on June 11, 2001.       
|   |                                                                                                                  
|5. | An Underground Injection Permit from Nevada Division of
      Environmental Protection issued on August 18,
2000.

Seasonality of Business

The Company and its major subsidiary (RREI) have been producing
energy revenues under the terms of two PPAs. These contracts specify favorable
rate periods and levels of production. The San Emidio Nevada plants contractual
terms provide for premium rates in the months from September to April. The RREI
contract pays favorable rates in the months of July/August and
November/December. Energy production can be influenced by the seasonal
temperatures. Generally, the Companys binary geothermal plants can operate more
efficiently in cooler temperatures. Cooler temperatures facilitate the cooling
process of the secondary fluid that is used to power the turbines. Drilling and
other construction activities could be negatively impacted by inclement weather
that can occur, primarily, during the winter months.

Industry Practices/Needs for Working Capital

The Company is heavily involved in development operations;
therefore high levels of working capital are committed, either directly or
indirectly to the construction efforts. After a plant becomes commercially
operational, the needs of working capital are expected to be low. This
assumption is primarily based upon the projected revenues and operational
expenses, as well as the actual operating results of the Raft River Energy I,
LLC that became operational January 3, 2008. The Company is expecting to be
significantly involved in development activities for the next 5 to 10 years.

-18-

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Dependence on Few a Customers

Ultimately, the market for electrical power is vast; however,
the numbers of entities that can physically, logistically and economically
purchase the commodity in large quantities in our area of operations are
limited. The Company currently collects revenues from two major sources that
include the Idaho Power Company (through the Companys major subsidiary Raft
River Energy Unit I) and Sierra Pacific Power Company. Even at planned levels of
operation, it is expected that the Company and its interests will have a small
number of direct customers that may amount to less than 4 or 5.

Competitive Conditions

Although the market for different forms of energy is large and
dominated by very powerful players, we perceive our industrial competition to be
independent power producers and in particular those producers who provide
green renewable power. Our definition of green power is electricity derived
from a source that does not pollute the air, water or earth. Sources of green
power, in addition to geothermal, include wind, solar, biomass and run-of-the
river hydroelectric. A number of states have instituted renewable portfolio
standards (RPS) that require utilities to purchase a minimum percentage of
their power from renewable sources. For example, RPS statutes in California and
Nevada require 20% renewable. On November 17, 2008, the Governor of California
signed executive order which mandated a RPS of 33% by 2020 which sits in
addition to the 20% order. According to the Department of Energys Energy
Efficiency and Renewable Energy department, utilities in 34 states nationwide
are providing their customers with the opportunity to purchase green, renewable
power through premium pricing programs. As a result, we believe green power is
an important sub-market in the broader electric market, in which many power
purchasers are increasing or committing to increase their investments.
Accordingly, the conventional energy producers do not provide direct
competition.

In the Pacific Northwest there is currently only one geothermal
facility (Raft River Energy Unit I). There are a number of wind farms, as well
as biomass and run-of-the river hydroelectric facilities. However, the Company
believes that the combination of greater reliability and baseload generation
from geothermal, access to infrastructure for deliverability, and a low "full
life" cost will allow it to successfully compete for long term power purchase
agreements.

Factors that can influence the overall market for our product
include some of the following:

- number of market participants buying and selling electricity;
- availability and cost of transmission;
- amount of electricity normally available in the market;
- fluctuations in electricity supply due to planned and unplanned outages of
  competitors generators;
- fluctuations in electricity demand due to weather and other factors;
- cost of fuel used by generators, which could be impacted by efficiency of
  generation technology and fluctuations in fuel supply;
- environmental regulations that impact us and our competitors;
- availability of production tax credits and other benefits allowed by tax
  law;
- relative ease or difficulty of developing and constructing new facilities;
  and

-19-

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- credit worthiness and risk associated with buyers.

Environmental Compliance

The Raft River project is in compliance with all environmental
permits and water quality monitoring requirements. The most significant
investment in environmental compliance in terms of time and cost was associated
with water quality monitoring which had been required on a weekly basis. The
Companys second petition to the Idaho Department of Water Resources (IDWR) to
reduce the monitoring obligations was accepted. IDWR has concurred that there is
no impact from the Companys operations on adjacent aquifers.

Since operations have been initiated, key environmental reports
include:

|1) | Monthly production and injection reports which are filed
      with the IDWR;                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|2) | Quarterly ground water monitoring reports which are filed
      with IDWR;                                                                               
|3) | Annual land application and blowdown water quality
      reports filed with the Idaho Department of Environmental
Quality.                               
|4) | Annual Tier II reporting filed with the Idaho Bureau of
      Homeland Security, Local Emergency Planning Committee, and the local fire
      department.

The Raft River project is ideally suited in a rural
agricultural area. The nearest full time resident is located over one mile south
of the plant. The nearest part time resident is located approximately one half
mile north of the plant. Additionally, there are no unique plant or animal
communities in the area and no unique cultural or environmental constraints.

Financial Information about Geographic Areas

As described in detail in the Property section, the Companys
interest in the Raft River Unit I power plant, located in the southeastern part
of the State of Idaho, became operational on January 3, 2008. Similar plants are
in the planning stages at the same location as well as locations in Nevada and
Oregon. The Company acquired a 3.6 MW geothermal plant and geothermal rights in
San Emidio, Nevada. Land acquisitions and rights have been obtained to explore
the development and construction of power plants in the southeastern part of the
State of Oregon. Substantial drilling and testing activities have occurred
during the last fiscal year. In April of 2010, the Company was granted a
geothermal energy rights concession in the Republic of Guatemala located in
Central America. Significant project strategies have just begun.

The Companys revenues for the three most recent fiscal years
ended March 31, 2010, 2009 and 2008 were $2,579,152, $2,336,202, and $190,721;
respectively. All of these revenues were attributable to customers in the
Northwest of the United States.

Available Information

We make available, free of charge through our Internet website
at http://www.usgeothermal.com, our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Information
on our website is not incorporated into this report and is not a part of this
report.

-20-

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Governmental Approvals and Regulation

U.S. Geothermal Inc. is subject to federal and state regulation
in respect of the production, sale and distribution of electricity. Federal
legislation includes the Energy Policy Act of 2005, the Federal Power Act, and
the Energy Policy Act of 1992. HTM is defined as an independent power producer
under the rules and regulations of the Federal Energy Regulatory Commission
(FERC). As an independent power producer, HTMs operations are supported by
the Public Utility Regulatory Policies Act (PURPA) which encourages
alternative energy sources such as geothermal, wind, biomass, solar and
cogeneration. The State of Idaho also regulates electricity through the Idaho
Public Utility Commission (IPUC). Regulated utilities have the exclusive right
to distribute and sell electricity within their service area. They may purchase
electricity in the wholesale market from independent producers like HTM. The
IPUC, has the authority to establish rules and regulations governing the sale of
electricity generated from alternative energy sources. Regulated utilities are
required to purchase electricity on an avoided cost basis from renewable energy
facilities, or they may acquire purchased power through bids or negotiated
procedures.

On May 8, 2006, HTM submitted proposals to Idaho Power in
response to their Request for Proposal for Geothermal Power. HTM was the
preferred respondent and entered power purchase contract negotiations with Idaho
Power. The Raft River Unit I Geothermal Power Plant started up under a contract
based on avoided costs which limited the output of the plant to 10 average MWs
per month. Through subsequent contract negotiations, HTM reduced the long-term
price of power to Idaho Power, and is now allowed to deliver as much power in
any month as the plant is capable of producing, up to a maximum hourly output of
approximately 16 MWs. The annual average output capacity is on the order of 13
MWs.

Because carbon regulation is anticipated to increase the cost
of power sourced from coal and because there are limited opportunities to
purchase baseload geothermal power, HTM has found that utilities across the
Western United States are eager to discuss PPAs with HTM.

On February 28, 2008, U.S. Geothermal Inc. and Eugene Water and
Electric Board (EWEB), from Eugene, Oregon signed a power purchase agreement
(PPA) for the planned Unit II power plant at Raft River. The PPA allows for
variable electrical output up to a maximum of 16 MW with a term of 25 years. The
PPA is subject to successful drilling and resource development at Raft River.
The power will be delivered to the Bonneville Power Agency (BPA) customer load
in Idaho.

The combined sales from the Idaho Power Raft River Unit I
contract and the EWEB Unit II contract is anticipated to be 26 MW from two
plants. Before the burgeoning interest in geothermal power, the Company had
originally planned 30 MWs from three plants. The construction of only two larger
plants will result in substantial capital and operating cost savings through
improved economy of scale.

-21-

---

In addition to the EWEB agreement, the strong regional interest
in geothermal power has resulted in numerous utilities inquiring with HTM to
purchase the electrical power output of Unit III at Raft River, for the output
of the Neal Hot Springs power plants, and for any expanded output at the
companys San Emidio, NV project. We anticipate that future plants will be
developed under PPAs that do not restrict the output of the project.

The most recent such contract was a 25 MW (maximum) contract
signed with Idaho Power on December 11, 2009 for the full output of the Neal Hot
Springs development in Oregon. The contract has received approval from the Idaho
PUC. The levelized cost of power for the project is $117.55/MWh for 25 years
after the plant startup.

HTM will be required to obtain various federal, state and
county approvals for construction of future geothermal facilities. These
approvals are issued by entities such as the U.S. Fish and Wildlife Service,
U.S. Environmental Protection Agency, State (NV, OR, ID) Departments of
Environmental Quality, Water Resources, State Historic Preservation Offices, the
applicable land management agency, and County Commissioners.

For project development in Idaho and Oregon, David Evans &
Associates of Boise, Idaho has provided consulting and engineering services for
transmission and interconnection issues. Centra Consulting, Inc. of Boise, Idaho
has been retained to assist with State of Idaho air quality and cooling water
reuse permitting, and we have retained various environmental engineering firms
and regulatory consultants to advise and assist HTM with regard to siting,
design and regulatory compliance.

For project development in Nevada, U.S. Geothermal is retaining
similar consulting firms to supplement in-house staff.

Environmental Credits

In the past several years, there has been increased demand for
energy generated from geothermal resources in the United States as production
costs for electricity generated from geothermal resources have become
competitive relative to fossil fuel generation. This is partly due to newly
enacted legislative and regulatory incentives, such as production tax credits
and state renewable portfolio standards. State renewable portfolio standards
laws require that an increasing percentage of the electricity supplied by
electric utility companies operating in states with such standards will be
derived from renewable energy resources until certain pre-established goals are
met. We expect increasing demand for energy generated from geothermal and other
renewable resources in the United States as additional states adopt or extend
renewable portfolio standards.

As a green power producer, environmental-related credits,
such as renewable energy credits or carbon credits, are also available for sale
to power companies (to allow them to meet their green power requirements) or
to businesses which produce carbon based pollution. In all of U.S. Geothermal
Inc.s project, these credits have been sold separately, or bundled with the
electricity to provide an additional source of revenue.

We expect the following key incentives to influence our results
of operation:

-22-

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Production Tax Credits and Investment Tax Credits.
Production tax credits provide project owners with a federal tax credit for the
first ten years of plant operation. At present, unless extended, facilities
constructed after December 31, 2014 will not be eligible to use this production
tax credit. The federal production tax credit available for geothermal energy in
2009 was 2.1 cents per kilowatt-hour. For projects under construction before the
end of 2010 and online before the end of 2013, a project can elect to take a 30%
investment tax credit in lieu of the PTC. The ITC may be converted into a cash
grant within the first 60 days of operation of the plant.

Renewable Energy Credits. Renewable Energy Certificates,
or RECs, are tradable environmental commodities that represent proof that 1
MW-hour of electricity was generated from an eligible renewable energy resource.
A renewable energy provider is credited with one REC for every 1,000
kilowatt-hours or 1 MW-hour of electricity it produces. The electrical energy is
fed into the electrical grid and the accompanying REC can either be delivered to
the purchaser of the power (bundled) or can be sold on the open market
providing the renewable energy producer with an additional source of income.

On July 29, 2006, U.S. Geothermal, Inc. signed a $4.6 million
renewable energy credits purchase and sales agreement with Holy Cross Energy, a
Colorado cooperative electric association. The agreement is capped at 87,600
RECs (10 MWs average over the year). Holy Cross Energy began purchasing the
renewable energy credits associated with the Raft River Unit I power production
on October 2007, and is expected to continue purchasing through 2017. Under the
revised RRU1 agreement with Idaho Power, keeps all RECs above 87,600 RECs per
year. In addition, we retain 49% of the renewable energy credits associated with
power production from Raft River Unit I after 2017 and Idaho Power retains the
other 51%. We expect to receive a majority of the annual revenue from the
ten-year renewable energy credits sales arrangement with Holy Cross Energy.

The power purchase agreements for the existing San Emidio power
plant, the planned Raft River Unit II facility, and the planned Neal Hot Springs
facility are all for bundled power and RECs. Therefore, under these contracts
all RECs are delivered with the net power delivered to the utility.

Regulatory Update

In January 2009, Congress extended the federal PTC for
renewable energy power plants for all projects initiating commercial production
prior to December 31, 2013. The PTC enhances the annual revenues of the projects
by about 25 percent per year for the first 10 years. Additionally, Congress
provided that for power plants that begin construction before the end of 2010,
the Company may elect to use the 30% ITC in lieu of the PTC. Application for the
cash ITC payment may be made 60 days after the start of commercial generation
and would be paid directly from the Department of Treasury.

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ITEM 1A. Risk Factors

General Business Risks

Our future performance depends on our ability to establish
that the geothermal resource is economically sustainable.Geothermal
resource exploration and development involves a high degree of risk. The
recovery of the amounts shown for geothermal properties and related deferred
costs on our financial statements, as well as the execution of our business plan
generally, is dependent upon the existence of economically recoverable and
sustainable reserves. Expansion of the production of power from our interests is
not certain and depends on successful drilling and discovery of additional
geothermal hydrothermal resources in quantities and containing sufficient heat
necessary to economically fuel future plants.

We have a need for substantial additional financing and will
have to significantly delay, curtail or cease operations if we are unable to
secure such financing.The Company requires substantial additional financing
to fund the cost of continued development of the Neal Hot Springs (Oregon), San
Emidio, Gerlach, Guatemala and Granite Creek Ranch (Nevada) projects. Also, the
Company requires funds for other operating activities, and to finance the growth
of our business, including the construction and commissioning of power
generation facilities. We may not be able to obtain the needed funds on terms
acceptable to us or at all. Further, if additional funds are raised by issuing
equity securities, significant dilution to our current shareholders may occur
and new investors may get rights that are preferential to current shareholders.
Alternatively, we may have to bring in joint venture partners to fund further
development work, which would result in reducing our interests in the projects.

We may be unable to obtain the financing we need to pursue
our growth strategy in the geothermal power production segment, which may
adversely affect our ability to expand our operations.When we identify a
geothermal property that we may seek to acquire or to develop, a substantial
capital investment will be required. Our continued access to capital, through
project financing or through a partnership or other arrangements with acceptable
terms is necessary for the success of our growth strategy. Our attempts to
secure the necessary capital may not be successful on favorable terms, or at
all.

Market conditions and other factors may not permit future
project and acquisition financings on terms favorable to us. Our ability to
arrange for financing on favorable terms, and the costs of such financing, are
dependent on numerous factors, including general economic and capital market
conditions, investor confidence, the continued success of current projects, the
credit quality of the projects being financed, the political situation in the
state in which the project is located and the continued existence of tax laws
which are conducive to raising capital. If we are unable to secure capital
through partnership or other arrangements, we may have to finance the projects
using equity financing which will have a dilutive effect on our common stock.
Also, in the absence of favorable financing or other capital options, we may
decide not to build new plants or acquire facilities from third parties. Any of
these alternatives could have a material adverse effect on our growth prospects
and financial condition.

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It is very costly to place geothermal resources into
commercial production.Before the sale of any power can occur, it will be
necessary to construct a gathering and disposal system, a power plant, and a transmission line, and considerable
administrative costs would be incurred, together with the drilling of additional
wells. For Raft River Energy Unit I, capital contributions of approximately $52
million were needed. Future expansion of power production at Raft River, Idaho
and San Emidio, Nevada and development of new power production capability at
Neal Hot Springs may result in significantly increased capital costs related to
increased production and injection well drilling and higher costs for labor and
materials. To fund expenditures of this magnitude, we may have to find a joint
venture participant with substantial financial resources. There can be no
assurance that a participant can be found and, if found, it would result in us
having to substantially reduce our interest in the project.

We may be unable to realize our strategy of utilizing the
tax and other incentives available for developing geothermal power projects to
attract strategic alliance partners, which may adversely affect our ability to
complete these projects.Part of our business strategy is to utilize the tax
and other incentives available to developers of geothermal power generating
plants to attract strategic alliance partners with the capital sufficient to
complete these projects. Many of the incentives available for these projects are
new and highly complex. There can be no assurance that we will be successful in
structuring agreements that are attractive to potential strategic alliance
partners. If we are unable to do so, we may be unable to complete the
development of our geothermal power projects and our business could be
harmed.

Our participation in the joint venture is subject to risks
relating to working with a co-venturer. Raft River Energy I LLC is the Unit
I project joint venture company with Raft River I Holdings, LLC, a subsidiary of
The Goldman Sachs Group Inc. Raft River I Holdings, LLC has contributed a total
of $34.2 million in cash and we have contributed over $16.4 million in cash and
approximately $1.5 million in production and injection wells and geothermal
leases to Raft River Energy I LLC. We are subject to risks in working with a
co-venturer that could adversely impact Unit I of the Raft River project as well
as anticipated development of Raft River Unit II. Its possible that the Raft
River Unit II power plant may utilize the geothermal resource within the Raft
River Unit I joint venture boundaries. Further, our contribution to the joint
venture may exceed returns from the joint venture, if any. Additional capital is
needed to repair the existing wells to deliver the full capacity of the resource
available to the project. There is a risk that the partner may not agree to the
capital needs which could reduce the plants performance and profitability.

We are a holding company and our revenues depend
substantially on the performance of our subsidiaries and the projects they
operate.We are a holding company whose primary assets are our ownership of
the equity interests in our subsidiaries. We conduct no other business and, as a
result, we depend entirely upon our subsidiaries earnings and cash flow. Our
subsidiaries and projects may berestricted in their ability to pay
dividends, make distributions or otherwise transfer funds to us prior to the
satisfaction of other obligations, including the payment of operating expenses
or debt service.

We may not be able to manage our growth due to the
commencement of operations of the Raft River and San Emidio power plants and
exploration activities in Neal Hot Springs which could negatively impact our
operations and financial condition. Significant growth in our operations
will place demands on our operational, administrative and financial resources,
and the increased scope of our operations will present challenges to us due to
increased management time and resources required and our existing limited staff. Our
future performance and profitability will depend in part on our ability to
successfully integrate the operational, financial and administrative functions
of Raft River and San Emidio and other acquired properties into our operations,
to hire additional personnel and to implement necessary enhancements to our
management systems to respond to changes in our business. There can be no
assurance that we will be successful in these efforts. Our inability to manage
the increased scope of operations, to integrate acquired properties, to hire
additional personnel or to enhance our management systems could have a material
adverse effect on our results of operations.

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If we incur material debt to fund our business, we could
face significant risks associated with such debt levels.We will need to
procure significant additional financing to construct, commission and operate
our power plants in order to generate and sell electricity. If this financing
includes the issuance of material amounts of debt, this would expose the Company
to risks including, among others, the following:

- a portion of our cash flow from operations would be used for the payment
  of principal and interest on such indebtedness and would not be available for
  financing capital expenditures or other purposes;
- a significant level of indebtedness and the covenants governing such
  indebtedness could limit our flexibility in planning for, or reacting to,
  changes in our business because certain activities or financing options may be
  limited or prohibited under the terms of agreements relating to such
  indebtedness;
- a significant level of indebtedness may make us more vulnerable to
  defaults by the purchasers of electricity or in the event of a downturn in our
  business because of fixed debt service obligations; and
- the terms of agreements may require us to make interest and principal
  payments and to remain in compliance with stated financial covenants and
  ratios. If the requirements of such agreements were not satisfied, the lenders
  could be entitled to accelerate the payment of all outstanding indebtedness
  and foreclose on the collateral securing payment of that indebtedness, which
  would likely include our interest in the project.

In such event, we cannot assure you that we would have
sufficient funds available or could obtain the financing required to meet our
obligations, including the repayment of outstanding principal and interest on
such indebtedness.

We may not be able to successfully integrate companies that
we may acquire in the future, which could materially and adversely affect our
business, financial condition, future results and cash flow.Our strategy is
to continue to expand in the future, including through acquisitions. Integrating
acquisitions is often costly, and we may not be able to successfully integrate
our acquired companies with our existing operations without substantial costs,
delays or other adverse operational or financial consequences. Integrating our
acquired companies involves a number of risks that could materially and
adversely affect our business, including:

- failure of the acquired companies to achieve the results we expect;
- inability to retain key personnel of the acquired companies;
- risks associated with unanticipated events or liabilities; and

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- the difficulty of establishing and maintaining uniform standards,
  controls, procedures and policies, including accounting controls and
  procedures.

If any of our acquired companies suffers performance problems,
the same could adversely affect the reputation of our group of companies and
could materially and adversely affect our business, financial condition, future
results and cash flow.

The success of our business relies on retaining our key
personnel.We are dependent upon the services of our President and Chief
Executive Officer, Daniel J. Kunz, our Chief Financial Officer, Kerry D.
Hawkley, our Vice President of Finance, Jonathan Zurkoff, our Chief Operating
Officer, Douglas J. Glaspey, and Kevin R. Kitz, our Vice President  Project
Development. The loss of any of their services could have a material adverse
effect upon us. As of the date of this report, the Company has executed
employment agreements with these persons, but does not have key-man insurance on
any of them.

Our development activities are inherently very risky.
The high risks involved in the development of a geothermal resource cannot be
over-stated. The development of geothermal resources at our Raft River, Idaho;
San Emidio, Nevada and Neal Hot Springs, Oregon projects are such that there
cannot be any assurance of success. Exploration costs are high and are not
fixed. The geothermal resource cannot be relied upon until substantial
development, including drilling, has taken place. The costs of development
drilling are subject to numerous variables such as unforeseen geologic
conditions underground which could result in substantial cost overruns. Drilling
for geothermal resource at Raft River is relatively deep with the average depth
of wells some 6,000 feet. Drilling at Neal Hot Springs, Raft River and San
Emidio may involve unprofitable efforts, not only from dry wells, but from wells
that are productive but do not produce sufficient net revenues to return a
profit after drilling, operating and other costs.

Our drilling operations may be curtailed, delayed or cancelled
as a result of numerous factors, many of which are beyond our control, including
economic conditions, mechanical problems, title problems, weather conditions,
compliance with governmental requirements and shortages or delays of equipment
and services. If our drilling activities are not successful, we could experience
a material adverse effect on our future results of operations and financial
condition.

In addition to the substantial risk that wells drilled will not
be productive, or may decline in productivity after commencement of production,
hazards such as unusual or unexpected geologic formations, pressures, downhole
conditions, mechanical failures, blowouts, cratering, explosions, uncontrollable
flows of well fluids, pollution and other physical and environmental risks are
inherent in geothermal exploration and production. These hazards could result in
substantial losses to us due to injury and loss of life, severe damage to and
destruction of property and equipment, pollution and other environmental damage
and suspension of operations.

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The impact of governmental regulation could adversely affect
our business by increasing costs for financing or development of power plants.
Our business is subject to certain federal, state and local laws and
regulations, including laws and regulations on taxation, the exploration for and
development, production and distribution of electricity, and environmental and
safety matters. On a Federal level, the most important tax rule that affects our
business is the PTC, which was extended to December 31, 2014. Recent legislation
enacted as part of the stimulus funding has also provided an election to take 30% ITC in lieu
of the PTC and convertible into a cash grant for certain qualified investments
being initiated before the end of 2010 and being placed in service before the
end of 2013. The loss of the PTC or ITC is a risk that could result in making
future expansions at Raft River, San Emidio and at Neal Hot Springs uneconomic.
New rules recently adopted by the Bureau of Land Management, as directed by the
Energy Policy Act of 2005, require competitive auction of all geothermal leases
on Federal lands. Competitive leasing is significantly increasing the cost of
obtaining leases on Federal land, is adding to the capital costs needed to
develop geothermal projects, is increasing the total electrical power prices
needed to make a geothermal project viable and is making it more difficult to
acquire additional adjacent lands for reservoir protection and exploration.

If Federal lands or any Federal involvement are included in any
geothermal development, requirements of the National Environmental Policy Act
("NEPA") will be triggered. Most of the geothermal resource in the United States
is located in the western states, where the Federal Government often is the
largest landowner. If a NEPA action is triggered, such as an Environmental
Impact Statement or Environmental Assessment, a project delay of one to two
years and a cost of $1,000,000 to $2,000,000 or more may be incurred while the
environmental permitting process is completed. NEPA not only can impact the
property where the geothermal resource is located, but includes the siting and
construction of transmission lines. Environmental legislation is evolving in a
manner that means stricter standards, and enforcement, fines and penalties for
non-compliance are more stringent. Environmental assessments of proposed
projects carry a heightened degree of responsibility for companies and
directors, officers and employees. The cost of compliance with changes in
governmental regulations has a potential to reduce the profitability of
operations.

In the states of Idaho, Nevada and Oregon, drilling for
geothermal resources is governed by specific rules. In Nevada drilling
operations are governed by the Division of Minerals (Nevada Administrative Code
Chapter 534A); in Idaho by the Idaho Department of Water Resources (IDAPA 37
Title 03 Chapter 04); and in Oregon by the Division of Oil, Gas and Mineral
Industries (Division 20 Geothermal Regulation). These rules require drilling
permits and govern the spacing of wells, rates of production, prevention of
waste and other matters, and, may not allow or may restrict drilling activity,
or may require that a geothermal resource be unitized (shared) with adjoining
land owners. Such laws and regulations may increase the costs of planning,
designing, drilling, installing, operating and abandoning our geothermal wells,
the power plant and other facilities. State environmental requirements and
permits, such as the Idaho Department of Environmental Quality, Air Quality
Permit to Construct, include public disclosure and comment. It is possible that
a legal protest could be triggered through one of the permitting processes that
would delay construction and increase cost for one of our projects. The state of
Oregon has an Energy Facility Siting Council that must issue a site certificate
for any geothermal energy facilities of 35 MWs or higher which could affect the
Neal Hot Spring project by adding additional cost and delay construction.

Because of these state and federal regulations, we could incur
liability to governments or third parties for any unlawful discharge of
pollutants into the air, soil or water, including responsibility for remediation
costs. We could potentially discharge such materials into the environment:

- from a well or drilling equipment at a drill site;

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- leakage of fluids or airborne pollutants from gathering systems,
  pipelines, power plant and storage tanks;
- damage to geothermal wells resulting from accidents during normal
  operations; and
- blowouts, cratering and explosions.

Because the requirements imposed by such laws and regulations
are frequently changed, we cannot assure you that laws and regulations enacted
in the future, including changes to existing laws and regulations, will not
adversely affect our business by increasing cost and the time required to
explore and develop geothermal projects. In addition, because the Vulcan
Property at Raft River was previously operated by others, we may be liable for
environmental damage caused by such former operators.

Industry competition may impede our growth and ability to
enter into power purchase agreements on terms favorable to us, or at all, which
would negatively impact our revenue. The electrical power generation
industry, of which geothermal power is a sub-component, is highly competitive
and we may not be able to compete successfully or grow our business. We compete
in areas of pricing, grid access and markets. The industry in the Western United
States, in which the Raft River and San Emidio projects are located, is complex
as it is composed of public utility districts, cooperatives and investor-owned
power companies. Many of the participants produce and distribute electricity.
Their willingness to purchase electricity from an independent producer may be
based on a number of factors and not solely on pricing and surety of supply. If
we cannot enter into power purchase agreements on terms favorable to us, or at
all, it would negatively impact our revenue and our decisions regarding
development of additional properties.

Some of our leases will terminate if we do not achieve
commercial production during the primary term of the lease, thus requiring us to
enter into new leases or secure rights to alternate geothermal resources, none
of which may be available on terms as favorable to us as any such terminated
lease, if at all.Most of our geothermal resource leases are for a fixed
primary term, and then continue for so long as we achieve commercial production
or pursuant to other terms of extension. The land covered by some of our leases
is undeveloped and has not yet achieved commercial production of the geothermal
resources. Leases that cover land which remains undeveloped and does not achieve
commercial production and leases that we allow to expire, will terminate. In the
event that a lease is terminated and we determine that we will need that lease
once the applicable project is operating, we would need to enter into one or
more new leases with the owner(s) of the premises that are the subject of the
terminated lease(s) in order to develop geothermal resources from, or inject
geothermal resources into, such premises or secure rights to alternate
geothermal resources or lands suitable for injection, all of which may not be
possible or could result in increased cost to us, which could materially and
adversely affect our business, financial condition, future results and cash
flow.

Claims have been made that some geothermal plants cause
seismic activity and related property damage. There are approximately
two-dozen steam geothermal plants operating within a fifty-square-mile region in
the area of Anderson Springs, in Northern California, and there is general
agreement that the operation of these plants causes a generally low level of
seismic activity. Some residents in the Anderson Springs area have asserted
property damage claims against those plant operators. There are significant
issues whether the plant operators are liable, and to date no court has found in favor of such
claimants. While we do not believe the areas of the Raft River, Idaho, San
Emidio, Nevada and Neal Hot Springs, Oregon binary cycle power plant projects
will present the same geological or seismic risks, there can be no assurance
that we would not be subject to similar claims and litigation, which may
adversely impact our operations and financial condition.

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Actual costs of construction or operation of a power plant
may exceed estimates used in negotiation of power purchase and power financing
agreements.The Companys initial power purchase contract is under rates
established by the Idaho Public Utility Commission, using an avoided-cost
model for cost of construction and operating costs of power plants. If the
actual costs of construction or operations exceed the model costs, the Company
may not be able to build the contemplated power plants, or if constructed, may
not be able to operate profitably. The Companys financing agreements provide
for a priority payback to our partner. If the actual costs of construction or
operations exceed the model costs, we may not be able to operate profitably or
receive the planned share of cash flow and proceeds from the project. The actual
costs of operating the Raft River power project are higher than the original
estimate due to several factors including the need to filter the ground water
for cooling to remove harmful and unanticipated chloride levels in the water,
the need to purchase production pump power from a third party to provide maximum
plant output, and increased general costs related to labor and management.

Payments under our Raft River Unit I power purchase
agreement may be reduced if we are unable to forecast our production
adequately. Under the terms of our power purchase agreement for Raft River
Unit I, and starting with the third year of operation (2010), if we do not
deliver electricity output within 90% to 110% of our forecasted amount, which
requires us to submit a forecast every three months, payments for the amount
delivered will be reduced, possibly significantly. For example if the plant
produces more than 110% of the power as forecasted then we would not receive any
revenue for the amount over the forecast figure. If the plant produces less than
90% of the forecast amount for unexcused reasons, such as normal plant
breakdowns and maintenance, then we may be subject to a reduced power price,
depending on the prevailing power market conditions. The agreement moves the
power price to the market price instead of contracted price. We currently expect
to forecast 9 MWs of delivery on a 10-MW plant and the damages would then result
if the actual delivery was only 8.1 MWs or less. All 8.1 MWs would be subject to
a reduced price that is not possible to predict at this time. The total average
revenue per MW hour is approximately $62.40 and the reduction in revenue could
be perhaps 30 percent of that amount. As a risk mitigation element, we are not
subject to this adjustment until year three of the contract and then we are able
to submit a new forecast every three months thereby limiting this exposure.

There are some risks for which we do not or cannot carry
insurance.Because our current operations are limited in scope, the Company
carries property, public liability insurance and directors and officers
liability coverage, but does not currently insure against any other risks. As
its operations progress, the Company will acquire additional coverage consistent
with its operational needs, but the Company may become subject to liability for
pollution or other hazards against which it cannot insure or cannot insure at
sufficient levels or against which it may elect not to insure because of high
premium costs or other reasons. In particular, coverage is not available for
environmental liability or earthquake damage.

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Our officers and directors may have conflicts of interests
arising out of their relationships with other companies.Several of our
directors and officers serve (or may agree to serve) as directors or officers of
other companies or have significant shareholdings in other companies. To the
extent that such other companies may participate in ventures in which the
Company may participate, the directors may have a conflict of interest in
negotiating and concluding terms respecting the extent of such participation.
From time to time several companies may participate in the acquisition,
exploration and development of natural resource properties thereby allowing for
their participation in larger programs, permitting involvement in a greater
number of programs and reducing financial exposure in respect of any one
program. It may also occur that a particular company will assign all or a
portion of its interest in a particular program to another of these companies
due to the financial position of the company making the assignment.

Failure to comply with regulatory requirements may adversely
affect our stock price and business.As a public company, we are subject to
numerous governmental and stock exchange requirements, with which we believe we
are in compliance. The Sarbanes-Oxley Act of 2002 and the Securities and
Exchange Commission (SEC) have requirements that we may fail to meet by the
required deadlines or we may fall out of compliance with, such as the internal
controls assessment, reporting and auditor attestation required under Section
404 of the Sarbanes-Oxley Act of 2002. The Company has documented and tested its
internal control procedures in order to satisfy the requirements of Section 404
of the Sarbanes-Oxley Act of 2002 (SOX). SOX requires an annual assessment by
management of the effectiveness of the Companys internal control over financial
reporting and an attestation report by the Companys independent auditors on
internal controls over financial reporting. We may incur additional costs in
order to comply with Section 404. In addition, if we fail to achieve and
maintain the adequacy of our internal controls, as such standards are modified,
supplemented or amended from time to time, we may not be able to ensure that we
can conclude on an ongoing basis that we have effective internal controls over
financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of
2002. Moreover, effective internal controls are necessary for us to produce
reliable financial reports and are important to help prevent financial fraud. If
we cannot provide reliable financial reports or prevent fraud, our business and
operating results could be harmed, investors could lose confidence in our
reported financial information, and the trading price of our stock could drop
significantly. Our failure to meet regulatory requirements and exchange listing
standards may result in actions such as the delisting of our stock impacting our
stocks liquidity; SEC enforcement actions; and securities claims and
litigation.

Risks Relating To the Market for Our
Securities

A significant number of shares of our common stock are
eligible for public resale. If a significant number of shares are resold on the
public market, the share price could be reduced and could adversely affect our
ability to raise needed capital. The market price for our common stock could
decrease significantly and our ability to raise capital through the issuance of
additional equity could be adversely affected by the availability and resale of
such a large number of shares in a short period of time. If we cannot raise
additional capital on terms favorable to us, or at all, it may delay our
exploration or development of existing properties or limit our ability to
acquire new properties, which would be detrimental to our business.

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Because the public market for shares of our common stock is
limited, investors may be unable to resell their shares of common stock.There is currently only a limited public market for our common stock on the
Toronto Stock Exchange in Canada and on the NYSE Amex in the United States, and
investors may be unable to resell their shares of common stock. The development
of an active public trading market depends upon the existence of willing buyers
and sellers that are able to sell their shares and market makers that are
willing to make a market in the shares. Under these circumstances, the market
bid and ask prices for the shares may be significantly influenced by the
decisions of the market makers to buy or sell the shares for their own account,
which may be critical for the establishment and maintenance of a liquid public
market in our common stock. We cannot give you any assurance that an active
public trading market for the shares will develop or be sustained.

The price of our common stock is volatile, which may cause
investment losses for our shareholders.The market for our common stock is
highly volatile, having ranged in the last fiscal year ended March 31, 2010,
from a low of $0.46 CDN to a high of $3.02 CDN on the TSX Exchanges and from a
low of $0.39 to a high of $2.95 on the NYSE Amex. The trading price of our
common stock on the TSX Exchange and on the NYSE Amex is subject to wide
fluctuations in response to, among other things, quarterly variations in
operating and financial results, and general economic and market conditions. In
addition, statements or changes in opinions, ratings, or earnings estimates made
by brokerage firms or industry analysts relating to our market or relating to
our company could result in an immediate and adverse effect on the market price
of our common stock. The highly volatile nature of our stock price may cause
investment losses for our shareholders.

We do not intend to pay any cash dividends in the
foreseeable future.We intend to reinvest any earnings in the development of
our projects. Payments of future dividends, if any, will be at the discretion of
our board of directors after taking into account various factors, including our
business, operating results and financial condition, current and anticipated
cash needs, plans for expansion and any legal or contractual limitations on our
ability to pay dividends.

Provisions in our bylaws and under Delaware law could
discourage a takeover that stockholders may consider favorable.Our bylaws
contain provisions that could depress the trading price of our common stock by
acting to discourage, delay or prevent a change of control of our company or
changes in our management that the stockholders of our company may deem
advantageous. These provisions prohibit stockholders from calling special
meetings, which may deter a takeover attempt. Additionally, we are subject to
Section 203 of the Delaware General Corporation Law, which generally prohibits a
Delaware corporation from engaging in any of a broad range of business
combinations with any holder of 15% or more of our capital stock for a period of
three years following the date on which the stockholder acquired such ownership
percentage, unless, among other things, our Board of Directors has approved the
transaction. This statute likewise may discourage, delay or prevent a change of
control.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Description of Property

The Company has interests in three areas in the Western United
States. These interests include the Raft River area located in southeastern
Idaho, the Neal Hot Springs area located in eastern Oregon (near the
Idaho/Oregon boarder), and our interests located in northwestern Nevada. The
properties in northwestern Nevada include San Emidio, Gerlach and Granite Creek.
The Company currently has two commercially operational power plants. Unit I at
Raft River became commercially operational on January 3, 2008. The San Emidio
plant was acquired in the Empire Acquisition in May 2008.



REGIONAL LOCATION MAP

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Raft River, Idaho

The Raft River project, where the companys geothermal
operations are located, is in southeastern Idaho, approximately 55 miles
southeast of Burley, the county seat of Cassia County. Burley, population 8,300,
is the local agricultural and manufacturing center for the area, providing a
full range of light to heavy industrial services.

A commercial airport is located 90 miles to the northeast in
Pocatello, Idaho. Pocatello, population 53,000, is a regional center for
agriculture, heavy industry (mining, phosphate refining), technology and
education with Idaho State University. Malta, a town with a population of
approximately 180, is 12 miles north of the project site where basic services,
fuel, and groceries are available. Year-round access to the project from Burley
is via Interstate Highway 84 south to State Highway 81 south, then east on the
Narrows Canyon Road, an improved county road.

The Raft River project currently consists of ten parcels
(generally referred to as the U.S. Geothermal Property, the Crank Lease, the
Newbold Lease, the Jensen Investments Leases, the Stewart Lease, the Bighorn
Mortgage Lease, the Doman Lease, the Griffin Lease, and the Glover Lease)
comprising 783.93 acres of fee land and 4,736.79 acres of contiguous leased
geothermal rights located on private property in Cassia County, Idaho. All
parcels are defined by legal subdivision or by metes and bounds survey
description. The ten parcels are as follows:

The U.S. Geothermal Property - Idaho.The U.S.
Geothermal Property is comprised of four separate properties that total 1,723.93
acres: the Vulcan, Elena Corporation, Dewsnup and the Wilcox Ranch Properties.
The Vulcan Property includes both surface and geothermal rights and consists of
two parcels. The first parcel has a total area of approximately 240 acres and
three geothermal wells (RRGE-1, RRGP-4 and RRGP-5) are located on this parcel.
The second parcel has a total area of approximately 320 acres, and three
additional geothermal wells (RRGE-3, RRGI-6 and RRGI-7) are located on this
parcel. A fourth well, RRGE-2, although located on the property covered by the
Crank lease, was acquired by the company from a local rancher. The Wilcox Ranch
includes 940 acres of agricultural and range lands adjacent to Raft River that
provides cooling water.

The Elena Property is comprised of surface and geothermal
rights to approximately 100 acres of property, excluding the oil and gas rights
to the property. The property is contiguous to other properties owned or leased
by the company.

The Dewsnup Property is comprised of the surface and geothermal
rights to approximately 123.93 acres of property, excluding the oil and gas
rights to the property, but including all surface water rights. The property is
contiguous to other properties owned or leased by the company.

The Crank Lease.The Crank lease covers approximately
160 acres of mineral and geothermal rights, with right of ingress and
egress.

The Newbold Lease.The Newbold lease covers
approximately 20 acres of both surface and geothermal rights.

-34-

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The Jensen Investments Leases.The first Jensen
Investments lease covers approximately 2,954.75 acres of geothermal rights only.
It is contiguous with the Vulcan Property and property covered by the Crank and
Stewart leases. The second Jensen Investments lease covers approximately 44.5
acres of surface and geothermal rights, and is contiguous with property covered
by the first Jensen lease.

The Stewart Lease.The Stewart Lease covers
approximately 317.54 acres on two adjoining parcels. Parcel 1 contains
approximately 159.04 acres and includes surface and geothermal rights. Parcel 2
contains approximately 158.50 acres and only covers surface rights. The
underlying geothermal rights for Parcel 2 are subject to the first Jensen
Investments Lease.

The Bighorn Mortgage Lease.The Bighorn Mortgage lease
covers approximately 280 acres of surface and geothermal rights.

The Doman Lease.The Doman lease covers approximately
640 acres of surface and geothermal rights, excluding oil and gas rights.

The Griffin Lease.The Griffin lease contains
approximately 160 acres of geothermal rights.

The Glover Lease.The Glover lease contains
approximately 160 acres of geothermal rights.

BLM Lease.The geothermal resources lease agreement with
the United States Department of Interior Bureau of Land Management (BLM) was
entered into on August 1, 2007. The lease is for approximately 1,685 acres of
land located contiguous to the Raft River Property in southeastern Idaho.

-35-

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Raft River Energy Unit I

Unit I at Raft River became commercially operational on January
3, 2008. As a result of the project financing for Unit I of the Raft River
project, the Company has contributed over $17.9 million in cash and property to
Raft River Energy I LLC, the Unit I project joint venture company. Raft River
Holdings, an affiliate of Goldman Sachs Group, has contributed approximately $34
million to the project. Property assigned to Raft River Energy by the Company
includes seven production and injection wells, seven monitoring wells, the
Stewart lease, the Crank lease, the Newbold lease, the Doman lease, and the
Glover lease. All appropriate permits and contracts have also been assigned to
Raft River Energy for Unit I.

Although significant detail has been provided about each
specific lease area, the economics of the project is based on the total
resource. The reservoir supporting the project encompasses the entire Known
Geothermal Resource Area (KGRA), which includes all the property owned or
leased by the company at Raft River. All discussions of the economics of the
project, including future phases, will be based at the project level rather than
at the lease level.

-36-

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Lease/Royalty Terms

The Crank lease, the Newbold lease, the Jensen Investments
leases, the Bighorn Mortgage lease, the Doman lease, the Griffin lease and the
Glover lease have royalties payable under the following terms:

|(a) | Energy produced, saved and used for the generation of
      electric power, which is then sold by lessee, has a royalty of ten percent
      (10%) of the net proceeds to RREI.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                
|(b) | Energy produced, saved and sold by lessee, then used by
      the purchaser for generation of electric power, has a royalty of ten
      percent (10%) of the market value.    
|    |                                                                                                                                                                                
|(c) | Energy produced, which is used for any purpose other than
      the generation of electricity has a royalty of five percent (5%) of the
      gross proceeds.                  

The Stewart lease has production royalties payable under the
following terms:

|(a) | Energy produced, saved and sold by the Lessee, then used
      by the purchaser for generation of electric power, has a royalty of ten
      percent (10%) of the market value of the electric power.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                      
|(b) | Energy produced, saved and used for the generation of
      electric power, which is then sold by Lessee, has a royalty of three
      percent (3%) of the market value of the electric power.       
|    |                                                                                                                                                                                                      
|(c) | Energy produced, which is used for any purpose other than
      the generation of electricity has a royalty of five percent (5%) of the
      gross proceeds.                                        

No production royalties have been paid to date under any of the
leases. All of the leases may be extended indefinitely if production is achieved
during the primary term, so long as production is maintained. For each lease
other than the Crank Lease (see below), once production is achieved the amounts
due annually will be the greater of the production royalty and the minimum
payment for the last year of the primary term. All payments under the leases are
made annually in advance on the anniversary date of the particular lease. In
addition, the following lease and other royalty terms apply to the individual
leases:

The Crank Lease.The lease agreement with Janice Crank
was originally entered into June 28, 2002, and had a primary term of 5 years.
After U.S. Geothermal Inc. provided evidence to the lessor that the well
(RRGE-2) located on lessors property was not owned by the lessor (but instead
was included in the Vulcan Property), a new lease was entered into on June 28,
2003, which excluded the ownership of RRGE-2, with a four-year initial term.

Payments for years 2002 through 2006 have been recorded as
lease expense. After commercial production was attained, these lease payments
have been deducted from future production royalties. For later years, during
commercial production, there is a minimum annual production royalty of $18,000.
The minimum amount that will be payable over the course of the leases is
$45,000. Maximum amounts payable will depend on production from the
property.

The Newbold Lease. The company leases this property
pursuant to a lease agreement with Jay Newbold dated March 1, 2004. The Newbold
lease has a primary term of 10 years (through February 28, 2014) and is extended
indefinitely so long as production from the geothermal field is maintained.
Minimum lease payments are as follows:

- Years 1-5: $10.00 per acre or $200 per year
- Years 6-10: $15.00 per acre or $300 per year

-37-

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The minimum amount that will be payable over the course of the
lease is $2,500. Maximum amounts payable will depend on royalties on production
from the property.

The Jensen Investments Leases.The first Jensen
Investments lease was originally with Sergene Jensen, as lessor, is dated July
11, 2002, and has a primary term of 10 years. In September 2005, the property
subject to the lease was conveyed and the lease was assumed by Jensen
Investments, Inc. Minimum lease payments (on a July to July basis) are as
follows:

- Years 1-5: $2.50 per acre or $7,386.88 per year
- Years 6-10: $3.00 per acre or $8,864.25 per year

The minimum amount that will be payable over the course of the
lease is $81,256. Maximum amounts payable will depend on production from the
property. The second Jensen Investments lease, with Jensen Investments,
Inc., is dated July 12, 2002, and has a primary term of 10 years. Minimum lease
payments (on a July to July basis) are as follows:

- Years 1-5: $2.50 per acre or $111.25 per year
- Years 6-10: $3.00 per acre or $133.50 per year

The minimum amount that will be payable over the course of the
lease is $1,224. Maximum amounts payable will depend on royalties on production
from the property.

The Stewart Lease.The Stewart lease, with Reid and Ruth
Stewart, is dated December 1, 2004, and has a primary term of 30 years. Minimum
lease payments are as follows:

- Year 1: $8,000
- Year 2: $5,000
- Year 3-30: $5,000 plus an annual increase of 5% per year.

The minimum amount that will be payable over the course of the
lease is $319,614. Maximum amounts payable will depend upon royalties on
production from the property.

The Bighorn Mortgage Lease.The Bighorn Mortgage lease,
with Conrad Irrevocable Trust, is dated July 5, 2005, and has a primary term of
10 years. Minimum lease payments are as follows:

- Year 1-5: $1,400
- Year 6-10: $2,100

The minimum amount that will be payable over the course of the
lease is $17,500. Maximum amounts payable will depend upon royalties on
production from the property.

The Doman Lease.The Doman lease, with Dale and Ronda
Doman, is dated June 23, 2005, and has a primary term of 10 years. Minimum lease
payments are as follows:

- Year 1-5: $1,600
- Year 6-10: $3,200

The minimum amount that will be payable over the course of the
lease is $24,000. Maximum amounts payable will depend upon royalties on
production from the property.

-38-

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The Griffin Lease. The Griffin lease, with Michael and
Cleo Griffin, Harlow and Pauline Griffin, Douglas and Margaret Griffin, Terry
and Sue Griffin, Vincent and Phyllis Jorgensen, and Alice Mae Griffin Shorts, is dated June 23, 2005, and has a
primary term of 10 years. Minimum lease payments are as follows:

- Year 1: $1,600
- Year 2-5: $800
- Year 6-10: $1,200

The minimum amount that will be payable over the course of the
lease is $10,800. Maximum amounts payable will depend upon royalties on
production from the property.

The Glover Lease.The Glover lease, with Philip Glover,
is dated January 25, 2006, and has a primary term of 10 years. Minimum lease
payments are as follows:

- Year 1: $2,100
- Year 2-5: $1,600
- Year 6-10: $2,400

The minimum amount that will be payable over the course of the
lease is $20,500. Maximum amounts payable will depend upon royalties on
production from the property.

The total minimum amount payable under all of the leases during
their primary terms is $522,393. The above listed lease payments are payable
annually in advance, and are current through lease years that began in 2009. The
leases can be renewed for extended periods as long as the power plant continues
to produce power.

BLM Lease.The lease entered into in August of 2007 has
a primary term of 10 years. After the primary term, the Company has the right to
extend the contract in accordance with regulation 43 CFR subpart 3207. The lease
calls for annual payments of $3,502 including processing fees. BLM has the right
to terminate the contract upon written notice if the Company does not comply
with the terms of the agreement. The royalty rate is based upon 10% of the value
of the resource at the well head. The amounts are calculated according to a
formula established by Minerals Management Service (MMS).

Neal Hot Springs, Oregon

Neal Hot Springs is a geothermal resource located in Eastern
Oregon. The Company acquired the Neal Hot Springs geothermal energy and surface
rights in September 2006. It is currently under development.

The first production well was completed in June 2008. A
step-rate flow test, with pressure buildup, was conducted for 12 hours on July
12, 2008 and resulted in a flowing production temperature of 286.5o F (141o C).
The well flowed under artesian pressure at a peak rate of 2,055 gallons per
minute (gpm) at artesian pressure and then was stepped down to a lower flow
rate of 1,210 gpm before it was shut in and the pressure buildup monitored.
Richard Holt of Geothermal Science, Inc., an independent geothermal reservoir
engineering firm, calculated a well productivity index of 450 gpm/psi, which is
considered to be very high in the geothermal industry. The Company proceeded
with permitting up to a 22 MW power plant. USG has acquired all state and
federal permits necessary for project construction. A Conditional Use Permit has been issued by Malheur County. The only remaining
permits required prior to construction are the septic approval for the office
facility and the local building permit. The transmission line right-of-ways have
been acquired, and a power purchase agreement (with Idaho Power) has been
approved by the IPUC.

-39-

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The Company has been issued permits for drilling up to 15
temperature gradient drill holes and 9 geothermal wells. Successful geothermal
resource delineation has continued with the development of a second geothermal
production well (NHS-5) located north of NHS-1 and temperature gradient well 21
which intersected additional geothermal resource south of NHS-1.



Lease/Royalty Terms

Cyprus Gold Exploration Corporation.The lease is for
mineral rights for 4,960 acres located in Malheur County, Oregon is dated
January 24, 2007, and has a primary term of 10 years, and expires January 24,
2017. Minimum lease payments are as follows:

| | Year 2008-2011 | $4,000
| | -------------- | ------
| | Year 2012-2016 | $8,000

The agreement defines a royalty rate is based upon 2% of the
actual revenue for the first 10 years of commercial production and 3%
thereafter.

-40-

---

JR Land and Livestock.The lease is for mineral rights
for 4,960 acres located in Malheur County, Oregon is dated January 24, 2007, and
has a primary term of 10 years, and expires January 24, 2017. Minimum lease
payments are as follows:

| | Year 1 | $15,000
| | ------ | -------
| | Year 2 | $25,000
| | Year 3 | $30,000

The agreement defines a royalty rate is based upon 3% of the
gross proceeds for the first 5 years of commercial production, 4% of gross
proceeds for the next 10 years, and 5% of the gross proceeds thereafter.

San Emidio, Nevada

Effective May 1, 2008, the Company acquired a 3.6 MW operating
geothermal power plant and approximately 30,734.21 acres (48.0 square miles) of
geothermal energy leases and certain ground water rights all located north of
Reno, Nevada. The total purchase price was $16.6 million. The assets are
comprised of two locations: the San Emidio assets and the Gerlach/Granite Creek
assets. The San Emidio assets are located in the San Emidio Desert, Washoe
County, Nevada and include the geothermal power project, approximately 22,944
acres (35.9 square miles) of geothermal leases, and ground water rights used for
cooling water. The Gerlach assets are comprised of approximately 3,415 acres
(5.3 square miles) of BLM geothermal leases located about 1 mile north of
Gerlach, Nevada. The Granite Creek assets are comprised of approximately 5,414
acres (8.5 square miles) of BLM geothermal leases located about 7 miles north of
Gerlach, Nevada. The Gerlach and Granite Creek assets are along a geologic
structure known to host geothermal features including the Great Boiling Spring
and the Fly Ranch Geyser.

The 3.6 -MW geothermal power plant has been producing power
since 1987 and sells electricity to Sierra Pacific Power Corporation under an
existing power purchase agreement that extends through 2017. A March 2008
resource assessment of the San Emidio geothermal leases by independent experts
Susan Petty of Black Mountain Technology and Geologist, Dennis Trexler,
estimated a total resource potential of 44 MWs with a 90% probability factor.

The power plant was constructed in 1986 with commercial power
generation beginning in 1987. Deeper wells with higher temperatures were drilled
in 1994 to supply the plant after output declined due to cooling of the
original, shallow production wells. The current configuration of the plant
consists of four 1.2 MW Ormat Energy Converters, three injection wells and two
production wells. A three cell cooling tower was added in 1998 to improve summer
power generation. The plant is connected to the transmission grid via a 60
kilovolt intertie.

San Emidio is our second operating geothermal power plant and
is owned by a wholly owned subsidiary of the Company (USG Nevada LLC). The
project is a small-scale geothermal power plant selling approximately 2.5 MWs.
The plant is approximately 22 years old and employs four binary cycle units. We
have conducted a review of the information regarding the project, and we believe
that the existing production wells can provide 4,000 to 5,000 gallons per minute
of 280 to 300 °F fluid to the current power plant.

-41-

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Lease/Royalty Terms

BLM Leases.At the closing of the Empire Acquisition,
the geothermal leases with the BLM were assigned to the Company. The lease
contracts are for approximately 21,905 acres of land and geothermal rights
located in the San Emidio Desert, Nevada. The lease contracts have primary terms
of 10 years. Per federal regulations applicable for the contracts, the lessee
has the option to extend the primary lease term another 10 years, under two
extension periods, at 5 years each, if the BLM does not need the land for any
other purpose and the lessee is maintaining production at commercial quantities.
The leases require the lessee to conduct operations in a manner that minimizes
adverse impacts to the environment.

The terms of the BLM contracts are detailed as follows:

Current ContractContract No.
    Expiration Date
    Acres
    Annual RateSan
      EmidioN63004
    9/30/2013
    1,280
    $ 1,280N63005
    9/30/2013
    1,279
    1,279N63006
    9/30/2013
    1,920
    1,920N63007
    9/30/2013
    1,920
    1,920N75233
    11/1/2011
    1,868
    3,738N75552
    11/1/2012
    2,560
    2,560N75553
    11/1/2012
    1,480
    1,480


-42-

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N75554
    11/1/2012
    2,118
    2,119N75555
    11/1/2012
    960
    960N75556
    11/1/2012
    1,480
    1,480N75557
    11/1/2012
    1,280
    1,280N75558
    11/1/2012
    680
    680N42707
    Indefinite
    1,797
    0N47169
    12/1/2017
    3
    0N74196
    4/30/2012
    640
    640N57437
    9/30/2013
    640
    2,560GerlachN55718
    6/30/2012
    1,252
    10,016N75228
    10/31/2011
    2,164
    4,328Granite
      CreekN65655
    10/31/2012
    1,955
    1,955N66403
    10/31/2012
    1,202
    1,202N66404
    10/31/2012
    2,259
    2,259


The BLM lease contracts require royalty payments for the use of
geothermal resources. The rate is based upon 10% of the value of the resource at
the well head. The amounts are calculated according to a formula established by
MMS.

Kosmos Lease.This is a geothermal resource lease
agreement for 1,040 acres with The Kosmos Company (Kosmos). The lease has been
in effect since October l987 and continues so long as the lessee is drilling
for, producing geothermal power, or conducting remedial operations. Under the
terms of the first amendment to the lease which became effective upon our
acquisition of the San Emidio Geothermal assets, Kosmos will be paid the greater
of $8,000 per month or 3.5% of the gross sales price of electric power from
fluids produced and injected until the proposed new power plant achieves
commercial operation. When a new power plant is installed and producing
commercial power, the royalty will change to 1.75% of the gross sales price of
electric power sold by the lessee for 120 months and 3.5% thereafter.

Gerlach, Nevada

In May 2008, the Company entered into a joint venture agreement
with Gerlach Green Energy LLC of Nevada to form a limited liability company
named Gerlach Geothermal LLC. The joint venture owns geothermal rights for 3,615
acres (5.6 square miles) located in northwestern Nevada near the town of
Gerlach. The target of the joint venture is the exploration of the regional
Gerlach geothermal system. The joint venture is located near the Companys
Granite Creek leases that were recently acquired as part of the San Emidio
geothermal power plant acquisition.

Lease/Royalty Terms

BLM Leases.The Gerlach Geothermal LLC assets are
comprised two BLM geothermal leases and one private lease totaling 3,615 acres.
Both BLM leases have a royalty rate is based upon 10% of the value of the
resource at the wellhead. The amounts are calculated according to a formula
established by MMS. One of the two BLM leases has a second royalty commitment to
a third party of 4% of gross revenue for power generation and 5%
for direct use based on BTUs consumed at a set comparable price of $7.00 per
million BTU of natural gas. The private lease has a 10 year primary term and
would receive a royalty of 3% gross revenue for the first 10 years and 4%
thereafter.

-43-

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Granite Creek, Nevada

The Granite Creek assets are comprised of approximately 5,414
acres (8.5 square miles) of BLM geothermal leases located about 6 miles north of
Gerlach, Nevada along a geologic structure known to host geothermal features
including the Great Boiling Spring and the Fly Ranch Geyser.

Lease/Royalty Terms

BLM Leases.The Company has three geothermal lease
contracts with the BLM. The lease contracts are for approximately 5,414 acres of
land and geothermal water rights located in the northwestern Nevada. The lease
contracts have primary terms of 10 years. Per federal regulations applicable for
the contracts, the lessee has the option to extend the primary lease term
another 40 years if the BLM does not need the land for any other purpose and the
lessee is maintaining production at commercial quantities. The leases state
annual lease payments of $5,414, not including processing fees, and expire
October 31, 2012.

-44-

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Republic of Guatemala

Subsequent to the end of the year, the Company announced on
April 15 that it was successful in acquiring a geothermal concession in the
Republic of Guatemala. The concession consists of 24,710 acres (100 square
kilometers) and is located 14 miles southwest of Guatemala City, the capital.
Nine wells with depths ranging from 560 to 2,000 feet (170 to 610 meters) were
drilled in the El Ceibillo resource area within the concession area during the
l990s. Six of the wells have measured reservoir temperatures in the range of 365
to 400°F (185 to 204°C). Fluid sample analysis and the mineralogy associated
with drill cuttings suggest the existence of a deeper, higher permeability
reservoir with temperature potential of 410 to 446°F (210 to 230°C).



Boise Administration Office, Idaho

The Company entered into a 3 year lease contract effective
January 1, 2008 through January 31, 2011, for general office space for an
executive office located in Boise, Idaho. The lease payments are due in monthly
installments that start at $5,637 per month and increase annually to $5,981 per
month.

-45-

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Item 3. Legal Proceedings

As of May 31, 2010, management is not aware of any material
current or pending legal proceedings in which the Company is a party, as
plaintiff or defendant, or which involve any of its properties.

Item 4. [Removed and Reserved]

-46-

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PART II

Item 5. Market for Registrants Common Equity, Related
Stockholder Matters and IssuerPurchases of Equity
Securities

NYSE Amex/Over-The-Counter Bulletin Board

From June 3, 2005 to April 15, 2008, the common stock of U.S.
Geothermal Inc. was quoted on the Over-The-Counter Bulletin Board (the Bulletin
Board) under the trading symbol UGTH. EffectiveApril 14, 2008, thecommon stock of U.S. Geothermal Inc. began trading on the American Stock
Exchange, now the NYSE Amex Equities, under the trade symbol HTM. Future
trading prices of our common shares will depend on many factors, including,
among others, our operating results and the market for similar securities.

The following sets forth information relating to the trading of
our common stock from April 1, 2008.

Bid
      Prices on the Over-The-Counter Bulletin and NYSE AmexFiscal Year
      Ended March 31, 2009
    High
    LowFirst Quarter *
    2.95
    2.18Second Quarter
    2.52
    1.51Third Quarter
    1.73
    0.39Fourth Quarter
    1.16
    0.60Fiscal Year
      Ended March 31, 2010First Quarter
    1.93
    0.74Second Quarter
    1.75
    1.14Third Quarter
    1.70
    1.44Fourth Quarter
    1.61
    0.91


* - The Companys common shares began
trading on the NYSE Amex on April 14, 2008.

TSX and TSX Venture Exchange

The Companys common shares began trading on the Toronto Stock
Exchange (TSX) on October 1, 2007, under the symbol GTH. Prior to trading on
the TSX, the Companys common shares were traded on the TSX Venture Exchange
through September 28, 2007 under the same symbol. TSX is the senior equity
market in Canada. TSX Venture Exchange is a segment of the Toronto Stock
Exchange Group that provides the global financial community with access to
Canada's equity capital and energy markets. The TSX Venture Exchange provides
access to capital for companies at the early stages of their growth while
offering investors a well-regulated market for making venture investments. The
following sets forth information relating to the trading on the TSX and TSX
Venture Exchange:

-47-

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Sales Prices on the TSX and TSX Venture Exchanges (CDN$)Fiscal Year
      Ended March 31, 2009
    High
    LowFirst Quarter
    3.02
    2.28Second Quarter
    2.47
    1.57Third Quarter
    1.84
    0.46Fourth Quarter
    1.40
    0.76Fiscal Year
      Ended March 31, 2010First Quarter
    2.16
    0.93Second Quarter
    1.87
    1.34Third Quarter
    1.81
    1.52Fourth Quarter
    1.69
    0.93


As of May 31, 2010, we had approximately 20,100 stockholders of
record.

The Company has never paid and does not intend to pay dividends
on our common stock in the foreseeable future. Although the Companys articles
of incorporation and by-laws do not preclude payment of dividends, we currently
intend to retain any future earnings for reinvestment in our business. Any
future determination to pay cash dividends will be at the discretion of our
board of directors and will be dependent upon our financial condition, results
of operations, capital requirements and other relevant factors. All of the
common shares are entitled to an equal share in any dividend declared and paid.

Recent Sales of Unregistered Securities

On March 16, 2010, we closed a private placement of securities
issued pursuant to a securities purchase agreement entered into with several
institutional investors, pursuant to which the Company issued 8,209,519 shares
of common stock at a price of $1.05 per share for gross proceeds of
approximately $8.6 million. Pursuant to the terms of the private placement, each
investor was also issued a common share purchase warrant exercisable for 50% of
the number of shares of common stock purchased by the investor. Each warrant is
exercisable at $1.25 per share for a period of five years beginning six months
after the closing of the Private Placement. However, under certain specified
circumstances, the warrants may be exercised by means of a cashless exercise.
The warrants have customary provisions for the adjustment to exercise price
based on certain stock dividends, stock splits and certain types of fundamental
transactions such as mergers and asset sales. After deducting for fees and
expenses, the net proceeds were approximately $8.0 million. The securities were
issued in reliance on exemptions from registration pursuant to Section 4(2) of
the Securities Act of 1933, as amended, and Rule 506 of Regulation D thereunder.
Each of the investors has represented to the Company that it is an accredited
investor as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act. The Company paid commissions to agents in connection with the
private placement in the amount of approximately $516,000 and issued warrants to
purchase up to 246,285 shares of common stock. The net proceeds of he offering
will be used by the Company to further develop its Neal Hot Springs geothermal
project and for general working capital purposes.

-48-

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Item 6. Selected Financial Data

|                                                        | For the Fiscal
      Years Ended March 31,
|------------------------------------------------------- | ------------------------------------------
|2010                                                    | 2009                                      
|Operating Revenues                                      | $ 2,579,152                               
|Operating Expenses                                      | 8,562,345                                 
|Loss from Continuing Operations                         | (5,983,193)                               
|Loss per share from Continuing Operations               | (0.09)                                    
|Cash dividends declared and paid per common
      share | 0                                         

|                                | As of March 31,
|------------------------------- | ---------------
|2010                            | 2009           
|Total Assets                    | $ 65,727,861   
|Total Long-term Obligations (1) | 2,080,859      

|(1) | Long-term obligations represent the stock compensation
      payable, a promissory note, and a capital lease obligation. The stock
      compensation liability is the fair value of stock options to be exercised
      by officers, directors, employees and consultants of the Company. These
      obligations were recorded as a liability since the option exercise price
      was stated in Canadian dollars, subjecting the Company and the employee to
      foreign currency exchange risk in addition to the normal market price
      fluctuation risk.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 | Loss per share |                    |            |             | Net Loss
      from
|-------------------------------- | -------------- | ------------------ | ---------- | ----------- | -------------------
|from                             | Operating      | Gross
      Profit | Loss from  | Continued  
|Continuing                       | Revenues       |                    | Operations | Operations 
|Operations                       |                |                    |            |            
|Fiscal Year Ended March 31, 2007 |                |                    |            |             |                    
|1stQuarter                       | $ (0.01)       | $ 0                | $ 0        | $ (961,777) | $ (372,486)        
|2ndQuarter                       | (0.02)         | 206                | 206        | (746,292)   | (680,021)          
|3rdQuarter                       | (0.01)         | 90,000             | 90,000     | (610,310)   | (338,278)          
|4thQuarter                       | (0.01)         | 0                  | 0          | (729,584)   | (552,099)          
|Fiscal Year Ended March 31, 2008 |                |                    |            |             |                    
|1stQuarter                       | (0.01)         | 0                  | 0          | (694,622)   | (410,536)          
|2ndQuarter                       | (0.02)         | 0                  | 0          | (1,374,285) | (1,042,678)        
|3rdQuarter                       | (0.01)         | 0                  | 0          | (1,103,192) | (806,494)          
|4thQuarter                       | (0.02)         | 190,721            | 190,721    | (1,206,051) | (1,054,765)        
|Fiscal Year Ended March 31, 2009 |                |                    |            |             |                    
|1stQuarter                       | (0.02)         | 480,915            | 480,915    | (1,774,518) | (1,717,061)        
|2ndQuarter                       | (0.03)         | 743,706            | 743,706    | (1,406,431) | (1,356,084)        
|3rdQuarter                       | (0.01)         | 575,886            | 575,886    | (899,643)   | (874,186)          
|4thQuarter                       | (0.02)         | 535,695            | 535,695    | (1,244,074) | (1,240,423)        
|Fiscal Year Ended March 31, 2010 |                |                    |            |             |                    
|1stQuarter                       | (0.04)         | 335,736            | 335,736    | (2,441,672) | (2,411,566)        
|2ndQuarter                       | (0.02)         | 734,622            | 734,622    | (1,156,554) | (1,122,525)        
|3rdQuarter                       | (0.02)         | 731,315            | 731,315    | (1,449,421) | (1,394,009)        
|4thQuarter                       | (0.01)         | 777,479            | 777,479    | (935,546)   | (910,750)          

-49-

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Item 7. Managements Discussion and Analysis of Financial
Condition and Results ofOperations

The following is a list of projects that are in operation,
under development or under exploration. Projects in operation have producing
geothermal power plants. Projects under development have at least a geothermal
resource discovery or may have wells in place, but require the drilling of new
or additional production and injection wells in order to supply enough
geothermal fluid sufficient to operate a commercial power plant. Projects under
exploration do not have a geothermal resource discovery occurrence yet, but have
significant thermal and other physical evidence that warrants the expenditure of
capital in search of the discovery of a geothermal resource. Due to inflation
and marketplace increases in the costs of labor and construction materials,
previous estimates of property development costs may be low.

For the fiscal year ended March 31, 2010, the Company was
focused on:

|1) | optimizing the operation of the well field at the Raft
      River, Idaho geothermal project (Raft River Unit I);                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) | continuing due diligence for the Department of Energy
      Section 1703 loan guarantee program for the Neal Hot Springs
    Project;                                
|3) | planning and permitting drilling and field development
      activities at Neal Hot Springs in Oregon and continuing the temperature
      gradient drilling program;
|4) | negotiating a PPA for the San Emidio Phase I repower and
      Phase II expansion project;                                                                           
|5) | optimizing the operation of the San Emidio power plant in
      Nevada, and planning for the Phase I repower of the existing well
      field;                       
|6) | planning and permitting for drilling at the Gerlach Joint
      Venture, and                                                                                         
|7) | the evaluation of potential new geothermal project
      acquisitions.                                                                                               

Raft River, Idaho

Raft River Energy Unit I is located in Idaho and has a 13 MW
capacity geothermal power plant in operation.

In early January 2009, production well RRG-7 underwent a
temperature decline that has reduced the inlet fluid temperature to the power
plant over the year by approximately 10 degrees Fahrenheit. At the same time of
the temperature change, fluid flow increased. Power generation has been reduced
by an estimated 1MW due to the lower temperature fluid. It was determined that
the cement in a lap joint had failed and a mechanical packer was installed to
reduce the cold water inflow, but was unsuccessful. A remediation program is
planned that will squeeze cement into the lap joint and plug off the cold
water flow to return the well temperature and increase power plant
generation.

The joint venture partners are evaluating a recovery plan that
includes repairing the lap joint RRG-7, drilling a new production leg on one or
two existing production wells and drilling a new injection well. We anticipate
completing the repair of well RRG-7, with a repair cost estimated at $813,300,
in the first half of the fiscal year before a decision is made on the remainder
of the recovery plan.

-50-

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Raft River Unit II is anticipated to cost approximately $134
million and Raft River Unit III is anticipated to cost approximately $166
million, up to 75% of which we believe may be funded by loans, with the
remainder funded through equity financing. Provided funding is available, Raft
River Unit II is anticipated to begin construction in the fourth calendar
quarter of 2010 with commercial operations commencing in the fourth calendar
quarter of 2013 or the first calendar quarter of 2014. Raft River Unit III is
anticipated to begin construction in the first calendar quarter of 2014 with
commercial operations commencing in the second calendar quarter of 2015.

Neal Hot Springs, Oregon

Neal Hot Springs is a promising geothermal resource located in
Eastern Oregon.

On February 26, 2009 U.S. Geothermal submitted an application
for the Neal Hot Springs project to the DOEs Energy Efficiency, Renewable
Energy and Advanced Transmission and Distribution Solicitation loan guarantee
program under Title XVII of the Energy Policy Act of 2005. The Company was
notified that its project application is complete, the power plant technology
choice qualifies as new or improved under the program, and the project has been
selected to proceed in the project loan process.

Conditional approval of the DOE loan was received in May 2010,
and it is expected to provide up to 75% of the $136 million estimated capital
cost of Stage I up to a maximum loan amount of $102.2 million. The capital cost
has increased to $136 million from prior estimates of $106 million due to costs
of labor, updated vendor pricing and construction materials, loan costs and
contingencies. Detailed design of a binary cycle power plant utilizing
significantly improved technology is currently in progress with construction
expected to begin in mid to late 2010. The new plant, designed to deliver
approximately 22 MWs of power net to the grid is scheduled to begin commercial
operations in early 2012. The DOE loan is anticipated to be a combined
construction and term loan and provide the project with a low cost annual
interest rate. We expect that we will be required to drill up to 8 wells as a
condition precedent to drawing on the DOE loan, if it is approved.

At our Neal Hot Springs project, an infill geophysical program
was carried out to increase the density of data to highlight suspected geologic
targets and structures. Applications for four additional exploration wells to
further delineate the geothermal resource with production and injection targets
were approved by the state of Oregon on September 11, 2009 and drilling of the
second production well, NHS-5, began on September 18, 2009. October 15, 2009,
the Company successfully completed well NHS-5, the second full size production
well at the Neal Hot Springs project located in eastern Oregon. NHS-5
encountered several lost circulation zones within the targeted horizon and
intercepted a large aperture fracture at 2,796 feet resulting in a total loss of
circulation. The well was completed to a depth of 2,896 feet. An initial 16 hour
flow test completed using air lift produced fluid at a rate of 1,500 gallons per
minute and resulted in a down hole flowing temperature of 286o F (141o C).

The reservoir-hosting fracture zone intersected in NHS-5 is 509
feet deeper in the geologic system than the large producing fracture intersected
by NHS-1 which is located approximately 600 feet to the southeast. Both wells
were instrumented with pressure and temperature equipment during the flow test. Geologic information and flow
data from the drilling and flow test has been incorporated into the ongoing
development of a reservoir model of the Neal Hot Springs geothermal system.

-51-

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In addition to the drilling program for production-sized wells,
the company has continued a temperature gradient (TG) drilling program
utilizing a small diameter drill hole. Eleven TG holes ranging in depth from 500
to 1,060 feet have been completed, and are providing valuable temperature
gradient data for the overall area that hosts the Neal Hot Springs reservoir.
Currently, several TG holes are being deepened and another three to five new TG
holes will be drilled with a number of the holes planned to reach a depth of
2,000 feet as the size of the geothermal anomaly is defined.

The Company received the Conditional Use Permit from the
Malheur County Planning Commission for construction of its proposed 22 net MW
power plant at Neal Hot Springs in eastern Oregon. The Conditional Use Permit
received unanimous approval at a September 24, 2009 Planning Commission meeting
and was issued on October 28, 2009. All of the Federal Energy Regulatory
Commission (FERC) mandated transmission studies have been completed by Idaho
Power Company. An interconnection agreement was signed with the Idaho Power
Company in February 2009. Private right-of-ways for the transmission line have
been acquired, the line route is surveyed and the final engineering design has
reached approximately 99% completion.

The PPA for the project was signed on December 11, 2009 with
the Idaho Power Company. The PPA has a 25 year term with a starting price of $96
per MW-hour and escalates at a variable percentage annually. Idaho Power Company
submitted the PPA to the Idaho Public Utilities Commission on December 28, 2009.
IPUC authorized a Modified Procedure for review of the PPA on March 17, 2010
which calls for a 45 day public comment period and 10 day reply period.
Subsequent to the end of the year, approval of the PPA by the IPUC was received
on May 20, 2010.

The total development cost of Neal Hot Springs Stage II is
estimated to be $154 million. Construction is anticipated to begin in the third
quarter of 2011 with commercial operations commencing in the third quarter of
2013.

San Emidio, Nevada

The San Emidio geothermal power plant has been producing power
since 1987 and sells electricity to Sierra Pacific Power Corporation under an
existing power purchase agreement that extends through 2017. Deeper wells with
higher temperatures were drilled in 1994 to supply the plant after output
declined due to cooling of the original, shallow production wells. The current
configuration of the plant consists of four 1.2 gross MW Ormat Energy Converters
(OEC), five production wells (two wells in use and three on stand by), and
four injection wells (three wells in use and one on standby). A cooling tower
was added in 1998 to improve summer peak power generation. Power sales from the
San Emidio plant for the last fiscal year averaged 2.2 MWs.

Two System Feasibility Studies were initiated in July 2008 with
Sierra Pacific Power Corporation to begin the FERC mandated transmission study
process for the development of the San Emidio resource. The studies are examining two levels of
power generation, 15 MWs and 45 MWs, several transmission routes and the costs
associated with each level of generation. The System Impact Study for the 15 MW
Phase I repower, the second phase of interconnection study process, was
completed in July and confirmed that the existing transmission system was able
to handle up to 15 MWs. The third phase study, the Interconnection Facilities
Study for the 15 MW option, was completed in October. A draft interconnection
agreement is expected from Sierra Pacific Power before the end of the second
calendar quarter of 2010.

-52-

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Subsequent to the end of the year, the System Impact Study for
the 45 MW option was received in April. The third phase study for the 45 MW
option, the Interconnection Facilities Study, will be contracted during the
second calendar quarter and is expected to be completed before year end.

On October 30, 2009, the Company was awarded $3.77 million in
Recovery Act funding for the exploration and development of its San Emidio
geothermal power project using advanced geophysical exploration techniques. This
award was categorized under the Innovative Exploration and Drilling Projects
section of the American Recovery and Reinvestment Act. The project at San Emidio
will apply innovative, seismic and satellite imagery techniques along with
state-of-the-art structural modeling, to locate large aperture factures that
represent high-productivity geothermal drilling targets. Initial geologic
mapping under the program has been initiated and the seismic team has been
contracted.

The San Emidio 35 MW development in planned for execution in
two phases. Phase I will be a repower and Phase II will be an expansion. Phase I
will utilize the existing production and injection wells with a new, more
efficient power plant. As shown in the table above, the repower is anticipated
to cost approximately $30 million and the expansion is anticipated to cost $127
million, 75% of which we believe may be funded by a Department of Energy loan,
with the remainder funded through equity financing. The Phase I repower is
anticipated to begin construction in the third calendar quarter of 2010 with
commercial operations commencing in the fourth calendar quarter of 2011 or first
calendar quarter of 2012. The Phase II expansion is anticipated to begin
construction in the second calendar quarter of 2010 with commercial operations
commencing in the third calendar quarter of 2012. The Company expects to be
granted about $40 million in ITC cash grant in connection with the $157 million
35 MW development. The 35 MW development will require an amendment to the
existing Sierra Pacific Power Purchase Agreement.

Factors Affecting Our Results of Operations

Although other factors may impact our operations and financial
condition, including many that we do not or cannot foresee, we believe that our
results of operations and financial condition for the foreseeable future will be
affected by the following factors.

Raft River Energy I LLC

In early January 2009, production well RRG-7 underwent a
temperature decline that has reduced the inlet fluid temperature to the power
plant over the year by approximately 10 degrees Fahrenheit. At the same time of
the temperature change, fluid flow increased. Power generation has been reduced by an estimated 1MW due to the
lower temperature fluid. It was determined that the cement in a lap joint had
failed so a mechanical packer was installed to reduce the cold water inflow, but
was unsuccessful. A remediation program is planned that will squeeze cement
into the lap joint and plug off the cold water flow to return the well
temperature and increase power plant generation.

-53-

---

Raft River Unit I operated through the year at 95.2 percent
availability which includes a scheduled maintenance outage of 12 days in April
2009 that was extended to replace a turbine damaged during construction. Raft
River generated in a range of 7.7 to 10.1 net MWs during the twelve month period
averaging 8.8 MWs. The reduction in output for the period compared to the
planned generation was primarily due to the loss of temperature from production
well RRG-7.

The joint venture partners are evaluating a recovery plan that
includes repairing the lap joint RRG-7, drilling a new production leg on one or
two existing production wells and drilling a new injection well. We anticipate
completing the repair of well RRG-7 in the first half of the year before a
decision is made on the remainder of the recovery plan.

Raft River Operating Agreement

We hold a 50% interest in Raft River Energy I LLC, which owns
Raft River Unit I (Unit I). Construction of Unit I required substantial
capital, and partnering with a co-venturer allowed us to share the risks of
ownership. The joint venture has also allowed the project to take advantage of
production tax credits which would not otherwise have been available to us. When
Unit I operates at full capacity of 13 MWs, we estimate we will receive cash
payments totaling approximately $1.6 million for the first four years of its
operations. While Unit I generates at less than full capacity, our annual cash
payments from the Raft River I project will be lower. See Note 5 Investment in
Subsidiary in the financial statements for detail of cash payments from RREI.

The Companys interests in the RREI as defined in the
partnership agreements are summarized as follows:

|                                         | Years 1 - 4             | Years 5 - 10  | Years 11 - 20 | Years 20 - 25
|---------------------------------------- | ----------------------- | ------------- | ------------- | -------------
|Cash Flow                                | RECs                    | 70%
      (1)
|GAAP Income                              | 1% (2)                  | 49%           | 80%          
|Lease Payments, O&M Services & Royalties | 100%                   
|Distributions                            | Guaranteed min. payment | 1% (3)        | 49%           | 80%          
|Tax Benefits                             | 1% (2)                  | 49%           | 80%          

|(1) | U.S. Geothermal allocates 70% of income and receives 70%
      of available cash from RECs sold to third- parties. After year 10, REC
      income is shared with Idaho Power Co. For additional details, see U.S.
      Geothermals Form 10-Q filed on August 10, 2009 (Exhibit 10.36).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Flip to next tier occurs after the later of 10 years or
      Raft River I Holdings target IRR is achieved.                                                                                                                                                                             
|(3) | Flip to next tier occurs after Raft River I Holdings
      target IRR is achieved.                                                                                                                                                                                                      

-54-

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San Emidio, Nevada

The San Emidio geothermal power plant has been producing power
since 1987 and sells electricity to Sierra Pacific Power Corporation under an
existing power purchase agreement that extends through 2017. Deeper wells with
higher temperatures were drilled in 1994 to supply the plant after output
declined due to cooling of the original, shallow production wells. The current
configuration of the plant consists of four 1.2 gross MW Ormat Energy Converters
(OEC), five production wells (two wells in use and three on stand by), and
four injection wells (three wells in use and one on standby). A cooling tower
was added in 1998 to improve summer peak power generation. Power sales from the
San Emidio plant for the year averaged 2.2 MWs.

Power Purchase Agreements

Prior to the construction of a geothermal project, we typically
enter into a power purchase agreement with a utility, which fixes the price of
energy produced at a project for a 20 to 25 year period. Such PPAs are typically
negotiated with the utility company and approved by a state utility commission
or similar regulating body.

Power purchase agreements generally provide for the payment of
energy payments, capacity payments, or both. Energy payments are calculated
based on the amount of electrical energy delivered to the relevant power
purchaser at a designated delivery point. The rates applicable to such payments
are either fixed, subject to adjustments in certain cases, or are based on the
relevant power purchasers short-run avoided costs calculated as the incremental
costs that the power purchaser avoids by not having to generate such electrical
energy itself or purchase it from others. Capacity payments, on the other hand,
are generally calculated based on the amount of time that our power plants are
available to generate electricity. Some power purchase agreements provide for
bonus payments in the event that the producer is able to exceed certain target
levels and forfeiture of payments if minimum target levels are not met.

Raft River Energy I LLC currently earns revenue from a
full-output PPA with Idaho Power, which is expected to be 13-MWs annual average.
The PPA expires in 2032. This PPA was signed as part of ongoing negotiations
with Idaho Power for PPAs covering an expected total output of 45.5 MWs and may
be used as the template for additional PPAs. The price of energy sold under the
Idaho Power PPA is split into three seasons: power produced during the peak
periods of July, August, November and December will be purchased at 120% of the
set price; power produced in the three month low demand season will be purchased
at 73.50% of the set price; and power produced in the remaining five months of
the year will be purchased at 100% of the set price. The PPA sets a first year
average purchase price of $53.60 per MW hour. The $53.60 purchase price is
escalated each year at a compound annual rate of 2.1% until year 15. From years
16 to 25 of the contract the escalation rate will drop to 0.6% per year.

Power generated by San Emidio is sold to Sierra Pacific Power
Corp. (NV Energy) pursuant to a 30 year PURPA PPA that terminates in December
2017. The PPA includes energy and capacity payment components, as well as peak
and off-peak rates. Contract prices are adjusted annually on March 1 based upon
the Handy-Whitman price index, total steam production plant category, as
specified by Nevada Public Utility Commission standards for PURPA contracts.

-55-

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The power purchase agreement (PPA) for the project was signed
on December 11, 2009 with the Idaho Power Company. The PPA has a 25 year term
with a starting price of $96 per MW-hour and escalates at a variable percentage
annually. Idaho Power Company submitted the PPA to the Idaho Public Utilities
Commission (IPUC) on December 28, 2009. Subsequent to the end of the year, the
PPA was approved by the IPUC on May 20, 2010.

Results of Operations

San Emidio, Nevada Plant Operations

Summarized statements of operations for the San Emidio power
plant are as follows:

|                              |  | Years Ended March 31, |  
|----------------------------- |  | --------------------- | -
|                              |  | 2010                  |  
|                              |  | $                     |  
|Operating
      revenues:     |  |                       |  
|Energy sales                  |  | 1,743,984             |  
|Energy credit sales           |  | 51,695                |  
|                              |  | 1,795,679             |  
|Operating
      expenses:     |  |                       |  
|General and administrative    |  | 349,422               |  
|Salaries and related costs    |  | 819,182               |  
|Operations:                   |  |                       |  
|Repairs and
      maintenance |  | 596,516               |  
|Other                         |  | 210,838               |  
|Rent and lease                |  | 78,683                |  
|Purchased utilities           |  | 65,543                |  
|Depreciation and amortization |  | 822,365               |  
|                              |  | 2,942,549             |  
|Net Loss                      |  | (1,146,870            | )

* - represents eleven months of
operations.% - represents the percentage of total operating
revenues.

Select financial information by quarter is as follows:

|                   |  |          |  |  |         |  |  | Ave. Rate |  |  |           |  |  | Depreciation | 
|------------------ |  | -------- |  |  | ------- |  |  | --------- |  |  | --------- |  |  | ------------ | 
|                   |  | Kilowatt |  |  | Energy  |  |  | per       |  |  |           |  |  | &            | 
|                   |  | Hours x  |  |  | Sales   |  |  | Kilowatt- |  |  | Net Loss  |  |  | Amortization | 
|Quarter Ended:     |  | 1,000    |  |  | ($)     |  |  | Hour ($)  |  |  | ($)       |  |  | ($)          | 
|September 30, 2008 |  | 5,650    |  |  | 529,383 |  |  | 0.0937    |  |  | (185,838) |  |  | 195,046      | 
|December 31, 2008  |  | 4,097    |  |  | 317,256 |  |  | 0.0774    |  |  | (146,859) |  |  | 196,941      | 
|March 31, 2009     |  | 3,808    |  |  | 296,577 |  |  | 0.0779    |  |  | (267,114) |  |  | 201,711      | 
|June 30, 2009      |  | 2,851    |  |  | 243,752 |  |  | 0.0855    |  |  | (589,082) |  |  | 200,972      | 
|September 30, 2009 |  | 5,224    |  |  | 540,841 |  |  | 0.1035    |  |  | (46,118)  |  |  | 207,066      | 
|December 31, 2009  |  | 4,689    |  |  | 463,286 |  |  | 0.0988    |  |  | (348,073) |  |  | 207,136      | 
|March 31, 2010     |  | 5,018    |  |  | 496,104 |  |  | 0.0989    |  |  | (163,597) |  |  | 207,191      | 

-56-

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Effective May 1, 2008, the Company purchased geothermal rights
and a geothermal power plant located in the San Emidio Desert of North Western
Nevada. The primary objective of the acquisition was to secure water rights for
future development. While the plant was expected to produce positive cash flows,
the plant was not expected to generate significant operating profits. The plant
has produced positive cash flows for four out of the last seven quarters of full
operations. Fluctuations in energy revenues are a product of plant efficiency
and the terms of the PPA which is based on an energy plus capacity payment.
Rates are adjusted annually (September 1 to September 1) with the energy price
component based upon the producer price index for coal and the capacity price
component based upon the Handy-Whitman Total Steam Production Plant Index.
Premium rates are paid during the months June through September. For the 2008-09
rate period, the kilowatt rates for the premium months ranged between $0.0757
and $0.1182, and ranged between $0.0616 and $0.1037 for non-premium months. For
the 2009-10 rate period, the kilowatt rates for the premium months range between
$0.0963 and $0.1418, and range between $0.0789 and $0.1274 for non-premium
months.

For the year ended March 31, 2010, energy sales totaled
$1,743,984, an increase of $327,132 (23%) over the prior year. Energy credit
sales increased $19,258 (59%) to $51,695 for the same period. Major increases in
expenses for the year ended March 31, 2010 when compared to the prior year were
Salaries and related costs at $240,173 (41%) and Repairs and maintenance at
$396,410 (198%).

Energy sales revenues were higher in the quarter ended
September 30, 2008 due to regular plant production and premium contracted rates.
The plant was not as productive in the quarters ended December 31, 2008 and
March 31, 2009 due to the down time experienced while extensive repairs and
maintenance was conducted. As a product of the repair efforts and capital
improvements, the plant has been more productive. For the quarters ended March
31, 2010 and December 31, 2009 the plant produced 31.8% and 14.5% more power;
respectively, than in the same quarters in the prior fiscal year.

A loss of $589,082 was incurred for the quarter ended June 30,
2009. Repair costs of over $112,000 were incurred to rebuild and reinstall a
pump. Costs that amounted to over $59,000 were incurred to retube an OEC
condenser and to install a new gear box. Both repairs resulted in loss of
productivity due to over two weeks of downtime.

For the quarter ended December 31, 2009, the San Emidio plant
reported a loss of $348,073. Energy production and related revenues increased
($146,030, 46.0%) in the quarter ended December 31, 2009 from the same period in
2008. This is primarily due to efficiencies gained from repairs made to the
plant since it was purchased in May 2008. In the quarter ended June 30, 2009,
repair costs of over $112,000 were incurred to rebuild and reinstall a pump.

During the last fiscal year ended March 31, 2010, the Company
spent over $596,000 making various repairs. Notable repairs were made to
electrical breakers and system controls, the pentane storage and transfer
system, gear box and drive shaft alignments on all OECs and cooling tower fans,
fix leaking condenser tubes, replace turbine inlet gaskets, modify the OEC oil
cooler water supply pipelines, replacement of leaking brine valves on the OECs,
AHD rebuilt production pumps in 75B-16 and 76-16, and replacement of check valve
on production pump 76-16.

-57-

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Land, Water and Mineral Rights Lease Revenues

|                                          |  | Years Ended March 31, | 
|----------------------------------------- |  | --------------------- | 
|                                          |  | 2010                  | 
|                                          |  | $                     | 
|Geothermal and
      surface water leases |  | 90,000                | 
|Rental income                             |  | 112,560               | 
|Other                                     |  | 6,984                 | 
|Net
      Loss                            |  | 209,544               | 

%- represents percentage of total operating revenues.
The Company receives revenues from geothermal and water rights leases and rental
income from its major subsidiary RREI. For the year ended March 31, 2010, the
Companys revenues from geothermal and water rights and rental income totaled
$209,544, as compared to $97,098 in 2009 and $121,742 in 2008. The primary cause
of the increase in 2010 was the receipt of increased rental income for use of
buildings and facilities at Raft River owned by US Geothermal. In the fiscal
year ended March 31, 2010, the Company started collecting rental revenues from
RREI for the use of 4 buildings located in Raft River, Idaho. The Company began
earning $7,504 per month in January 2009. Geothermal and surface water rights
lease revenues have been consistent for the three fiscal years. In 2007, an
adjustment was made to record two months of revenues earned in the prior period.

Management Fee Income

For the year ended March 31, 2010 and 2009, management fee
income increased by $187,500 to $250,000 compared to the same period in 2008.
Management fees are earned by the Company from its subsidiary RREI at a rate of
$20,833 per month ($250,000 annual). These fees began when the plant became
operational in January 2008. In the fiscal year ended March 31, 2008, the
Company earned 3 months of management fees. For the fiscal year ended March 31,
2009 and 2010, the Company earned fees for an entire year.

-58-

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Gain on Investment in Subsidiary (Raft River Energy I,
LLC)

The Company uses the hypothetical liquidation at book value
method (HLBV) for allocating of RREIs profits and losses. This method
utilizes the specific terms outlined in the RREIs operating agreement or other
authoritative documents. These terms include cash disbursement terms, associated
financial instruments, debt arrangements, and rights to specific revenue
streams. The primary element of the profit and loss allocation from inception
has been the amount of renewable energy credits earned. Summarized unaudited
(based on different fiscal year-end than RREI Financial Statements included in
Exhibit 13.2) statements of operations for RREI are as follows:

|                                                    |  | Years Ended March 31, |  
|--------------------------------------------------- |  | --------------------- | -
|                                                    |  | 2010                  |  
|                                                    |  | $                     |  
|Operating
      revenues:                           |  |                       |  
|Energy sales                                        |  | 4,365,522             |  
|Energy credit sales                                 |  | 499,405               |  
|                                                    |  | 4,864,927             |  
|Operating
      expenses:                           |  |                       |  
|Operations                                          |  | 4,801,968             |  
|Depreciation and amortization                       |  | 2,049,822             |  
|                                                    |  | 6,851,790             |  
|Operating Loss                                      |  | (1,986,863            | )
|Other income                                        |  | 5,807                 |  
|Net Loss                                            |  | (1,981,056            | )
|U.S. Geothermal Inc.s
      Allocation of Net Loss |  | 323,929               |  

* - began commercial operations
January 3, 2008. Includes nine months of test and development; and three months
of normal operations.% - represents the percentage of total
operating revenues.

For the year ended March 31, 2010, RREIs operating revenues
decreased from $5,262,700 to $4,864,927 (7.6% decrease). This decrease was
primarily due to loss of the geothermal water resource related to a collar
failure that occurred at one of the production wells. The Companys allocation
of RREIs profits and losses is based upon receiving 70% of revenue from
renewable energy credits and 1% of all other profits and losses. The Companys
allocation of profits and losses decreased from $539,815 to $323,929 (40.0%
decrease) from the fiscal year 2009 to 2010 primarily due to a decrease in
energy production which reduced the energy credit sales earned during the fiscal
year ended 2010.

RREIs net operating loss was $1,505,100 for the quarter ended
June 30, 2009. This was primarily due to both planned and unplanned maintenance
and repairs that led to lower revenues and increased costs. The entire plant was
shut down for planned maintenance from April 1, 2009 to April 13, 2009 to
replace a turbine damaged during startup. The shut down reduced energy
production for that time period. Overall, energy revenue was down approximately
$279,000 for the quarter ended June 30, 2009 from the same quarter in 2008.
In addition to the shut down, production was down due to loss in temperature as
a result of a lap joint leaking at one production well and two pump failures.
The pump repairs were substantially complete at September 30, 2009. The repairs
on the lap joint were not completely successful and that well continues to
suffer lower temperatures. The lower temperatures have reduced the productivity
of the plant. Prior to the leak, the plant had averaged 7,588,151 kilowatt hours
per month. After the leak, the plant has averaged 6,494,834 kilowatt hours per
month (14.4% decrease). The severity of the leak continues to increase with
time. A plan to repair this condition has been formulated by the Company and
will be implemented upon acceptance of RREIs other partner.

-59-

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In December 2008, the reverse osmosis system was placed into
operations. Prior to its implementation, the average chemical treatment costs
per month were approximately $73,000. After the system was operational, the
average monthly treatment costs have been approximately $19,000 (monthly savings
of $53,000, 72.6%) .

Corporate Administration

Corporate Administrative costs of $803,417 were incurred for
the fiscal year ended March 2010 which were largely consistent with the costs
incurred in 2009. Corporate Administrative costs of $753,045 were incurred for
the fiscal year ended March 31, 2009, which was an increase of $173,010 (28.9%)
from the prior fiscal year. The primary components of the increases in 2009 were
the increases in exchange filing fees ($25,400), insurance ($58,000) and
administration office rent ($50,500). The Company moved into a new building in
January 2008. Therefore, the 2008 fiscal year only included three months of the
higher rental costs for the new building.

Professional and Management Fees

|                  |           | Percentage     | Percentage of
|----------------- | --------- | -------------- | -------------
|                  |           | of Increase    | Total        
|Fiscal Year Ended | Amount    | from Prior     | Operating    
|March 31,         | ($)       | Year
      (%) | Expenses (%) 
|2008              | 845,908   | -              | 18.5         
|2009              | 997,452   | 17.9           | 13.2         
|2010              | 1,669,227 | 67.4           | 19.5         

For the year ended March 31, 2010, the Company incurred
professional and management fees of $1,669,227, which is an increase of $671,775
from 2009. Legal fees that exceeded $316,000 were incurred related to equity
offerings, contract reviews and responses to SEC comment letters. Legal fees
over $233,000 (over $101,000 in 2009) were paid related the equity offerings as
well as meeting other filing requirements. Consulting fees of approximately
$147,000 were paid for SOX compliance, review of quarterly filings and tax
preparation. Consulting fees from the auditing firm directly related to
assistance with the SEC comment letters were approximately $31,000. Similar
costs of services related to the equity offerings and the SEC comment letters
were not incurred in the same period in 2009.

For the year ended March 31, 2009, professional and management
costs increased $151,544 (17.9%) compared to the same period in 2008. The
increase was primarily due to additional audit fees, compliance with Sarbanes-Oxley Act and contractors
involved in plant support. The financial statement audit fees increased
approximately $25,000 due to the larger scope of the audit engagement related to
the Companys new entities. To comply with the Sarbanes-Oxley Act, additional
audit fees of approximately $35,000 were incurred and additional consulting fees
of $61,300 were incurred for a total of $136,000 for the fiscal year. An
incremental amount of approximately $83,000 was paid to outside contractors that
supported the operations of our primary subsidiary. These contractors were
performing water testing and general plant operational support.

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Salary and Related Costs

For the year ended March 31, 2010, our salary and related costs
decreased from $1,180,647 to $1,171,752. There was a slight increase in staff (2
management and development staff) added in the fiscal year ended March 31, 2010;
however, salary expenses were slightly lower ($8,895, 0.75%) than fiscal year
ended 2009. The primary reason was that approximately $376,000 in salary and
related costs was capitalized related to management and development efforts for
the Neal Hot Springs project. For the year ended March 31, 2009, our salary and
related costs increased $563,324 (91.2%) as compared to 2008. During that time
period, there were no significant changes in the number of management and
development employees, pay scales or other benefits. Prior to January 3, 2008,
the Companys primary subsidiary was in a development stage, and directly
involved efforts from management and development employees. Accordingly, the
salaries and related costs of approximately $455,000 were allocated to the
subsidiary in the fiscal year ended March 31, 2008. After the subsidiary became
operational in 2008, the amount of salary costs from management and development
employees were significantly reduced at the subsidiary level and were carried at
the corporate level.

Travel and Promotion

For the year ended March 31, 2010, travel and promotion costs
decreased $203,066 (39.7%) from the same period in 2009. The Company
discontinued certain trade show expenditures which amounted to $227,000 in 2009.
Travel and promotion costs for the fiscal year ended March 31, 2009 were
reasonably consistent with the same period in 2008.

Lease and Equipment Repairs

For the year ended March 31, 2010, lease and equipment costs
decreased $77,538 (35.8%) from the prior year. The primary reason for the
decrease in the 2010 fiscal year ended December 2010, was utility line
reservation fees as noted above were not incurred. For the year ended March 31,
2009, the lease and equipment maintenance costs increased $146,986 (211.5%) as
compared to 2008. During the 2009 fiscal year, the Company began lease payments
for utility line reservation fees of $101,928. Additional lease payments for
geothermal water rights were incurred that amounted to over $81,000. Of that
amount, $41,000 was for geothermal lease rights for the exploration activities
conducted by the new joint venture company Gerlach Geothermal, LLC.

-61-

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Liquidity and Capital Resources

We believe our cash and liquid investments at March 31, 2010
are adequate to fund our general operating activities through March 31, 2011
including limited drilling at Neal Hot Springs and general development support
activities at San Emidio. Additional funding will be needed to finance the
expansion of production volumes at Raft River and the development of the San
Emidio, Nevada and Neal Hot Springs, Oregon projects. In addition to government
loans and grants discussed below, we anticipate that the additional funding may
be raised through the issuance of equity and/or through the sale of ownership
interest in tax credits and benefits.

The current financial credit crisis is not anticipated to
impact the ability of our customers, Idaho Power Company and Sierra Pacific
Power, to pay for their power. This power is sold under long-term contracts at
fixed prices to large utilities. Projections for 2010 indicate that both
projects, Raft River and San Emidio, will generate positive cash flows to the
Company. However, the current status of the credit and equity markets could
delay our project development activities while the Company seeks to obtain
economic credit terms or a favorable equity market price to further the drilling
and construction activities. The Company continues discussions with potential
investors to evaluate alternatives for funding at the corporate and project
levels. We are also pursuing available DOE loans and guarantees in order to
reduce interest costs for any debt instruments the Company may require. At the
current market price for the Companys stock, we do not anticipate that
additional funding will result from the exercise of current stock options or
warrants in the near future. In these difficult financial times, the Company has
also implemented procedures to conserve cash, reduce costs and maximize revenue.
At the corporate level, we have cancelled non-essential consulting contracts and
are reducing all non-critical expenditures. At the project level, Raft River and
San Emidio are increasing efforts to reduce operating costs and look for
additional cost savings.

On March 16, 2010, the Company closed a private placement of
securities issued pursuant to a securities purchase agreement (the "Purchase
Agreement") entered into with several institutional investors, pursuant to which
the Company issued 8,209,519 shares of common stock at a price of $1.05 per
share for gross proceeds of approximately $8.6 million (the "Private
Placement"). Pursuant to the terms of the Private Placement, each investor was
also issued a common share purchase warrant (a "Warrant") exercisable for 50% of
the number of shares of common stock purchased by the investor. The Company paid
commissions to agents in connection with the Private Placement in the amount of
approximately $516,000 and issued warrants to purchase up to 246,285 shares of
common stock. The net proceeds of the offering (approximately $8.0 million) will
be used by the Company to further develop its Neal Hot Springs geothermal
project and for general working capital purposes.

On October 30, 2009, the Company was awarded $3.77 million in
Recovery Act funding for the exploration and development of its San Emidio
geothermal power project using advanced geophysical exploration techniques. This
award was categorized under the Innovative Exploration and Drilling Projects
section of the American Recovery and Reinvestment Act. The project at San Emidio
will apply innovative, seismic and satellite imagery techniques along with
state-of-the-art structural modeling, to locate large aperture fractures that
represent high-productivity geothermal drilling targets.

-62-

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On August 17, 2009, the Company completed a private placement
of 8,100,000 Subscription Receipts (Receipt) at $1.35 CDN per Receipt for
aggregate gross proceeds of CDN $10,935,000. Each Receipt was exchanged on
December 17, 2009 for one share of common stock of the Company and one half of
one common stock purchase warrant (a "Warrant"). Each Warrant entitles the
holder thereof to acquire one additional share of common stock of the Company
for $1.75 for 24 months from closing. The placement agents have been paid an
aggregate cash fee of CDN $656,100, representing 6% of the aggregate gross
proceeds of the offering, and have been issued compensation options, exercisable
for 24 months, entitling the placement agents to purchase up to 243,000 shares
of common stock of the Company at $1.22. The proceeds provided funds to drill
production size wells at Neal Hot Springs to increase production capacity to 22
MW and allow a 30-day flow test to verify the well reservoir capacity.
Completion of drilling is a condition precedent to the funding from the DOE loan
program, if our application is approved.

On February 26, 2009 U.S. Geothermal submitted an application
for the Neal Hot Springs project to the DOEs Energy Efficiency, Renewable
Energy and Advanced Transmission and Distribution Solicitation loan guarantee
program under Title XVII of the Energy Policy Act of 2005. The Company was
notified that its project application is complete, the power plant technology
choice qualifies as new or improved under the program, and the project has been
selected to proceed in the project loan process. Although we have not yet
received approval, the DOE guaranteed loan is expected to provide up to 75% of
the $119 million estimated capital cost of Stage I up to a maximum loan amount
of $102.2 million. The capital cost has increased to $119 million from prior
estimates of $106 million due to costs of labor, updated vendor pricing and
construction materials, project loan costs and contingencies. Detailed design of
a binary cycle power plant utilizing significantly improved technology is
currently in progress with construction expected to begin in mid 2010. The new
plant, designed to deliver approximately 22 MW of power net to the grid is
scheduled to begin commercial operations in early 2012. The DOE guaranteed loan
is anticipated to be a combined construction and term loan and provide the
project with a low cost annual interest rate. We expect that we will be required
to drill up to 8 additional wells as a condition precedent to drawing on the DOE
guaranteed loan, if it is approved.

Potential Acquisitions

The Company intends to continue its growth through the
acquisition of ownership or leasehold interests in properties and/or property
rights that it believes will add to the value of the Companys geothermal
resources, and through possible mergers with or acquisitions of operating power
plants and geothermal or other renewable energy properties.

Critical Accounting Policies

The discussion and analysis of our financial condition and
results of operations are based upon the consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. Certain accounting policies
involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different
amounts could have been reported under different conditions, or if different
assumptions had been made. We evaluate our estimates and assumptions on a
regular basis. We base our estimates on historical experience and various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for the financial statements.

-63-

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Cash and Cash Equivalents

The Company considers cash deposits and highly liquid
investments to be cash and cash equivalents for financial reporting presentation
on the consolidated balance sheet and statement of cash flows. The Company
subscribes to the accounting standards that define cash equivalents as highly
liquid, short-term instruments that are readily convertible to known amounts of
cash, which are generally defined investments that have original maturity dates
of less than three months. With the large value of funds invested in short-term
deposits, small variations in short term interest rates may materially affect
the value of cash equivalents. Investments in government obligations accumulate
higher interest, but the principal balance is not insured by the FDIC.

Property, Plant and Equipment

During the development stage of operations, the Company has
purchased and otherwise acquired geothermal properties for the production of
power. The geothermal properties include: drilled wells, power plant components,
power plant support components, land, land rights, surface water rights, and
geothermal water rights. The Companys first power plant became operational in
January 2008. When the plant became operational, plant property and equipment
costs were charged to operations in a systematic manner based upon the estimated
useful lives of the individual assets. The factors and assumptions that comprise
this allocation process will be based upon the best information available to us,
and will be evaluated, at least, annually for viability. If it is determined
that our cost allocations have produced results that vary significantly from the
conditions surrounding the value of the Companys geothermal properties, a gain
or loss adjustment will be made in the period in which this determination is
made. The cost allocation or amortization process is not intended to present the
fair market value of our geothermal properties; rather to allocate the actual
historical costs of those properties over their service lives.

Income Taxes

According to generally accepted accounting practices, entities
must recognize assets and/or liabilities that originate with the differences in
revenues and expenses presented for financial reporting purposes and those
revenues and expenses that are utilized to comply with federal and state income
tax law. Often deductions can be accelerated for income tax purposes, thus
creating temporary timing differences. Other items (generally non-allowable
expenses) do not reverse over time, and are considered to be permanent
differences. These types of costs are, typically, not factored into the deferred
income tax asset or liability calculation. The Companys primary element that
impacts the liability or asset calculation relates to the operating losses
generated in its early stages of operation that will be allowed to offset future
earnings. Stock-based compensation is another significant area that impacts that
recognition of deferred income taxes. Compensation that has been provided to
employees and contractors based upon the value of the issuance of stock options
is reported as an operating cost. However, this compensation is not an allowable
deduction for income tax purposes. At the end of the fiscal year, the Companys significant tax differences would ultimately result in the
recognition of an asset; however, due to the uncertainly surrounding future
earnings, an allowance has been calculated that effectively removes the asset.
The Company continues to track the financial elements that comprise the deferred
income tax calculation and will remove or reduce the asset allowance if the
Company is determined to be in position where it is likely to produce
earnings.

-64-

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Stock-Based Compensation

Effective April 1, 2007, the Company adopted a standard that
states that if certain conditions are present surrounding the issuance of equity
instruments as share based compensation, then circumstances may warrant the
recognition of a liability for financial reporting purposes. One such condition
was present when the Company originally issued stock options in a foreign
currency (Canadian dollars) to employees before the beginning of the fiscal
year. Authors of the standard have reasoned that when a condition is present
that creates a financial risk to the recipient in addition to normal market
risks (i.e., foreign currency translation risk), then the instrument takes on
the characteristics of a liability, rather than an equity item. As the
underlying stock options are exercised or are forfeited, then the stock based
compensation liability will be reduced. The Companys financial statements
reflect these changes in the consolidated balance sheet. As the value of the
options change over the vesting periods, these changes will ultimately be
reflected in the amount of expense charged to operations.

The Company awards stock options for compensation to
non-employees for services performed and/or services performed above and beyond
expectations. After the services have been completed, the awards are made at the
discretion of the Board of Directors. The fair value of the options are
determined on the date the options are awarded according to several factors that
include the exercise price of the option, the current price of the underlying
share, the expected life of the options and the expected volatility of the
stock. Generally speaking, a longer life and higher expected volatility yields a
higher value of the option. In accordance with appropriate accounting guidance,
the Company amortizes the value of these options as operating expense during the
period in which they vest. Stock options awarded to Company employees are also
valued on the date they are awarded. However, the value of these options are
capitalized and expensed over the vesting period. The current vesting period for
all options is eighteen months. The nature of the services provided determines
whether the value will be expensed or added to the value of a Company asset. To
date, no services have been provided directly related to the construction of
property and equipment, thus, all services have been charged to operations.

Contractual Obligations

As of March 31, 2010, the following table denotes contractual
obligation by payments due for each period:

|                                 | Total     | < 1 year  | 1-3 years | 3-5 years | > 5 years
|-------------------------------- | --------- | --------- | --------- | --------- | ---------
|Operating Leases                 | $ 538,841 | $ 154,124 | $ 161,221 | $ 121,237 | $ 74,192 
|Capital Leases                   | 38,944    | 11,836    | 27,108    | 0         | 0        
|Promissory Note                  | 230,000   | 0         | 230,000   | 0         | 0        
|Stock
      Compensation Payable | 1,823,751 | 0         | 1,823,751 | 0         | 0        

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For further information regarding lease terms and conditions,
please note Item 2, Description of Property, Lease/Royalty Terms beginning on
page 28 of this document.

The obligations reflected for Stock Compensation Payable are
reflected as due on the option expiration date. The obligation will be relieved
upon exercise of the options, which may be at any time between vesting and
expiration.

Off Balance Sheet Arrangements

As of March 31, 2010, the Company does not have any off balance
sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures About
Market Risk

Interest Risk on Investments

At March 31, 2010, the Company held investments of $13,025,588
in money market accounts. These are highly liquid investments that are subject
to risks associated with changes in interest rates. The money market funds are
invested in governmental obligations with minimal fluctuations in interest rates
and fixed terms.

Foreign Currency Risk

The Company is subject to limited amount of foreign currency
risks associated with cash deposits maintained in Canadian currency. The Company
has utilized and it is continuing to utilize the Canadian markets for raising
capital. By proper timing of the transactions and then maintenance of adequate
operating funds in other financial resources, the Company has been able to
mitigate some of the risks surrounding foreign currency exchanges. At fiscal
year end, the Company did not hold any deposits in Canadian currency. Also, the
Canadian currency exchange rate has been reasonably consistent over the past
fiscal year. As a matter of standard operating practice, the Company does not
maintain large balances of Canadian currency; and, substantially, all operating
transactions are conducted in U.S. dollars.

The strike price for the Companys stock option plan has been
stated in Canadian dollars as the plan has been administered through our
Vancouver office and Pacific Corporate Trust Company. This subjects the Company
to foreign currency risk in addition to the normal market risks associated with
the stock price fluctuations. A long-term liability has been established to
reflect the fair value of the stock options payable. The strike price on future
option grants will be stated in US dollars.

Commodity Price Risk

The Company is exposed to risks surrounding the volatility of
energy prices. These risks are impacted by various circumstances surrounding the
energy production from natural gas, nuclear, hydro, solar, coal and oil. The
Company has been able to mitigate, to a certain extent, this risk by entering
into long-term power purchase contracts for both the Raft River and San Emidio
power plants. These types of arrangement will be the model for power purchase
contracts planned for future power plants.

-66-

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Item 8. Financial Statements and Supplementary
Data

The information required hereunder is set forth under Report
of Independent Registered Public Accounting Firm, Consolidated Balance
Sheets, Consolidated Statements of Operations, Consolidated Statements of
Comprehensive Income (Loss) and Stockholders Equity (Deficit), Consolidated
Statements of Cash Flows, and Notes to Consolidated Financial Statements
included in the consolidated financial statements that are a part of this Report
(See Part IV, Item 15, exhibit 13.1) . Other financial information and schedules
are included in the consolidated financial statements that are a part of this
Report.

Item 9. Changes in and Disagreements With Accountants on
Accounting and FinancialDisclosure

None.

Item 9A. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

In connection with the preparation of this annual report on
Form 10-K, an evaluation was carried out by the Companys management, with the
participation of the Chief Executive Officer and the Chief Financial Officer, of
the effectiveness of the Companys disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (Exchange Act)) as of March 31, 2010. Disclosure controls and procedures
are designed to ensure that information required to be disclosed in reports
filed or submitted under the Exchange Act is recorded, processed, summarized,
and reported within the time periods specified in the SEC rules and forms and
that such information is accumulated and communicated to management, including
the Chief Executive Officer and the Chief Financial Officer, to allow timely
decisions regarding required disclosures.

Based on their evaluation, our Chief Executive Officer and
Chief Financial Officer concluded disclosure controls and procedures were
effective as of March 31, 2010.

MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING

The Companys management is responsible for establishing and
maintaining adequate internal control over financial reporting. Internal control
over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f)
promulgated under the Exchange Act as a process designed by, or under the
supervision of, the Companys principal executive and principal financial
officers, or persons performing similar functions, and effected by the Companys
Board of Directors, management and other personnel, 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. The Companys internal control over financial
reporting includes those policies and procedures that:

-67-

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- pertain to the maintenance of records that, in reasonable detail,
  accurately and fairly reflect the transactions and dispositions of the assets
  of the Company;
- 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
- provide reasonable assurance regarding prevention or timely detection of
  unauthorized acquisition, use or disposition of the Companys assets that
  could have a material effect on the financial statements.

The Companys management assessed the effectiveness of the
Companys internal control over financial reporting as of March 31, 2010. In
making this assessment, it used the criteria set forth in the Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Based on our assessment, management concluded
that, as of March 31, 2010, the Companys internal control over financial
reporting is effective based on those criteria.

BehlerMick, P.S., independent registered public accounting
firm, who audited and reported on the consolidated financial statements of U.S.
Geothermal, Inc. included in this report, has issued an attestation report
regarding its assessment of the Companys internal control over financial
reporting as of March 31, 2010, which report appears as Exhibit 13.1.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

As of the end of the period covered by this report, there have
been no changes in internal control over financial reporting (as defined in Rule
13a-15(f) of the Exchange Act) during the quarter ended March 31, 2010, that
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.

Item 9B. Other Information

None.

-68-

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PART III

Item 10  Directors, Executive Officers and Corporate
Governance

The information required by this item is set forth below or
incorporated by reference to information under the caption Proposal 1 -
Election of Directors and to the information under the captions Section 16(a)
Beneficial Ownership Reporting Compliance and Corporate Governance-Board
Qualifications and Selection Process in the Companys definitive Proxy
Statement for its annual meeting of shareholders to be held on August 23, 2010.
See also Part I - Item1 - Executive Officers of the Registrant.

Audit Committee and Audit Committee Financial Expert

Our Board has a separately-designated standing Audit Committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act. The
members of the Audit Committee are John H. Walker, Paul A. Larkin and Leland L.
Mink. Our Board has determined that Paul A. Larkin, Chairman of the Audit
Committee, is an audit committee financial expert as defined by Item 407(d)(5)
of Regulation S-K under the Exchange Act and that each member of the Audit
Committee is independent under the NYSE Amex independence standards applicable
to audit committee members.

Code of Ethics and Governance Guidelines

Our Board of Directors has adopted the U.S. Geothermal, Inc.
Code of Business Conduct and Ethics to provide a corporate governance framework
for our directors and management to effectively pursue U.S. Geothermal Inc.s
objectives for the benefit of our shareholders. The Board annually reviews and
updates these guidelines and the charters of the Board committees in response to
evolving best practices and the results of annual Board and committee
evaluations. Our Code of Business Conduct and Ethics can be found at
www.usgeothermal.com. by clicking on About Us and then Code of Ethics.
Shareholders may request a free printed copy of our Code of Business Conduct and
Ethics from our investor relations department by contacting them at
info@usgeothermal.com or by calling (208) 424-1027. We will post any amendments
to the Code of Business Conduct and Ethics at that location. In the unlikely
event that the Board of Directors approves any sort of waiver to the Code of
Business Conduct and Ethics for our executive officers or directors, information
concerning such waiver will also be posted at that location. No waivers were
granted in the most recent fiscal year. In addition to posting information
regarding amendments and waivers on our website, the same information will be
included in a Current Report on Form 8-K within four business days following the
date of the amendment or waiver, unless website posting of such amendments or
waivers satisfies applicable NYSE Amex listing rules.

Item 11  Executive Compensation

The information required by this item is incorporated by
reference to information under the captions Proposal 1  Election of Directors
and Executive Compensation in the Companys definitive Proxy Statement for its
annual meeting of shareholders to be held on August 23, 2010.

-69-

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Item 12  Security Ownership of Certain Beneficial Owners
and Management andRelated Stockholder Matters

The information required by this item is incorporated by
reference to information under the captions Security Ownership of Certain
Beneficial Owners and Management and Proposal 1 - Election of Directors in
the Companys definitive Proxy Statement for its annual meeting of shareholders
to be held on August 23, 2010.

Securities Authorized for Issuance under Equity Compensation
Plans

The following table details the number of securities authorized
for issuance under the Companys equity compensation plans for the fiscal year
ended March 31, 2010:

|Equity Compensation Plan
      Information                      
|----------------------------------------------------------------
|                                                                
|Plan Category                                                   
|                                                                
|                                                                
|Equity compensation plans
      approved by security holders    
|Equity compensation plans not
      approved by security holders
|Total                                                           

Item 13  Certain Relationships and Related Transactions,
and Director Independence

The information required by this item is incorporated by
reference to information under the captions Corporate Governance and Certain
Relationships and Related Transactions in the Companys definitive Proxy
Statement for its annual meeting of shareholders to be held on August 23,
2010.

Item 14  Principal Accounting Fees and
Services

The information required by this item is incorporated by
reference to information under the caption Audit Committee Report and Payment
of Fees to Auditors in the Companys definitive Proxy Statement for its annual
meeting of shareholders to be held on August 23, 2010.

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PART IV

Item 15. Exhibits, Financial Statement
Schedules

The following documents are filed as a part of this report:

| | 1. | Consolidated Financial Statements.                                                                                                      
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                         
| |    | See Item 8 of Part II for a list of the Financial
      Statements filed as part of this report.                                        
| |    |                                                                                                                                         
| | 2. | Financial Statement Schedules.                                                                                                          
| |    |                                                                                                                                         
| |    | See Exhibit 13.2 for the following Financial Statement
      Schedules filed as part of this report:                                    
| |    |                                                                                                                                         
| |    | Financial Statements for Raft River Energy I LLC                                                                                        
| |    | Report of Independent Auditors                                                                                                          
| |    | Balance Sheets at December 31, 2009 and November 28, 2008                                                                               
| |    | Statements of Operations for the periods ended
      December 31, 2009, December 26, 2008, November 28, 2008 and November 30,
      2007
| |    | Statements of Cash Flows                                                                                                                
| |    | Statement of Members Equity                                                                                                            
| |    | Notes to the Financial Statement                                                                                                        
| |    |                                                                                                                                         
| | 3. | Exhibits. See below.                                                                                                                    

EXHIBIT LIST

|**EXHIBIT** |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                          
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NUMBER      |  |                                                                                                                                                                                                                                                                                                                                                      
|3.1         |  | Certificate of Incorporation of U.S. Cobalt Inc. (now
      known as U.S. Geothermal Inc.) (Incorporated by reference to exhibit 3.1
      to the registrants Form SB-2 registration statement as filed on July 8,
      2004)                                                                                                                      
|3.2         |  | Certificate of Domestication of Non-U.S. Corporation
      (Incorporated by reference to exhibit 3.2 to the registrants Form SB-2
      registration statement as filed on July 8, 2004)                                                                                                                                                            
|3.3         |  | Certificate of Amendment of Certificate of Incorporation
      (changing name of U.S. Cobalt Inc. to U.S. Geothermal Inc.) (Incorporated
      by reference to exhibit 3.3 to the registrants Form SB-2 registration
      statement as filed on July 8, 2004)                                                                                      
|3.4         |  | First
      Amended and Restated Bylaws of U.S. Geothermal Inc. (Incorporated by
      reference to exhibit 3.4 to the registrants Form 8-K as filed on November
      4, 2009)                                                                                                                                                                     
|3.5         |  | Plan of Merger of U.S. Geothermal, Inc. and EverGreen
      Power Inc. (Incorporated by reference to exhibit 3.5 to the registrants
      Form SB-2 registration statement as filed on July 8, 2004)                                                                                                                                                
|3.6         |  | Amendment to Plan of Merger (Incorporated by reference to
      exhibit 3.6 to the registrants Form SB-2 registration statement as filed
      on July 8, 2004)                                                                                                                                                                                     
|3.7         |  | Certificate of Amendment to Certificate of Incorporation
      filed on August 26, 2008 (incorporated by reference to Exhibit 3.4 to the
      Companys Form 8-K as filed on August 27, 2008)                                                                                                                                                       
|4.1         |  | Form
      of Stock Certificate (Incorporated by reference to exhibit 4.1 to the
      registrants Form SB-2 registration statement as filed on July 8, 2004)                                                                                                                                                                                       
|4.2         |  | Provisions Regarding Rights of Stockholders (Incorporated
      by reference to Exhibit 4.3 to the Companys Form SB-2 registration
      statement as filed on July 8, 2004)                                                                                                                                                                        
|4.3         |  | Form
      of Warrant used in private placement of April 2008 (Incorporated by
      reference to Exhibit 10.3 to the Companys Form 8-K current report as
      filed on May 2, 2008)                                                                                                                                                               
|4.4         |  | Form of Broker Warrant (Incorporated by reference as
      exhibit 10.4 to the Companys Form 8-K current report as filed on May 2,
      2008)                                                                                                                                                                                                      
|4.5         |  | Form
      of Subscription Agreement relating to private placement of April 2008
      (Incorporated by reference to Exhibit 10.2 to the Companys Form 8-K
      current report as filed on May 2, 2008)                                                                                                                                            
|4.6         |  | Form of Subscription Agreement for Subscription Receipts
      relating to private placement of August 2009 (Incorporated by reference to
      Exhibit 4.3 to the Companys Form S-1 registration statement as filed on
      November 27, 2009)                                                                                                    
|4.7         |  | Subscription Receipt Agreement dated August 17, 2009 among the
      Company, Dundee Securities Corporation, Clarus Securities Inc., Toll Cross
      Securities Inc. and Computershare Trust Company of Canada (Incorporated by
      reference to Exhibit 4.4 to the Companys Form S-1 registration statement
      as filed on November 27, 2009)

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|4.8   |  | Form of Warrant used in private placement of August 2009
      (Incorporated by reference to Exhibit 4.5 to the Companys Form S-1
      registration statement as filed on November 27, 2009)                                                                                                                                                                                                                      
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.9   |  | Form
      Broker Warrant (Incorporated by reference to Exhibit 4.6 to the Companys
      Form S-1 registration statement as filed on November 27, 2009)                                                                                                                                                                                                                                                           
|10.1  |  | Agreement between U.S. Geothermal Inc. and Vulcan Power
      Company dated December 3, 2002 regarding the acquisition of the Vulcan
      interest (Incorporated by reference to exhibit 10.1 to the registrants
      Form SB-2 registration statement as filed on July 8, 2004)                                                                                                                                 
|10.2  |  | Amendment No. 1 dated November 15, 2003 to Agreement between
      U.S. Geothermal Inc. and Vulcan Power Company (Incorporated by reference
      to exhibit 10.2 to the registrants Form SB-2 registration statement as
      filed on July 8, 2004)                                                                                                                                                              
|10.3  |  | Amendment No. 2 to Agreement by and between U.S.
      Geothermal Inc. and Vulcan Power Company dated December 30, 2003
      (Incorporated by reference to exhibit 10.3 to the registrants Form SB-2
      registration statement as filed on July 8, 2004)                                                                                                                                                     
|10.4  |  | Geothermal Lease and Agreement dated July 11, 2002, between
      Sergene Jensen, Personal Representative of the Estate of Harlan B. Jensen,
      and U.S. Geothermal Inc. (Incorporated by reference to exhibit 10.5 to the
      registrants Form SB-2 registration statement as filed on July 8, 2004)                                                                                                         
|10.5  |  | Geothermal Lease and Agreement dated June 14, 2002,
      between Jensen Investments Inc. and U.S. Geothermal Inc. (Incorporated by
      reference to exhibit 10.6 to the registrants Form SB-2 registration
      statement as filed on July 8, 2004)                                                                                                                                                            
|10.6  |  | Geothermal Lease and Agreement dated March 1, 2004, between
      Jay Newbold and U.S. Geothermal Inc. (Incorporated by reference to exhibit
      10.7 to the registrants Form SB-2 registration statement as filed on July
      8, 2004)                                                                                                                                                                        
|10.7  |  | Geothermal Lease and Agreement dated June 28, 2003,
      between Janice Crank and the children of Paul Crank and U.S. Geothermal
      Inc. (Incorporated by reference to exhibit 10.8 to the registrants Form
      SB-2 registration statement as filed on July 8, 2004)                                                                                                                                        
|10.8  |  | Geothermal Lease and Agreement dated December 1, 2004, between
      Reid S. Stewart and Ruth O. Stewart and US Geothermal Inc. (Incorporated
      by reference to exhibit 10.9 to the registrants Amendment No. 2 to Form
      SB-2 registration statement as filed on January 10, 2005)                                                                                                                        
|10.9  |  | Geothermal Lease and Agreement, dated July 5, 2005,
      between Bighorn Mortgage Corporation and US Geothermal Inc. (Incorporated
      by reference to exhibit 10.11 to the registrants Form 10-QSB quarterly
      report as filed on February 17, 2006)                                                                                                                                                       
|10.10 |  | Geothermal Lease and Agreement, dated June 23, 2005, among
      Dale and Ronda Doman, and US Geothermal Inc. (Incorporated by reference to
      exhibit 10.13 to the registrants Form 10-QSB quarterly report as filed on
      February 17, 2006)                                                                                                                                                               
|10.11 |  | Geothermal Lease and Agreement, dated June 23, 2005, among
      Michael and Cleo Griffin, Harlow and Pauline Griffin, Douglas and Margaret
      Griffin, Terry and Sue Griffin, Vincent and Phyllis Jorgensen, and Alice
      Mae Griffin Shorts, and US Geothermal Inc. (Incorporated by reference to
      exhibit 10.14 to the registrants Form 10- QSB quarterly report as filed
      on February 17, 2006)
|10.12 |  | Geothermal Lease and Agreement dated January 25, 2006, between
      Philip Glover and US Geothermal Inc. (Incorporated by reference to exhibit
      10.9 to the registrants Form 10-QSB quarterly report as filed on February
      17, 2006)                                                                                                                                                                    

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|10.13 |  | Geothermal Lease and Agreement,
      dated May 24, 2006, between JR Land and Livestock Inc. and US Geothermal
      Inc. (Incorporated by reference to exhibit 10.30 to the registrants Form
      10-KSB annual report as filed on June 29, 2006)                                                                                    
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.15 |  | Employment Agreement dated May 18, 2010 with
      Daniel J. Kunz (Incorporated by reference to exhibit 99.1 to the
      registrants Form 8-K as filed on May 24, 2010)                                                                                                                                                               
|10.16 |  | Employment Agreement dated
      April 1, 2010 with Kerry D. Hawkley (Incorporated by reference to exhibit
      99.2 to the registrants Form 8-K as filed on May 28, 2010)                                                                                                                                                            
|10.17 |  | Employment Agreement dated April 1, 2010 with
      Douglas J. Glaspey (Incorporated by reference to exhibit 99.1 to the
      registrants Form 8-K as filed on May 28, 2010)                                                                                                                                                          
|10.18 |  | Escrow Agreement made December
      19, 2003, among U.S. Geothermal Inc., Pacific Corporate Trust Company, as
      escrow agent, and certain security holders (Incorporated by reference to
      exhibit 10.15 to the registrants Form SB-2 registration statement as
      filed on July 8, 2004)                                  
|10.19 |  | Escrow Agreement made December 19, 2003, among
      U. S. Geothermal Inc., Pacific Corporate Trust Company, as escrow agent,
      and certain security holders (Incorporated by reference to exhibit 10.16
      to the registrants Form SB-2 registration statement as filed on July 8,
      2004)                                 
|10.21 |  | First Amended and Restated
      Merger Agreement dated November 30, 2003 among U.S. Cobalt Inc., EverGreen
      Power Inc., U.S. Geothermal Inc., and the stockholders of U.S. Geothermal
      Inc. (Incorporated by reference to exhibit 10.17 to the registrants Form
      SB- 2 registration statement as filed on July 8, 2004)
|10.22 |  | Agreement with Dundee Securities Corporation
      dated June 28, 2004 (Incorporated by reference to exhibit 10.18 to the
      registrants Form SB-2 registration statement as filed on July 8, 2004)                                                                                                                                 
|10.23 |  | Amended and Restated Stock
      Option Plan of U.S. Geothermal Inc. dated September 29, 2006.(Incorporated by reference to exhibit 10.23 to the registrants Form
      SB-2 registration statement as filed on October 2, 2006.)                                                                                                      
|10.24 |  | Power Purchase Agreement dated December 29,
      2004 between U.S. Geothermal Inc. and Idaho Power Company (Incorporated by
      reference to exhibit 10.19 to the registrants Amendment No. 2 to Form
      SB-2 registration statement as filed on January 10, 2005)                                                               
|10.25 |  | Engineering, Procurement and
      Construction Agreement dated December 5, 2005 between U.S. Geothermal Inc.
      and Ormat Nevada Inc. (Incorporated by reference to exhibit 10.28 to the
      registrants Form 10-QSB quarterly report as filed on February 17, 2006)                                                             
|10.26 |  | Amendment to the Engineering, Procurement and
      Construction Agreement dated April 26, 2006 between U.S. Geothermal Inc.
      and Ormat Nevada Inc. (Incorporated by reference to exhibit 99.1 to the
      registrants Form 8-K as filed on May 2, 2006)                                                                         
|10.27 |  | Letter of Intent from Eugene
      Water and Electric Board to U.S. Geothermal Inc. dated February 22, 2006
      (Incorporated by reference to exhibit 10.27 to the registrants Form SB-2
      as filed on September 29, 2006).                                                                                                      
|10.28 |  | Renewable Energy Credits Purchase and Sales
      Agreement dated July 29, 2006 between Holy Cross Energy and U.S.
      Geothermal Inc. (Incorporated by reference to exhibit 10.28 to the
      registrants Form SB-2 as filed on September 29, 2006).                                                                               
|10.29 |  | Transmission Agreement dated
      June 24, 2005 between Department of Energys Bonneville Power
      Administration - Transmission Business Line and U.S. Geothermal                                                                                                                                                                  

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|      |  | Inc.
      (Incorporated by reference to exhibit 10.27 to the registrants Form
      10-QSB quarterly report as filed on August 12, 2005)                                                                                                                                                                                                      
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.30 |  | Interconnection and Wheeling Agreement dated March 9, 2006
      between Raft River Rural Electric Co-op and U.S. Geothermal Inc.
      (Incorporated by reference to exhibit 10.28 to the registrants Form
      10-KSB annual report as filed on June 29, 2006)                                                                              
|10.31 |  | Construction Contract dated May 16, 2006 between Raft River
      Rural Electric Co-op and U.S. Geothermal Inc. (Incorporated by reference
      to exhibit 10.31 to the registrants Form SB-2 as filed on September 29,
      2006).                                                                                                          
|10.32 |  | Membership Admission Agreement, dated August 9, 2006,
      among Raft River Energy I LLC, U.S. Geothermal Inc., and Raft River I
      Holdings, LLC (Incorporated by reference to exhibit 10.1 to the
      registrants Form 8-K as filed on August 23, 2006)                                                                                
|10.33 |  | Amended and Restated Operating Agreement of Raft River Energy
      I LLC, dated as of August 9, 2006, among Raft River Energy I LLC, Raft
      River I Holdings, LLC and U.S. Geothermal Inc (Incorporated by reference
      to exhibit 10.2 to the registrants Form 8-K as filed on August 23, 2006).                                      
|10.34 |  | Management Services Agreement, dated as of August 9, 2006,
      between Raft River Energy I LLC and U.S. Geothermal Services, LLC
      (Incorporated by reference to exhibit 10.3 to the registrants Form 8-K as
      filed on August 23, 2006)                                                                                             
|10.35 |  | Construction contract dated May 22, 2006 between Industrial
      Builders and U.S. Geothermal Inc. (Incorporated by reference to exhibit
      10.31 to the registrants Form 10- KSB annual report as filed on June 29,
      2006)                                                                                                           
|10.36 |  | First Amendment to the Amended and Restated Operating
      Agreement of Raft River Energy I LLC, dated as of November 7, 2006, among
      Raft River Energy I LLC, Raft River I Holdings, LLC and U.S. Geothermal
      Inc. (Incorporated by reference to exhibit 10.36 to the registrants Form
      10-QSB as filed on February 20, 2007).
|10.38 |  | Geothermal Lease and Agreement dated August 1, 2007, between
      Bureau of Land Management and U.S. Geothermal Inc. (Incorporated by
      reference as exhibit 10.34 to the registrants Form S-1 as filed on March
      26, 2010)                                                                                                          
|10.39 |  | Asset Purchase Agreement dated as of March 31, 2008,
      between U.S. Geothermal Inc., and Empire Geothermal Power LLC and Michael
      B. Stewart (Incorporated by reference as exhibit 99.1 to the registrants
      Form 8-K current report as filed on April 7, 2008)                                                                   
|10.42 |  | Water
      Rights Purchase Agreement Michael B. Stewart and U.S. Geothermal Inc.
      dated March 31, 2008 (Incorporated by reference as exhibit 99.2 to the
      registrants Form 8-K current report as filed on April 7, 2008).                                                                                                            
|10.43 |  | Power Purchase Agreement dated as of December 11, 2009,
      between Idaho Power Company and USG Oregon LLC (Incorporated by reference
      to Exhibit 10.43 to the Companys Form 10-Q quarterly report as filed on
      February 9, 2010)                                                                                                  
|10.44 |  | Power
      Purchase and Sale Agreement, dated as of February 2008, between Eugene
      Water & Electric Board and U.S. Geothermal Inc. (Incorporated by
      reference to Exhibit 10.42 to the registrants Form 10-Q/A quarterly
      report as filed on March 3, 2010)                                                                    
|10.45 |  | Long Term Agreement For the Purchase and Sale of
      Electricity, dated December 31, 1986, between Sierra Pacific Power Company
      and Empire Farms, as amended (Incorporated by reference to Exhibit 10.43
      to the registrants Form 10-Q/A quarterly report as filed on March 3,
      2010)                                        
|13.1  |  | Audited Consolidated Financial Statements of U.S. Geothermal
      Inc. as of March 31, 2010.                                                                                                                                                                                                                                                   

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|13.2 |  | Audited Financial Statements of significant subsidiary
      Raft River Energy I LLC as of December 31, 2009
|---- |  | ------------------------------------------------------------------------------------------------------------
|21.1 |  | Subsidiaries of the Registrant                                                                              
|23.1 |  | Consent of BehlerMick PS                                                                                    
|23.2 |  | Consent of PricewaterhouseCoopers LLP                                                                       
|23.3 |  | Consent of GeothermEx Inc.                                                                                  
|23.4 |  | Consent of Black Mountain Technology, Inc.                                                                  
|23.5 |  | Consent of Geothermal Science, Inc.                                                                         
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002    
|31.2 |  | Certification of Chief Financial Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002    
|32.1 |  | Certification of Chief Executive Officer Pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002    
|32.2 |  | Certification of Chief Financial Officer Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002    

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

|             |  | U.S. Geothermal Inc.                 
|------------ |  | -------------------------------------
|             |  | (Registrant)                         
|             |  |                                      
|             |  |                                      
|June 9, 2010 |  | /s/ Daniel J. Kunz                   
|Date         |  | Daniel J. Kunz                       
|             |  | Chief Executive Officer and President
|             |  | (Principal Executive Officer)        

Pursuant to the requirements of the Securities Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
in the capacities and on the date indicated:

|Name                         |  | Title                                                  |  | Date        
|---------------------------- |  | ------------------------------------------------------ |  | ------------
|                             |  | Chief Executive Officer, President and
      Director  |  |             
|/s/ Daniel J. Kunz           |  | (Principal Executive Officer)                          |  | June 9, 2010
|Daniel J. Kunz               |  |                                                        |  |             
|                             |  | Chief Financial Officer (Principal Financial
      and |  |             
|/s/ Kerry Hawkley            |  | Accounting Officer)                                    |  | June 9, 2010
|Kerry Hawkley                |  |                                                        |  |             
|                             |  |                                                        |  |             
|/s/ Douglas J.
      Glaspey |  | Chief Operating Officer and Director                   |  | June 9, 2010
|Douglas J. Glaspey           |  |                                                        |  |             
|                             |  |                                                        |  |             
|/s/ John H. Walker           |  | Chairman and Director                                  |  | June 9, 2010
|John H. Walker               |  |                                                        |  |             
|                             |  |                                                        |  |             
|/s/ Paul A. Larkin           |  | Director                                               |  | June 9, 2010
|Paul A. Larkin               |  |                                                        |  |             
|                             |  |                                                        |  |             
|/s/ Leland L. Mink           |  | Director                                               |  | June 9, 2010
|Leland R. Mink               |  |                                                        |  |             

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