---

U.S. GEOTHERMAL INC.(A Development Stage Company)

Consolidated Financial Statements 
  March 31, 2007

---

Board of Directors 
  U.S. Geothermal Inc. 
  Boise, Idaho

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheet of
  U.S. Geothermal Inc. (a development stage company) as of March 31, 2007 and
  2006, and the related consolidated statements of operations, stockholders
  equity and cash flows for the year then ended and for the period from February
  26, 2002 (inception) through March 31, 2007. These consolidated financial statements
  are the responsibility of the Companys management. Our responsibility
  is to express an opinion on these consolidated financial statements based on
  our audit.

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

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  U.S. Geothermal Inc. as of March 31, 2007 and 2006 and the results of its operations,
  stockholders equity, and cash flows for the year then ended and for the
  period from February 26, 2002 (inception) through March 31, 2007 in conformity
  with accounting principles generally accepted in the United States of America.





Williams & Webster, P.S. 
  Certified Public Accountants 
  Spokane, Washington 
  June 25, 2007

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U.S. GEOTHERMAL INC.(A Development Stage Company)CONSOLIDATED BALANCE SHEETS(Stated in U.S. Dollars)

|                                                        |   | March 31,  |   |   | March 31,  |  
|------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                        |   | 2007       |   |   | 2006       |  
|                                                        |   |            |   |   |            |  
|ASSETS                                                  |   |            |   |   |            |  
|                                                        |   |            |   |   |            |  
|Current                                                 |   |            |   |   |            |  
|Cash and cash equivalents                               | $ | 6,759,161  |   | $ | 196,499    |  
|Restricted
      cash                                   |   | 5,363,400  |   |   | -          |  
|Private placement proceeds
      receivable             |   | -          |   |   | 19,961,890 |  
|Accounts
      receivable from subsidiary               |   | 154,277    |   |   | -          |  
|Other current assets                                    |   | 27,706     |   |   | 11,429     |  
|Total current assets                                    |   | 12,304,544 |   |   | 20,169,818 |  
|                                                        |   |            |   |   |            |  
|Investment in subsidiary (note 2)                       |   | 6,230,410  |   |   | -          |  
|Property, plant and equipment                           |   | 4,138,386  |   |   | 1,726,115  |  
|Total assets                                            | $ | 22,673,340 |   | $ | 21,895,933 |  
|                                                        |   |            |   |   |            |  
|                                                        |   |            |   |   |            |  
|LIABILITIES                                             |   |            |   |   |            |  
|                                                        |   |            |   |   |            |  
|Current:                                                |   |            |   |   |            |  
|Accounts
      payable and accrued liabilities          | $ | 1,446,952  |   | $ | 270,831    |  
|Related party accounts payable                          |   | 9,510      |   |   | 10,083     |  
|Total current liabilities                               |   | 1,456,462  |   |   | 280,914    |  
|Long-term:                                              |   |            |   |   |            |  
|Stock compensation
      payable (note 2 and 6)         |   | 2,397,564  |   |   | 1,707,548  |  
|Total liabilities                                       |   | 3,854,026  |   |   | 1,988,462  |  
|                                                        |   |            |   |   |            |  
|STOCKHOLDERS EQUITY                                    |   |            |   |   |            |  
|                                                        |   |            |   |   |            |  
|Capital stock                                           |   |            |   |   |            |  
|Authorized:                                             |   |            |   |   |            |  
|100,000,000
      common shares with a $0.001 par value |   |            |   |   |            |  
|Issued and
      outstanding:                           |   |            |   |   |            |  
|43,810,512
      shares at March 31, 2007 and           |   |            |   |   |            |  
|18,263,844
      shares at March 31, 2006               |   | 43,811     |   |   | 18,264     |  
|Capital stock issuable                                  |   | -          |   |   | 20,134,260 |  
|Additional paid-in capital                              |   | 25,767,826 |   |   | 4,954,690  |  
|Accumulated deficit before development stage            |   | (1,004,630 | ) |   | (1,004,630 | )
|Accumulated deficit during development stage            |   | (5,987,693 | ) |   | (4,195,113 | )
|Total
      stockholders equity                        |   | 18,819,314 |   |   | 19,907,471 |  
|                                                        |   |            |   |   |            |  
|Total liabilities and stockholders equity              | $ | 22,673,340 |   | $ | 21,895,933 |  

The accompanying notes are an integral part of these consolidated
  financial statements. 
  -3-

---

U.S. GEOTHERMAL INC.(A Development Stage Company)CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(Stated in U.S. Dollars)

|                                               |   |                            |   |   |                   |   |   |            |   |   | Cumulative Period   |  
|---------------------------------------------- | - | -------------------------- | - | - | ----------------- | - | - | ---------- | - | - | ------------------- | -
|                                               |   | Year
      Ended March 31, |   |   | From February 26, |  
|                                               |   |                            |   |   |                   |   |   |            |   |   | 2002 (Inception) to |  
|                                               |   | 2007                       |   |   | 2006              |   |   | 2005       |   |   | March 31, 2007      |  
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Revenue                                        | $ | -                          |   | $ |                   |   | $ | -          |   | $ | -                   |  
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Operating Expenses                             |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Loss from investment in subsidiary             |   | 102,336                    |   |   | -                 |   |   | -          |   |   | 102,336             |  
|Consulting fees                                |   | 67,913                     |   |   | 29,005            |   |   | 489,747    |   |   | 463,804             |  
|Corporate admin and development                |   | 215,914                    |   |   | 185,186           |   |   | 118,098    |   |   | 549,481             |  
|Exploration expenditures                       |   | -                          |   |   | -                 |   |   | 438,885    |   |   | 440,611             |  
|Professional fees                              |   | 663,009                    |   |   | 386,275           |   |   | 104,081    |   |   | 1,627,001           |  
|Management fees                                |   | 45,515                     |   |   | 36,415            |   |   | 86,463     |   |   | 326,748             |  
|Salaries and wages                             |   | 506,354                    |   |   | 484,656           |   |   | 129,219    |   |   | 1,094,223           |  
|Stock based compensation                       |   | 978,772                    |   |   | 180,779           |   |   | 295,540    |   |   | 1,751,163           |  
|Travel and promotion                           |   | 408,056                    |   |   | 360,753           |   |   | 89,497     |   |   | 882,574             |  
|Loss from Operations                           |   | (2,987,869                 | ) |   | (1,663,069        | ) |   | (1,751,530 | ) |   | (7,237,941          | )
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Other Income                                   |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Foreign exchange gain                          |   | 411,341                    |   |   | 149,200           |   |   | (95,885    | ) |   | 422,611             |  
|Other income                                   |   | 90,206                     |   |   | -                 |   |   | -          |   |   | 90,206              |  
|Interest income                                |   | 693,738                    |   |   | 23,276            |   |   | 16,994     |   |   | 737,431             |  
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Net Loss                                       | $ | (1,792,584                 | ) | $ | (1,490,593        | ) | $ | (1,830,421 | ) | $ | (5,987,693          | )
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Basic And Diluted Net Loss Per Share           | $ | (0.04                      | ) | $ | (0.09             | ) | $ | (0.12      | ) |   |                     |  
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Weighted Average Number Of Shares              |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Outstanding for Basic and Diluted Calculations |   | 43,640,303                 |   |   | 17,797,637        |   |   | 15,209,468 |   |   |                     |  
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Other Comprehensive Income (Loss)              |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Net loss for the period                        | $ | (1,792,584                 | ) | $ | (1,490,593        | ) | $ | (1,830,421 | ) | $ | (5,987,693          | )
|Foreign currency translation                   |   |                            |   |   |                   |   |   |            |   |   |                     |  
|adjustment                                     |   | -                          |   |   | (165,262          | ) |   | 165,262    |   |   | -                   |  
|                                               |   |                            |   |   |                   |   |   |            |   |   |                     |  
|Total Comprehensive
      Loss                 | $ | (1,792,584                 | ) | $ | (1,655,855        | ) | $ | (1,665,159 | ) | $ | (5,987,693          | )

The accompanying notes are an integral part of these consolidated
  financial statements. 
  -4-

---

U.S. GEOTHERMAL INC.(A Development Stage Company)CONSOLIDATED STATEMENTS OF CASH FLOWS(Stated in U.S. Dollars)

|                                              |   |                            |   |   |                |   |   |            |   |   | From February  |  
|--------------------------------------------- | - | -------------------------- | - | - | -------------- | - | - | ---------- | - | - | -------------- | -
|                                              |   |                            |   |   |                |   |   |            |   |   | 26, 2002       |  
|                                              |   | Year
      Ended March 31, |   |   | (Inception) to |  
|                                              |   | 2007                       |   |   | 2006           |   |   | 2005       |   |   | March 31, 2007 |  
|                                              |   |                            |   |   |                |   |   |            |   |   |                |  
|Operating Activities:                         |   |                            |   |   |                |   |   |            |   |   |                |  
|Net loss                                      | $ | (1,792,584                 | ) | $ | (1,490,593     | ) | $ | (1,830,421 | ) | $ | (5,987,693     | )
|Add non-cash items:                           |   |                            |   |   |                |   |   |            |   |   |                |  
|Depreciation                                  |   | 16,511                     |   |   | 1,350          |   |   | 1,399      |   |   | 19,836         |  
|Loss of operations
      of subsidiary        |   | 133,304                    |   |   | -              |   |   | -          |   |   | 133,304        |  
|Shares issued for other than cash             |   | 65,384                     |   |   | 84,000         |   |   | -          |   |   | 198,984        |  
|Stock based compensation                      |   | 978,772                    |   |   | 180,779        |   |   | 295,540    |   |   | 1,751,162      |  
|Change in non-cash working capital items:     |   |                            |   |   |                |   |   |            |   |   |                |  
|Accounts receivable,
      subsidiary         |   | (154,277                   | ) |   | -              |   |   |            |   |   | (154,277       | )
|Accounts payable and accrued                  |   |                            |   |   |                |   |   |            |   |   |                |  
|liabilities                                   |   | (160,166                   | ) |   | 115,812        |   |   | (20,363    | ) |   | 120,748        |  
|Prepaid expenses & other                      |   | (16,277                    | ) |   | (1,608         | ) |   | (24,294    | ) |   | (27,706        | )
|Total cash used by operating activities       |   | (929,333                   | ) |   | (1,110,260     | ) |   | (1,578,139 | ) |   | (3,945,642     | )
|                                              |   |                            |   |   |                |   |   |            |   |   |                |  
|Investing Activities:                         |   |                            |   |   |                |   |   |            |   |   |                |  
|Purchases of property, plant and equipment    |   | (1,093,068                 | ) |   | (1,131,764     | ) |   | (41,331    | ) |   | (2,822,508     | )
|Cash acquired in business combination         |   | -                          |   |   | -              |   |   | -          |   |   | 5,798          |  
|Cash restricted under contract                |   | (5,363,400                 | ) |   | -              |   |   | -          |   |   | (5,363,400     | )
|Investment in subsidiary                      |   | (6,363,714                 | ) |   | -              |   |   | -          |   |   | (6,363,714     | )
|Total cash used by investing activities       |   | (12,820,182                | ) |   | (1,131,764     | ) |   | (41,331    | ) |   | (14,543,824    | )
|                                              |   |                            |   |   |                |   |   |            |   |   |                |  
|Financing Activities:                         |   |                            |   |   |                |   |   |            |   |   |                |  
|Issuance of share capital, net of share issue |   |                            |   |   |                |   |   |            |   |   |                |  
|cost                                          |   | 20,312,177                 |   |   | 646,710        |   |   | 2,576,562  |   |   | 25,215,835     |  
|Total cash provided
      by financing        |   |                            |   |   |                |   |   |            |   |   |                |  
|activities                                    |   | 20,312,177                 |   |   | 646,710        |   |   | 2,576,562  |   |   | 25,215,835     |  
|                                              |   |                            |   |   |                |   |   |            |   |   |                |  
|Foreign Exchange Effect On Cash And           |   |                            |   |   |                |   |   |            |   |   |                |  
|Cash Equivalents                              |   | -                          |   |   | (165,262       | ) |   | 129,470    |   |   | -              |  
|                                              |   |                            |   |   |                |   |   |            |   |   |                |  
|Increase (Decrease) In Cash And Cash          |   |                            |   |   |                |   |   |            |   |   |                |  
|Equivalents                                   |   | 6,562,662                  |   |   | (1,760,576     | ) |   | 1,086,562  |   |   | 6,759,161      |  
|                                              |   |                            |   |   |                |   |   |            |   |   |                |  
|Cash And Cash Equivalents, Beginning          |   |                            |   |   |                |   |   |            |   |   |                |  
|Of Period                                     |   | 196,499                    |   |   | 1,957,075      |   |   | 870,513    |   |   | -              |  
|                                              |   |                            |   |   |                |   |   |            |   |   |                |  
|**Cash And Cash Equivalents, End Of Period**  | $ | 6,759,161                  |   | $ | 196,499        |   | $ | 1,957,075  |   | $ | 6,759,161      |  

The accompanying notes are an integral part of these consolidated
  financial statements. 
  -5-

---

U.S. GEOTHERMAL INC.(A Development Stage Company)CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)(Stated in U.S. Dollars)

|                                                    |   | Year
      Ended |  |   | From February 26, 2002 | 
|--------------------------------------------------- | - | ---------------- |  | - | ---------------------- | 
|                                                    |   |                  |  |   | March 31,              | 
|                                                    |   | 2007             |  |   | 2006                   | 
|                                                    |   |                  |  |   |                        | 
|Supplemental Disclosure:                            |   |                  |  |   |                        | 
|Non-cash investing and financing activities         |   |                  |  |   |                        | 
|Shares
      issued for settlement of debt          |   |                  |  |   |                        | 
|Shares issued with employment
      agreements      | $ | 65,384           |  | $ | 84,000                 | 
|Shares issued
      for geothermal property         |   |                  |  |   |                        | 
|Purchase of property and
      equipment on account |   | 1,335,714        |  |   |                        | 
|Warrants
      issued for share issue cost          |   |                  |  |   |                        | 

The accompanying notes are an integral part of these consolidated
  financial statements. 
  -6-

---

U.S. GEOTHERMALINC.(ADevelopmentStageCompany)

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERSEQUITY(Continued)

FROMINCEPTION,FEBRUARY26, 2002 TOMARCH31, 2007(Stated in U.S. Dollars)

|                                                                |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   | ACCUM. |  |   |          |   |   |          |  
|--------------------------------------------------------------- | --------- |  | - | ------ |  | - | ---------- |  | - | -------- |  | - | -------- |  | - | ------ |  | - | -------- | - | - | -------- | -
|                                                                | NUMBER    |  |   |        |  |   | ADDITIONAL |  |   | CAPITAL  |  |   | STOCK    |  |   | OTHER  |  |   |          |   |   |          |  
|                                                                | OF        |  |   |        |  |   | PAID-IN    |  |   | STOCK    |  |   | PURCHASE |  |   | COMP.  |  |   | ACCUM.   |   |   |          |  
|                                                                | SHARES    |  |   | AMOUNT |  |   | CAPITAL    |  |   | ISSUABLE |  |   | WARRANTS |  |   | INCOME |  |   | DEFICIT  |   |   | TOTAL    |  
|                                                                |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|Shares issued for cash at $0.015 per share
       February 26, |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|2002                                                            | 2,600,000 |  | $ | 2,600  |  | $ | 37,400     |  | $ | -        |  | $ | -        |  | $ | -      |  | $ | -        |   | $ | 40,000   |  
|Shares and warrants issued for Geothermal property
      at     |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|$0.009  March 5, 2002                                          | 1,895,000 |  |   | 1,895  |  |   | 15,105     |  |   |          |  |   |          |  |   |        |  |   |          |   |   | 17,000   |  
|                                                                |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|                                                                |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|Balance, March 31, 2002  U.S. Geothermal
      Inc.  Idaho    | 4,495,000 |  |   | 4,495  |  |   | 52,505     |  |   | -        |  |   | -        |  |   | -      |  |   | -        |   |   | 57,000   |  
|                                                                |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|                                                                |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|Shares issued for cash at $0.25 per share  May 28, 2002        | 395,000   |  |   | 395    |  |   | 98,355     |  |   |          |  |   |          |  |   |        |  |   |          |   |   | 98,750   |  
|Shares issued for services at $0.25 per share
       May 28,   |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|2002                                                            | 5,000     |  |   | 5      |  |   | 1,245      |  |   |          |  |   |          |  |   |        |  |   |          |   |   | 1,250    |  
|Shares issued for cash at $0.30 per share 
      November 1,   |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|2002                                                            | 1,023,667 |  |   | 1,024  |  |   | 306,076    |  |   |          |  |   |          |  |   |        |  |   |          |   |   | 307,100  |  
|Shares issued for services at $0.30 per share
       November  |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|1, 2002                                                         | 10,000    |  |   | 10     |  |   | 2,990      |  |   |          |  |   |          |  |   |        |  |   |          |   |   | 3,000    |  
|Shares issued for services at $0.30 per share
       February  |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|14, 2003                                                        | 151,170   |  |   | 151    |  |   | 45,199     |  |   |          |  |   |          |  |   |        |  |   |          |   |   | 45,350   |  
|                                                                |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|Net loss for the period                                         |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   | (164,909 | ) |   | (164,909 | )
|                                                                |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|Balance carried forward, March 31, 2003  U.S.                  |           |  |   |        |  |   |            |  |   |          |  |   |          |  |   |        |  |   |          |   |   |          |  
|Geothermal Inc.  Idaho                                         | 6,079,837 |  | $ | 6,080  |  | $ | 506,370    |  | $ | -        |  | $ | -        |  | $ | -      |  | $ | (164,909 | ) | $ | 347,541  |  

-6-

---

U.S. GEOTHERMALINC.(ADevelopmentStageCompany)

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERSEQUITY(Continued)

FROMINCEPTION,FEBRUARY26, 2002, TOMARCH31, 2007(Stated in U.S. Dollars)

|                                                                |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   | ACCUM. |  |   |            |   |   |           |  
|--------------------------------------------------------------- | ---------- | - | - | ------ | - | - | ---------- | - | - | -------- |  | - | --------- |  | - | ------ |  | - | ---------- | - | - | --------- | -
|                                                                | NUMBER     |   |   |        |   |   | ADDITIONAL |   |   | CAPITAL  |  |   | STOCK     |  |   | OTHER  |  |   |            |   |   |           |  
|                                                                | OF         |   |   |        |   |   | PAID-IN    |   |   | STOCK    |  |   | PURCHASE  |  |   | COMP.  |  |   | ACCUM.     |   |   |           |  
|                                                                | SHARES     |   |   | AMOUNT |   |   | CAPITAL    |   |   | ISSUABLE |  |   | WARRANTS  |  |   | INCOME |  |   | DEFICIT    |   |   | TOTAL     |  
|                                                                |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|Balance carried forward, March 31, 2003 
      U.S.            |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|Geothermal Inc.  Idaho                                         | 6,079,837  |   | $ | 6,080  |   | $ | 506,370    |   | $ | -        |  | $ | -         |  | $ | -      |  | $ | (164,909   | ) | $ | 347,541   |  
|                                                                |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|Consolidation adjustment to the number of shares issued         |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|and outstanding as a result of
      the reverse take-over      |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|transaction- U.S. Geothermal Inc.- Idaho; December              |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|19, 2003                                                        | (6,079,837 | ) |   | (6,080 | ) |   | 6,080      |   |   |          |  |   |           |  |   |        |  |   |            |   |   | -         |  
|Legal parent company shares issued and outstanding at           |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|time of reverse take-over- U.S.
      Cobalt Inc.; December     |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|19, 2003                                                        | 2,274,616  |   |   | 2,275  |   |   | (2,275     | ) |   |          |  |   |           |  |   |        |  |   |            |   |   | -         |  
|Shares issued for acquisition of U.S. Geothermal
      Inc.-    |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|Idaho                                                           | 6,939,992  |   |   | 6,940  |   |   | (6,940     | ) |   |          |  |   |           |  |   |        |  |   | (408,166   | ) |   | (408,166  | )
|Warrants issued for acquisition of U.S. Geothermal
      Inc.-  |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|Idaho                                                           |            |   |   |        |   |   |            |   |   |          |  |   | 629,256   |  |   |        |  |   | (629,256   | ) |   | -         |  
|                                                                |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|Shares and warrants issued for cash at a price of $0.45 per     |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|share in a private placement,
      net of share issue costs of |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|$75,122 paid in cash and $25,437 paid by issuance
      of      |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|83,333 agents warrants-
      December 19, 2003                | 3,322,221  |   |   | 3,322  |   |   | 959,230    |   |   |          |  |   | 457,326   |  |   |        |  |   |            |   |   | 1,419,878 |  
|Shares and warrants issued for conversion of notes at           |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|$0.45 per share  February
      20, 2004                       | 385,864    |   |   | 386    |   |   | 123,090    |   |   |          |  |   | 50,162    |  |   |        |  |   |            |   |   | 173,638   |  
|Stock options granted                                           |            |   |   |        |   |   | 296,081    |   |   |          |  |   |           |  |   |        |  |   |            |   |   | 296,081   |  
|                                                                |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|Foreign currency translation gain                               |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   | 35,792 |  |   |            |   |   | 35,792    |  
|                                                                |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|Net loss for the year                                           |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   | (676,398   | ) |   | (676,398  | )
|                                                                |            |   |   |        |   |   |            |   |   |          |  |   |           |  |   |        |  |   |            |   |   |           |  
|Balance, March 31, 2004                                         | 12,922,693 |   | $ | 12,923 |   | $ | 1,881,636  |   | $ | -        |  | $ | 1,136,744 |  | $ | 35,792 |  | $ | (1,878,729 | ) | $ | 1,188,366 |  

-7-

---

U.S. GEOTHERMALINC.(ADevelopmentStageCompany)

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERSEQUITY(Continued)

FROMINCEPTION,FEBRUARY26, 2002 TOMARCH31, 2007(Stated in U.S. Dollars)

|                                                                 |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   | ACCUM.   |   |   |            |   |   |            |  
|---------------------------------------------------------------- | ---------- |  | - | ------ |  | - | ---------- | - | - | ---------- |  | - | ---------- | - | - | -------- | - | - | ---------- | - | - | ---------- | -
|                                                                 | NUMBER     |  |   |        |  |   | ADDITIONAL |   |   | CAPITAL    |  |   | STOCK      |   |   | OTHER    |   |   |            |   |   |            |  
|                                                                 | OF         |  |   |        |  |   | PAID-IN    |   |   | STOCK      |  |   | PURCHASE   |   |   | COMP.    |   |   | ACCUM.     |   |   |            |  
|                                                                 | SHARES     |  |   | AMOUNT |  |   | CAPITAL    |   |   | ISSUABLE   |  |   | WARRANTS   |   |   | INCOME   |   |   | DEFICIT    |   |   | TOTAL      |  
|                                                                 |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   |            |   |   |            |  
|Balance, March 31, 2004                                          | 12,922,693 |  | $ | 12,923 |  | $ | 1,881,636  |   | $ | -          |  | $ | 1,136,744  |   | $ | 35,792   |   | $ | (1,878,729 | ) | $ | 1,188,366  |  
|                                                                 |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   |            |   |   |            |  
|Shares and warrants issued for cash at a price
      of $0.66 in |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   |            |   |   |            |  
|a private placement, net of share issue costs
      of           |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   |            |   |   |            |  
|$225,131 paid in cash and $133,341
      paid by the             |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   |            |   |   |            |  
|issuance of 280,000 agents warrants- September
      17,        |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   |            |   |   |            |  
|2004                                                             | 4,000,001  |  |   | 4,000  |  |   | 1,103,082  |   |   |            |  |   | 1,324,038  |   |   |          |   |   |            |   |   | 2,431,120  |  
|Shares issued for property at a price of $0.60- February         |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   |            |   |   |            |  
|22, 2005                                                         | 100,000    |  |   | 100    |  |   | 60,251     |   |   |            |  |   |            |   |   |          |   |   |            |   |   | 60,351     |  
|Shares issued for stock options exercised                        | 308,735    |  |   | 309    |  |   | 145,133    |   |   |            |  |   |            |   |   |          |   |   |            |   |   | 145,442    |  
|Stock options granted                                            |            |  |   |        |  |   | 295,540    |   |   |            |  |   |            |   |   |          |   |   |            |   |   | 295,540    |  
|Foreign currency translation gain                                |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   | 129,470  |   |   |            |   |   | 129,470    |  
|Net loss for the year                                            |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   | (1,830,421 | ) |   | (1,830,421 | )
|Balance, March 31, 2005                                          | 17,331,429 |  |   | 17,332 |  |   | 3,485,642  |   |   | -          |  |   | 2,460,782  |   |   | 165,262  |   |   | (3,709,150 | ) |   | 2,419,868  |  
|Stock options granted                                            |            |  |   |        |  |   | 180,780    |   |   |            |  |   |            |   |   |          |   |   |            |   |   | 180,780    |  
|Expiration of stock purchase warrants                            |            |  |   |        |  |   | 1,061,145  |   |   |            |  |   | (1,061,145 | ) |   |          |   |   |            |   |   | -          |  
|Shares issued for stock options and warrants
      exercised     | 812,415    |  |   | 812    |  |   | 526,753    |   |   |            |  |   | (75,599    | ) |   |          |   |   |            |   |   | 451,966    |  
|Stock issued as result of employment agreements                  | 120,000    |  |   | 120    |  |   | 83,880     |   |   |            |  |   |            |   |   |          |   |   |            |   |   | 84,000     |  
|Foreign currency translation loss                                |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   | (165,262 | ) |   | 32,792     |   |   | (132,470   | )
|Capital stock issuable as result of a private placement to       |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   |            |   |   |            |  
|be closed April 3, 2006                                          |            |  |   |        |  |   |            |   |   | 20,134,260 |  |   |            |   |   |          |   |   |            |   |   | 20,134,260 |  
|Stock compensation liability                                     |            |  |   |        |  |   | (383,510   | ) |   |            |  |   | (1,324,038 | ) |   |          |   |   |            |   |   | (1,707,548 | )
|                                                                 |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   |            |   |   |            |  
|Net loss for the year                                            |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   | (1,523,385 | ) |   | (1,523,385 | )
|                                                                 |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |          |   |   |            |   |   |            |  
|Balance, March 31, 2006                                          | 18,263,844 |  | $ | 18,264 |  | $ | 4,954,690  |   | $ | 20,134,260 |  | $ | -          |   | $ | -        |   | $ | (5,199,743 | ) | $ | 19,907,471 |  

-8-

---

U.S. GEOTHERMALINC.(ADevelopmentStageCompany)

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERSEQUITY(Continued)

FROMINCEPTION,FEBRUARY26, 2002 TOMARCH31, 2007(Stated in U.S. Dollars)

|                                                |            |  |   |        |  |   |            |   |   |             |   |   |            |   |   | ACCUM. |  |   |            |   |   |            |  
|----------------------------------------------- | ---------- |  | - | ------ |  | - | ---------- | - | - | ----------- | - | - | ---------- | - | - | ------ |  | - | ---------- | - | - | ---------- | -
|                                                | NUMBER     |  |   |        |  |   | ADDITIONAL |   |   | CAPITAL     |   |   | STOCK      |   |   | OTHER  |  |   |            |   |   |            |  
|                                                | OF         |  |   |        |  |   | PAID-IN    |   |   | STOCK       |   |   | PURCHASE   |   |   | COMP.  |  |   | ACCUM.     |   |   |            |  
|                                                | SHARES     |  |   | AMOUNT |  |   | CAPITAL    |   |   | ISSUABLE    |   |   | WARRANTS   |   |   | INCOME |  |   | DEFICIT    |   |   | TOTAL      |  
|                                                |            |  |   |        |  |   |            |   |   |             |   |   |            |   |   |        |  |   |            |   |   |            |  
|                                                |            |  |   |        |  |   |            |   |   |             |   |   |            |   |   |        |  |   |            |   |   |            |  
|Balance, March 31, 2006                         | 18,263,844 |  | $ | 18,264 |  | $ | 4,954,690  |   | $ | 20,134,260  |   | $ | -          |   | $ | -      |  | $ | (5,199,743 | ) | $ | 19,907,471 |  
|                                                |            |  |   |        |  |   |            |   |   |             |   |   |            |   |   |        |  |   |            |   |   |            |  
|Stock issued as result of employment agreements | 49,168     |  |   | 49     |  |   | 65,331     |   |   |             |   |   |            |   |   |        |  |   | 4          |   |   | 65,384     |  
|Stock options granted                           |            |  |   |        |  |   | 978,772    |   |   |             |   |   |            |   |   |        |  |   |            |   |   | 978,772    |  
|Shares issued for stock options and warrants    |            |  |   |        |  |   |            |   |   |             |   |   |            |   |   |        |  |   |            |   |   |            |  
|exercised                                       | 497,500    |  |   | 498    |  |   | 487,595    |   |   |             |   |   | (137,806   | ) |   |        |  |   |            |   |   | 350,287    |  
|Capital stock issued as result of a private     |            |  |   |        |  |   |            |   |   |             |   |   |            |   |   |        |  |   |            |   |   |            |  
|placement closed April 3, 2006                  | 25,000,000 |  |   | 25,000 |  |   | 20,109,260 |   |   | (20,134,260 | ) |   |            |   |   |        |  |   |            |   |   | -          |  
|Stock purchase warrants expired                 |            |  |   |        |  |   | 1,186,232  |   |   |             |   |   | (1,186,232 | ) |   |        |  |   |            |   |   | -          |  
|                                                |            |  |   |        |  |   |            |   |   |             |   |   |            |   |   |        |  |   |            |   |   |            |  
|Stock compensation liability                    |            |  |   |        |  |   | (2,014,054 | ) |   |             |   |   | 1,324,038  |   |   |        |  |   |            |   |   | (690,016   | )
|                                                |            |  |   |        |  |   |            |   |   |             |   |   |            |   |   |        |  |   |            |   |   |            |  
|Net loss for the period                         |            |  |   |        |  |   |            |   |   |             |   |   |            |   |   |        |  |   | (1,792,584 | ) |   | (1,792,584 | )
|                                                |            |  |   |        |  |   |            |   |   |             |   |   |            |   |   |        |  |   |            |   |   |            |  
|Balance, March 31, 2007                         | 43,810,512 |  | $ | 43,811 |  | $ | 25,767,826 |   | $ | -           |   | $ | -          |   | $ | -      |  | $ | (6,992,323 | ) | $ | 18,819,314 |  

The accompanying notes are an integral part of these consolidated
  financial statements. 
  -9-

---

U.S. GEOTHERMAL INC.(A Development Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
  MARCH 31, 2007(Stated in U.S. Dollars)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

When U.S. Cobalt Inc. (GTH or the Company)
  completed a reverse take-over on December 19, 2003, the former stockholders
  of U.S. Geothermal Inc. (GEO  Idaho) a company incorporated
  on February 26, 2002 in the State of Idaho, acquired control of GTH. In connection
  with the transaction, U.S. Cobalt Inc. changed its name to U.S. Geothermal Inc.
  and consolidated its common stock on a one new to five old basis. All references
  to common shares in these financial statements have been restated to reflect
  the roll-back of common stock.

The Company has been in the development stage since its formation
  and has not yet realized any revenues from its planned operations. GEO - Idaho
  operates for the purpose of acquiring geothermal properties and entered into
  an agreement with Vulcan Power Company (Vulcan) of Bend, Oregon,
  U.S.A., pursuant to which it acquired a 100% interest in the Raft River Geothermal
  Property located in Cassia County, Idaho, U.S.A. (Note 3).

Basis of Presentation

These consolidated financial statements are prepared in accordance
  with accounting principles generally accepted in the United States of America.
  The Company consolidates more-than-50% owned subsidiaries that it controls and
  entities over which control is achieved through means other than voting rights.
  These consolidated financial statements include the accounts of the Company
  and its wholly-owned subsidiaries. The accounts of the following companies are
  consolidated in these financial statements:

| | i)   | U.S. Geothermal Inc. (incorporated in the State of Delaware);                 
| | ---- | ------------------------------------------------------------------------------
| | ii)  | U.S. Geothermal Inc. (incorporated in the State of Idaho);                    
| | iii) | U.S. Cobalt Inc. (incorporated in the State of Colorado);                     
| | iv)  | U.S. Geothermal Services, LLC (incorporated in the State
        of Delaware).

All Company transactions are eliminated on consolidation.

Raft River Energy I LLC was consolidated through July 2006, after
  which the entity is recorded under the equity method. See Consolidation of Variable
  Interest Entity in Note 2 for further discussion.

Reclassification

Certain amounts from prior periods have been reclassified to
  conform to the current period presentation. This reclassification has resulted
  in no changes to the Companys accumulated deficit or net losses presented.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following are summarized accounting policies considered to
  be significant by the Companys management:

-10-

---

Accounting Method

The Companys financial statements are prepared using the
  accrual basis of accounting in accordance with accounting principles generally
  accepted in the United States of America and have been consistently applied
  in the preparation of the financial statements.

Development Stage Company

Pursuant to Statement of Financial Accounting Standards No. 7,
  Accounting and Reporting by Development Stage Enterprises (SFAS
  7), the Company is considered to be a development stage enterprise since its
  planned principal operations have not commenced. The various entities that comprised
  the Company prior to February 26, 2002 were not engaged in operations directly
  related to the development of geothermal power plants. After that time, the
  Company began its current and primary development activities, and accordingly,
  accounted for the accumulated deficit separately from the prior operations.
  The statements of operations, stockholders equity and cash flows present
  the accumulated activities from the inception of the current operating activities
  to present. This presentation will continue until the Company begins operations.

Use of Estimates

The preparation of financial statements in accordance with generally
  accepted accounting principles requires the use of estimates and assumptions
  that affect the reported amounts of assets and liabilities, disclosure of contingent
  assets and liabilities known to exist as of the date the financial statements
  are published, and the reported amounts of revenues and expenses during the
  reporting period. Uncertainties with respect to such estimates and assumptions
  are inherent in the preparation of the Companys financial statements;
  accordingly, it is possible that the actual results could differ from these
  estimates and assumptions and could have a material effect on the reported amounts
  of the Companys financial position and results of operations.

Cash and Cash Equivalents

The Company considers all unrestricted cash, short term deposits,
  and other investments with maturities of no more than ninety days when acquired
  to be cash and cash equivalents for the purposes of the statement of cash flows.
  Discussion regarding restricted cash is included in Notes 5 and 9. 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. All investments held by the Company are highly liquid,
  available on demand.

Concentration of Credit Risk

The Companys cash and cash equivalents consisted of commercial
  bank deposits, a money market account, and petty cash. The money market funds
  totaled $12,081,369, and are not subject to deposit insurance. Cash deposits
  are held in a commercial bank in Boise, Idaho, and in a commercial bank in Vancouver,
  British Columbia. The accounts in Idaho are guaranteed by the Federal Deposit
  Insurance Corporation (FDIC) up to $100,000. The Canadian dollar accounts in
  British Columbia are guaranteed by the Canadian Deposit Insurance Corporation
  (CIDC) up to $100,000 Canadian (approximately $86,000 in U.S. dollars at March
  31, 2007). At March 31, 2007, the Company exceeded the FDIC insured amount by
  approximately $53,800 and did not exceed the CIDC insured amount.

Consolidation of Variable Interest Entities

The Company has a significant interest in a Raft River Energy
  I, LLC (RREI), which has been

-11-

---

determined to be a variable interest entity as defined by FASB
  Interpretation No. 46(R) (FIN 46(R)). RREIs purpose is to hold the financial
  interests of the first phase of the Raft River project for the construction
  of a 10 megawatt geothermal power plant. As described below, the Companys
  interest changed during the current fiscal period from primary beneficiary to
  a significant interest.

RREI resulted from agreements signed August 9, 2006, between
  U.S. Geothermal Inc. and Raft River Holdings, LLC, a subsidiary of the Goldman
  Sachs Group, for construction financing of Phase I of the Raft River project.
  To accommodate the construction financing, U.S. Geothermal sold 50% of its ownership
  in Raft River Energy to Raft River Holdings. As a result of the agreements,
  U.S. Geothermal is required to contribute approximately $6,400,000 in cash and
  property, and Raft River Holdings is required to contribute $34,000,000 to Raft
  River Energy.

As of March 31, 2007, U.S. Geothermal Inc. has contributed $6,363,714
  in cash and property to the project, while Raft River Holdings has contributed
  $23,458,100. As a result, Raft River Holdings has been designated the primary
  beneficiary.

For periods prior to August 2006, U.S. Geothermal was the 100%
  owner of RREI and consolidated the loss of $30,968. For the period August 2006
  to March 2007, U.S. Geothermal recorded RREI under the equity method of accounting
  for investments in subsidiaries based on the capital contribution ratio at March
  31, 2007 (loss of $102,336).

RREIs financial information is summarized as follows:

As of November 24, 2006:Total current
        assets
      $
      3,417,793Property and equipment
      
      18,618,764Total
        assets
      $
      22,036,557Total current
        liabilities
      $
      3,360,052Members equity
      
      18,676,505Total liabilities and equity
      $
      22,036,557From inception on August 18, 2005 toNovember 24, 2006:Operating
        revenues
      $
      0Operating loss
      
      (245,879
      )Net loss
      
      (237,309
      )


Property, Plant and Equipment

Costs of acquisition of geothermal properties are capitalized
  on an area-of-interest basis. Geothermal properties include all direct costs
  for the acquisition of land rights, water rights and mineral rights. Amortization
  of these costs will be on a unit-of-production basis, based on estimated proven
  geothermal reserves should such reserves be found. If an area of interest is
  abandoned, the costs thereof are charged to income in the year of abandonment.
  With the inherent uncertainty of calculating the units of production for a renewable
  resource, revisions to the estimates and the subsequent field performance of
  the resource would cause the life of the resource to differ significantly from
  the estimated units of production. A large percentage increase or decrease in
  the estimated reserves would decrease or increase the depreciation, depletion
  or amortization of capital costs proportionately.

The Company expenses all costs related to the development of
  geothermal reserves prior to the establishment of proven and probable reserves.

-12-

---

Depreciation will be based upon the estimated useful life of
  the asset. For assets directly related to revenue production defined by a specific
  contract, the estimated useful lives will not exceed the life of the contract.
  Depletion on wells and other assets directly involved in the extraction of the
  natural resources will be based upon the total estimated capacity on a unit
  of production basis. Units will be defined as gallons of geothermal water, processed
  through the plant, used directly in the production of revenues.

Other equipment is recorded at cost. Depreciation of other equipment
  is calculated on a straight-line basis at an annual rate of 30%.

Impairment of Long-Lived Assets

Statement of Financial Accounting Standards No. 144 Accounting
  for the Impairment or Disposal of Long-Lived Assets (SFAS 144) establishes
  a single accounting model for long-lived assets to be disposed of by sale including
  discontinued operations. SFAS 144 requires that these long-lived assets be measured
  at the lower of the carrying amount or fair value less cost to sell, whether
  reported in continuing operations or discontinued operations. The Company has
  adopted SFAS 144 and evaluates its long-term assets annually for impairment
  or when circumstances or events occur that may impact the fair value of the
  assets. The fair value of geothermal property is primarily evaluated based upon
  the present value of expected revenues directly associated with those assets.
  An impairment loss would be recognized if the carrying amount of a capitalized
  asset is not recoverable and exceeds its fair value. As expected for the initial
  stages of the Companys operations, circumstances have not warranted the
  recognition of losses due to the impairment of long-lived assets.

Asset Retirement Obligations

Statement of Financial Accounting Standards No. 143, Accounting
  for Asset Retirement Obligations, requires legal obligations associated
  with the retirement of long-lived assets to be recognized at their fair value
  at the time the obligations are incurred. Upon initial recognition of a liability,
  that cost should be capitalized as part of the related long-lived asset and
  allocated to expense over the useful life of the asset. The Company has previously
  adopted this statement, with no impact to the Companys financial statements.

Stock Options Granted to Employees and Non-employees

On April 1, 2006, the Company adopted Statement of Financial
  Accounting Standards No. 123 (revised 2004), Share-Based Payment
  (SFAS 123(R)), which requires the measurement of the value of employee services
  received in exchange for an award of an equity instrument based on the grant-date
  fair value of the award. For employees, directors and officers, the fair value
  of the awards are expensed over the vesting period. The current vesting period
  for all options is eighteen months.

Under SFAS 123(R), the Company has elected to use the modified
  prospective transition method, and accordingly, the Companys consolidated
  financial statements for periods prior to adoption of SFAS 123(R) have not been
  restated to reflect, and do not include the impact of adopting.

For non-employee stock based compensation, the Company has adopted
  EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued
  to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods
  or Services and EITF Issue No. 00-18, Accounting Recognition for
  Certain Transactions involving Equity Instruments Granted to Other Than Employees.
  Non-employee stock options have been granted, at the Board of Directors
  discretion, to select vendors as a bonus for exceptional performance. Prior
  to issuance of the awards, the Company was not under any obligation to issue
  the stock options. Subsequent to the award, the recipient was not obligated
  to perform any services. Therefore, the fair value of these options was expensed
  on the grant date which was also the measurement date.

-13-

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Pursuant to the requirements to SFAS 123(R), the Company made
  certain reclassifications to its consolidated balance sheet as of March 31,
  2006, to reflect the stock compensation liability that resulted from the issuance
  of stock options denominated in a foreign currency. The reclassification from
  shareholder equity to liabilities amounted to $1,707,548 at March 31, 2006.
  We account for stock-based compensation in accordance with SFAS No.123(R), Share-Based
  Payment. Under the fair value recognition provisions of this statement,
  share-based compensation cost is measured at the grant date based on the value
  of the award and is recognized as expense over the vesting period. Determining
  the fair value of share-based awards at the grant date requires judgment, including
  estimating expected dividends. In addition, judgment is also required in estimating
  the amount of share-based awards that are expected to be forfeited. If actual
  results differ significantly from these estimates, stock-based compensation
  expense and our results of operations could be materially impacted.

Earnings Per Share

The Company has adopted Statement of Financial Accounting Standard
  No. 128 Earnings per Share (SFAS 128), which provides for calculation
  of "basic" and "diluted" earnings per share. Basic earnings per share includes
  no dilution and is computed by dividing net income available to common shareholders
  by the weighted average common shares outstanding for the period. Diluted earnings
  per share reflect the potential dilution of securities that could share in the
  earnings of an entity similar to fully diluted earnings per share. Although
  there were common stock equivalents outstanding at March 31, 2007 and 2006,
  they were not included in the calculation of earnings per share because their
  inclusion would have been considered anti-dilutive.

Financial Instruments

The Companys financial instruments consist of cash and
  cash equivalents, refundable tax credits, and accounts payable and accrued liabilities.
  Unless otherwise noted, it is managements opinion that the Company is
  not exposed to significant interest, currency or credit risks arising from these
  financial instruments. The fair values of these financial instruments approximate
  their carrying values, unless otherwise noted.

Refundable tax credit is comprised of Goods and Services Tax
  (GST) which is refundable from the Government of Canada.

Foreign Currency Translation

The Companys functional currency is the U.S. dollar. Transactions
  in foreign currency are converted into U.S. dollars using the current method
  as follows:

- Monetary items at the rate prevailing at the balance sheet date;
- Non-monetary items at the historical exchange rate;
- Revenue and expenses at the average rate in effect during the applicable
    accounting period.

Adjustments arising from the translation of the foreign currency
  amounts are included as a separate component of stockholders equity.

Foreign Operations

The accompanying balance sheet contains certain recorded Company
  assets (principally cash) in a foreign country (Canada). Although Canada is
  considered economically stable, it is always possible that unanticipated events
  in foreign countries could disrupt the Companys operations.

-14-

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Provision for Taxes

Income taxes are provided based upon the liability method of
  accounting pursuant to Statement of Financial Accounting Standards No. 109,
  Accounting for Income Taxes (SFAS 109). Under this approach, deferred
  income taxes are recorded to reflect the tax consequences in future years of
  differences between the tax basis of assets and liabilities and their financial
  reporting amounts at each year-end. A valuation allowance is recorded against
  deferred tax assets if management does not believe the Company has met the more
  likely than not standard imposed by SFAS 109 to allow recognition of such
  an asset.

At March 31, 2007, the Company had net deferred tax assets calculated
  at an expected rate of 34% of approximately $2,177,500 (March 31, 2006 - $1,568,000)
  principally arising from net operating loss carry forwards and stock compensation.
  As management of the Company cannot determine that it is more likely than not
  that the Company will realize the benefit of the net deferred tax asset, a valuation
  allowance equal to the net deferred tax asset was recorded at March 31, 2007.
  The significant components of the deferred tax asset at March 31, 2007 and March
  31, 2006 were as follows:

|                                       |   | March 31,  |   |   | March 31,  |  
|-------------------------------------- | - | ---------- | - | - | ---------- | -
|                                       |   | 2007       |   |   | 2006       |  
|Net operating loss carry forward       | $ | 6,404,500  |   | $ | 4,612,100  |  
|                                       |   |            |   |   |            |  
|Deferred tax asset                     | $ | 2,177,500  |   | $ | 1,568,000  |  
|Deferred tax asset valuation allowance |   | (2,177,500 | ) |   | (1,568,000 | )
|Net deferred tax asset                 | $ | -          |   | $ | -          |  

At March 31, 2007, the Company has net operating loss carry forwards
  of approximately $6,404,500 ($4,612,100 in March 31, 2006), which expire in
  the years 2023 through 2027. The change in the allowance account from March
  31, 2006 to March 31, 2007 was $609,500.

Although we believe that our estimates are reasonable, no assurance
  can be given that the final tax outcome of these matters will not be different
  than that which is reflected in our tax provisions. Ultimately, the actual tax
  benefits to be realized will be based upon future taxable earnings levels, which
  are very difficult to predict.

Going Concern

Based on the Companys projected spending over the next
  12 months, the $20,134,260 cash received from the private placement completed
  April 3, 2006, and the private placement completed in June 2007 (details provided
  in footnote 10), the Companys auditors have removed the going concern
  qualification from the Companys financial statements. Management believes
  that sufficient funding will be available to meet its business objectives, including
  anticipated cash needs for working capital, and financing for construction of
  the phase one power plant. As shown in the accompanying consolidated financial
  statements, the Company has incurred an accumulated deficit of $7,025,115 and
  has no revenue from operations. In the ordinary course of constructing a power
  plant facility of this size and complexity, cost overruns and contract delays
  can significantly affect the economics of the project. Failure to achieve commercial
  operations of the power plant prior to December 31, 2008 would jeopardize the
  production tax credit, and could materially affect the ability of U.S. Geothermal
  to operate as a going concern.

-15-

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Accounting Pronouncements - Recent

The Fair Value Option for Financial Assets and Financial
  LiabilitiesIn February 2007, the FASB issued Statement of Financial Accounting Standards
  No. 159, The Fair Value Option for Financial Assets and Financial Liabilities
  (SFAS 159). This statement permits entities to choose to measure many financial
  instruments and certain other items at fair value. The objective is to improve
  financial reporting by providing entities with the opportunity to mitigate volatility
  in reported earnings caused by measuring related assets and liabilities differently
  without having to apply complex hedge accounting provisions. This Statement
  is expected to expand the use of fair value measurement, which is consistent
  with the Boards long-term measurement objectives for accounting for financial
  instruments. This Statement is effective as of the beginning of an entitys
  first fiscal year that begins after November 15, 2007, although early adoption
  is permitted. Management is currently evaluating the potential impact of the
  adoption of this statement on the financial position, results of operations
  and cash flows of the Company. Management has not elected early adoption of
  this statement.

Defined Benefit Pension and Other Postretirement PlansIn September, 2006, the Financial Accounting Standards Board issued Statement
  of Financial Accounting Standards No. 158, Employers Accounting
  for Defined Benefit Pension and Other Postretirement Plans  an amendment
  of FASB Statements No. 87,88,106, and 132(R) (SFAS No. 158). This
  statement requires an employer to recognize the overfunded or underfunded statues
  of a defined benefit postretirement plan (other than a multiemployer plan) as
  an asset or liability in its statement of financial position and to recognize
  changes in that funded status in the year in which the changes occur through
  comprehensive income of a business entity or changes in unrestricted net assets
  of a not for profit organization. This statement also requires an employer to
  measure the funded status of a plan as of the date of its year end statement
  of financial position, with limited exceptions. The adoption of this statement
  had no immediate material effect on the Companys financial condition or
  results of operations.

Fair Value MeasurementsIn September 2006, the FASB issued Statement of Financial Accounting Standards
  No. 157, Fair Value Measurements (SFAS 157). This statement defines
  fair value as used in numerous accounting pronouncements, establishes a framework
  for measuring fair value in generally accepted accounting principles and expands
  disclosure related to the use of fair value measures in financial statements.
  The statement is to be effective for financial statements issued in 2008; however,
  earlier application is encouraged. The Company is currently evaluating the timing
  of adoption and the impact that adoption might have on its financial position
  or results of operations.

Accounting for Uncertainty in Income TaxesIn June 2006, the FASB issued FASB Interpretation No. 48, Accounting
  for Uncertainty in Income Taxes (FIN 48). The interpretation clarifies
  the accounting for uncertainty in income taxes recognized in a company's financial
  statements in accordance with SFAS 109. Specifically, the pronouncement prescribes
  a recognition threshold and a measurement attribute for the financial statement
  recognition and measurement of a tax position taken or expected to be taken
  in a tax return. The interpretation also provides guidance on the related derecognition,
  classification, interest and penalties, accounting for interim periods, disclosure
  and transition of uncertain tax positions. The interpretation is effective for
  fiscal years beginning after December 15, 2006. The Company does not expect
  the adoption of FIN 48 to have a material impact on the Company's consolidated
  financial position, results of operations, cash flows or financial statement
  disclosures.

-16-

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NOTE 3 - REVERSE TAKE-OVER

Effective December 19, 2003, GTH acquired 100% of the issued
  and outstanding voting shares of GEO - Idaho by issuing 6,939,992 common shares
  and 2,420,217 share purchase warrants, of which 2,150,309 common shares and
  no share purchase warrants were held in escrow as at December 31, 2005 (as of
  March 31, 2005, 4,243,325 common shares and 1,946,937 share purchase warrants
  were held in escrow). Each share purchase warrant entitled the holder to purchase
  one additional common share at a price of $0.75 per share until December 19,
  2005. As of December 31, 2005, the 2,420,217 stock purchase warrants noted above
  expired without exercise. Since the transaction resulted in the former shareholders
  of GEO - Idaho owning the majority of the issued shares of GTH, the transaction,
  which is referred to as a reverse take-over, has been treated for
  accounting purposes as an acquisition by GEO - Idaho of the net assets and liabilities
  of GTH. Under this purchase method of accounting, the results of operations
  of GTH are included in these financial statements from December 19, 2003. GEO
  - Idaho is deemed to be the purchaser for accounting purposes. Accordingly,
  its net assets are included in the balance sheet at their previously recorded
  values.

The Company determined that the share purchase warrants issued
  as part of the aforementioned transaction have a fair value of $629,256 as determined
  by using the Black-Scholes pricing model with the assumptions as stated in Note
  6. The amount is considered to be additional consideration given to the former
  GEO - Idaho shareholders and, as such, was allocated, along with the net liabilities
  assumed of GTH, to accumulated deficit. The acquisition is summarized as follows:

Current assets (including cash of $5,798)
      $
      11,616Current liabilities
      
      (419,782
      )Net liabilities assumed
      $
      (408,166
      )


The net liabilities assumed have been charged to accumulated
  deficit.

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

During the year ended March 31, 2007, the Company incurred an
  additional $12,084,849 in construction costs for Raft River Project phase I.
  These costs were primarily for the drilling of additional wells and the construction
  of the power plant and related infrastructure. Raft River Holdings reimbursed
  the Company for $4,917,100 in amounts associated with Raft River Energy phase
  I. As described in note 2, property (both geothermal property and construction
  in process) was transferred to Raft River Energy, in exchange Companys
  interest in the subsidiary that amounted to $6,363,714. In addition to construction
  activities, the Company acquired 1,083 acres of surface rights in exchange for
  cash payments of $1,281,006 and 631 acre feet per annum in water rights for
  $138,820. Legal fees for $87,121 were incurred for the acquisition of mineral
  rights. The Company acquired access to 5,409 acres of surface, mineral and geothermal
  rights through a lease payment of $15,000. Vehicles, furniture and computer
  equipment utilized by the corporate administrative and the Raft River site offices
  were purchased for $102,800.

For the year ended March 31, 2006, the Company acquired a 100%
  interest in the Raft River Geothermal Property by making cash payments totalling
  $250,000 in 2003, $225,000 in 2004 and the final instalment of $125,000 in 2005.
  The Company has also completed the requisite work program. In addition, the
  Company has paid $57,728 to acquire two purchase options on 1,083 acres of surface
  and water rights, and paid $949,036 to initiate construction of the Raft River
  Project.

Property, plant and equipment consisted of the following at the
  dates shown:

-17-

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| |                                             |   | March 31,  |   |   | March 31, |  
| | ------------------------------------------- | - | ---------- | - | - | --------- | -
| |                                             |   | 2007       |   |   | 2006      |  
| | Geothermal Property (land and equipment)    |   |            |   |   |           |  
| | Balance, beginning of period                | $ | 775,079    |   | $ | 592,351   |  
| | Contributed
      to subsidiary             |   | (480,911   | ) |   | -         |  
| | Acquisitions                                |   | 1,521,947  |   |   | 182,728   |  
| | Balance,
      end of period                |   | 1,816,115  |   |   | 775,079   |  
| |                                             |   |            |   |   |           |  
| | Construction in Process- Raft River Project |   |            |   |   |           |  
| | Balance, beginning of period                |   | 949,036    |   |   | -         |  
| | Contributed to subsidiary                   |   | (5,882,803 | ) |   | -         |  
| | Reimbursed by partner                       |   | (4,917,100 | ) |   | -         |  
| | Acquisitions                                |   | 12,084,849 |   |   | 949,036   |  
| | Balance, end of period                      |   | 2,233,982  |   |   | 949,036   |  
| |                                             |   |            |   |   |           |  
| | Other Equipment                             |   |            |   |   |           |  
| | Balance, beginning
      of period          |   | 5,325      |   |   | 5,325     |  
| | Acquisitions                                |   | 102,800    |   |   | -         |  
| | Balance,
      end of period                |   | 108,125    |   |   | 5,325     |  
| | Less: Accumulated depreciation              |   | (19,836    | ) |   | (3,325    | )
| | Balance, end of
      period                |   | 88,289     |   |   | 2,000     |  
| |                                             |   |            |   |   |           |  
| |                                             | $ | 4,138,386  |   | $ | 1,726,115 |  

NOTE 5 - CAPITAL STOCK

The Company is authorized to issue 100,000,000 shares of common
  stock. All shares have equal voting rights, are non-assessable and have one
  vote per share. Voting rights are not cumulative and, therefore, the holders
  of more than 50% of the common stock could, if they choose to do so, elect all
  of the directors of the Company.

During the quarter ended March 31, 2007, the Company issued 62,500
  common shares upon the exercise of 12,500 stock options, plus 50,000 broker
  compensation options at an exercise price of $1.00 CDN ($0.83 U.S.).

During the quarter ended December 31, 2006, the Company issued
  72,741 shares to employees in satisfaction of employment agreements at an average
  price of $0.90, and 23,573 shares previously held in escrow were cancelled and
  returned to treasury.

During the quarter ended September 30, 2006, the Company issued
  395,000 common shares upon the exercise of 280,000 stock purchase warrants at
  an exercise price of $0.85 CDN ($0.73 -$0.75 U.S.), the exercise of 15,000 stock
  purchase warrants at an exercise price of $1.25 CDN ($0.86 U.S.), and the exercise
  of 100,000 options at an exercise price of $0.60 CDN ($0.54 U.S.).

During the quarter ended June 30, 2006, the Company issued 40,000
  common shares upon the exercise of 40,000 options at an exercise price of $0.60
  CDN ($0.53 U.S.).

On April 3, 2006, the Company completed a private placement of
  25,000,000 common shares at a price of $1.00 CDN ($0.86 U.S. as of April 3,
  2006). Proceeds, net of financing fees, totaled $20,134,260. Of the net proceeds,
  $172,370 had been received in the Companys bank accounts prior to year
  end. Since the subscription forms reflected a March 30, 2006 date, and the remainder
  of the cash of $19,961,890 was on deposit with Dundee Securities Corporation,
  the private placement was

-18-

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recorded as Private placement proceeds receivable
  and as Capital Stock Issuable in the financial statements at March
  31, 2006.

During the quarter ended March 31, 2006, the Company issued 691,304
  common shares upon the exercise of 378,370 options at an exercise price of $0.60
  CDN ($0.51 U.S.), the exercise of 192,934 stock purchase warrants at an exercise
  price of $0.75 U.S., and 120,000 common shares as a signing bonus as part of
  an employment agreement at a deemed price of $0.72 CDN ($0.61 U.S.).

During the quarter ended December 31, 2005, the Company issued
  183,333 common shares upon the exercise of 100,000 options at an exercise price
  of $0.60 CDN ($0.51 U.S.) and 83,333 purchase warrants at an exercise price
  of $0.45 U.S.

During the quarter ended September 30, 2005, the Company issued
  40,000 common shares upon the exercise of 40,000 options at an exercise price
  of $0.60 CDN ($0.51 U.S.).

During the quarter ended June 30, 2005, the Company issued 17,778
  common shares upon the exercise of 17,778 options at an exercise price of $0.90
  CDN ($0.73 U.S.).

Escrow Shares and Warrants

The following common shares are in escrow at the dates shown:

March 31,
      March 31,2007
      2006Common shares
      0
      2,150,309Share purchase warrants
      0
      0


The escrow shares and warrants were held in escrow pursuant to
  standard requirements of the TSX Venture Exchange, which required that escrow
  conditions be placed upon the shares and share purchase warrants issued in conjunction
  with the acquisition of GEO - Idaho and the concurrently completed private placement,
  noted above. Shares were released from escrow at six month intervals, with the
  last release from escrow completed December 19, 2006. All stock purchase warrants
  previously held in escrow expired as of December 31, 2005, without exercise.

NOTE 6 - STOCK BASED COMPENSATION

The Companys stock option plan provides for the grant of
  incentive stock options for up to 4,381,051 common shares to employees, consultants,
  officers and directors of the Company. All terms and conditions of the options
  are the same for external parties as well as internal employees and directors.
  Options are granted for a term of up to five years from the date of grant. Stock
  options granted generally vest over a period of eighteen months, with no conditions
  precedent to vesting. Since the plan has been administered by the Companys
  Vancouver office and Pacific Corporate Trust Company, the Company has issued
  stock options with an exercise price stated in Canadian dollars per share.

U.S. Geothermal and their Board of Directors have previously
  provided additional incentive to our United States (U.S.A.) employees
  and consultants by offering stock options at a discount off market price as
  allowed by the TSX Venture exchange. The U.S.A. legislature and the Internal
  Revenue Service (IRS) are now issuing regulations to dissuade companies
  from granting these discounted stock options. Through the American Jobs Creation
  Act of 2004 and the Internal Revenue Code Section 409A, discounted stock options
  have now been classified as deferred compensation in which

-19-

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the discount is taxable at the date of vesting, instead
  of upon the date of exercise. They have also dictated that a 20% penalty on
  all discounts is to be paid at date of vesting. These new rules have been retroactively
  applied to all options vesting after January 1, 2005.

Since U.S. Geothermal stock options vest 25% on date of grant
  and 25% every six months thereafter, option holders would be subject to amending
  tax returns for prior years and paying tax and penalty on the value of the discount.
  These amendment and payments would be required whether or not the option holder
  exercises the options. The IRS is allowing option holders until December 31,
  2007 to rectify the situation by allowing them to reprice the existing options
  to the market price on the date of option grant. As of March 31, 2007, the majority
  of our U.S.A. option holders have repriced their options to the market price
  on the date of grant. An adjustment to the fair market value of the repriced
  options was included in the stock compensation accrual for March 2007.

During the quarter ended March 31, 2007, the Company granted
  235,000 stock options to consultants and employees exercisable at a price of
  $1.40 CDN ($1.24 U.S.) until January 22, 2012.

During the quarter ended September 30, 2006, the Company granted
  170,000 stock options to consultants and employees exercisable at a price of
  $1.00 CDN ($0.89 U.S.) until July 31, 2011.

During the quarter ended June 30, 2006, the Company granted 1,763,000
  stock options to consultants, employees, directors and officers exercisable
  at prices ranging from $0.85 to $1.00 CDN ($0.77 to $0.90 U.S.) until April
  12, 2011.

During the year ended March 31, 2006, the Company granted 50,000
  stock options to a consultant exercisable at a price of $0.72 CDN ($0.58 U.S.).

During the year ended March 31, 2005, the Company granted 560,000
  stock options to consultants, directors and officers exercisable at prices ranging
  from $0.72 to $0.90 CDN ($0.58 to $0.72 U.S.).

During the year ended March 31, 2004, the Company granted 1,745,000
  stock options to consultants, directors and officers exercisable at a price
  of $0.60 CDN ($0.48 U.S.).

The changes in stock options are as follows:

|                                    |  |              |   |   | Weighted       |  |   |              |  |   |              |  
|----------------------------------- |  | ------------ | - | - | -------------- |  | - | ------------ |  | - | ------------ | -
|                                    |  |              |   |   | Average        |  |   | Weighted     |  |   |              |  
|                                    |  | Number of    |   |   | Exercise       |  |   | Average      |  |   | Aggregate    |  
|                                    |  | shares under |   |   | Price Per      |  |   | Fair Value   |  |   | Intrinsic    |  
|                                    |  | options      |   |   | Share          |  |   | (US
      $) |  |   | Value (US $) |  
|                                    |  |              |   |   |                |  |   |              |  |   |              |  
|Balance outstanding, March 31, 2004 |  | 1,745,000    |   | $ | 0.60 CDN       |  | $ | 0.28         |  | $ | 495,489      |  
|Forfeited                           |  | (240,000     | ) |   | 0.60 CDN       |  |   | 0.30         |  |   | (70,880      | )
|Exercised                           |  | (308,735     | ) |   | 0.60 CDN       |  |   | 0.27         |  |   | (84,984      | )
|Granted                             |  | 560,000      |   |   | 0.85
      CDN |  |   | 0.45         |  |   | 250,408      |  
|Balance outstanding, March 31, 2005 |  | 1,756,265    |   |   | 0.68 CDN       |  |   | 0.34         |  |   | 590,033      |  
|Forfeited                           |  | (204,489     | ) |   | 0.63 CDN       |  |   | 0.31         |  |   | (64,037      | )
|Exercised                           |  | (536,148     | ) |   | 0.61 CDN       |  |   | 0.29         |  |   | (153,641     | )
|Granted                             |  | 50,000       |   |   | 0.72
      CDN |  |   | 0.54         |  |   | 26,791       |  
|Balance outstanding, March 31, 2006 |  | 1,065,628    |   |   | 0.69 CDN       |  |   | 0.37         |  |   | 399,146      |  
|Forfeited                           |  | (145,000     | ) |   | 0.86 CDN       |  |   | 0.62         |  |   | (90,487      | )
|Exercised                           |  | (152,500     | ) |   | 0.63 CDN       |  |   | 0.30         |  |   | (46,427      | )
|Granted                             |  | 2,168,000    |   |   | 1.05
      CDN |  |   | 0.99         |  |   | 2,140,719    |  

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|Balance outstanding, March 31, 2007 |  | 2,936,128 |  | $ | 0.96 CDN |  | $ | 0.82 |  | $ | 2,402,951 | 
|----------------------------------- |  | --------- |  | - | -------- |  | - | ---- |  | - | --------- | 

The fair value of each option award is estimated on the date
  of grant using the Black-Scholes option-pricing model using the assumptions
  noted in the following table. Expected volatilities are based on historical
  volatility of the Companys stock. The Company uses historical data to
  estimate option exercises and employee termination within the Black-Scholes
  model. The expected term of options granted represents the period of time that
  options granted are expected to be outstanding, based upon past experience and
  future estimates and includes data from the Plan. The risk-free rate for periods
  within the expected term of the option is based upon the U.S. Treasury yield
  curve in effect at the time of grant. The Company currently does not foresee
  the payment of dividends in the near term.

The fair value of the stock options granted was estimated using
  the Black-Scholes option-pricing model and is amortized over the vesting period
  of the underlying options. The weighted average fair value of options granted
  was $0.89 per share. The assumptions used to calculate the fair value are as
  follows:

|                        | Fiscal Years Ended
|----------------------- | ------------------
|                        | 2007              
|                        |                   
|Dividend yield          | 0                 
|Expected volatility     | 82-149%           
|Risk free interest rate | 3.94-4.20%        
|Expected life (years)   | 3.36              

Changes in the subjective input assumptions can materially affect
  the fair value estimate and, therefore, the existing models do not necessarily
  provide a reliable measure of the fair value of the Companys stock options.

The following table summarizes information about the stock options
  outstanding at March 31, 2007:

OPTIONS
        OUTSTANDING
      
      OPTIONS EXERCISABLEREMAININGEXERCISE
      NUMBER OF
      CONTRACTUAL
      
      NUMBER OFPRICE
      SHARES
      LIFE (YEARS)
      
      SHARES$      0.60CDN
      355,628
      1.91
      
      355,6280.72CDN
      197,500
      2.67
      
      197,5000.85 CDN
      20,000
      4.00
      
      15,0000.90CDN
      347,500
      2.67
      
      347,5001.00 CDN
      1,615,500
      4.00
      
      807,7501.15CDN
      165,000
      4.50
      
      82,5001.40 CDN
      235,000
      4.83
      
      58,750$      0.96CDN
      2,936,128
      3.59
      
      1,864,628


The following table summarizes information about the stock options
  outstanding at March 31, 2006:

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OPTIONS
        OUTSTANDING
      
      OPTIONS EXERCISABLEREMAININGEXERCISE
      NUMBER OF
      CONTRACTUAL
      
      NUMBER OFPRICE
      SHARES
      LIFE (YEARS)
      
      SHARES$      0.60CDN
      495,628
      2.76
      
      495,6280.72CDN
      520,000
      3.67
      
      390,0000.90CDN
      50,000
      3.67
      
      37,500$      0.67CDN
      1,065,628
      3.25
      
      923,128


A summary of the status of the Companys nonvested shares
  for the fiscal years ended March 31, 2007 and 2006, and changes during the years
  ended March 31, 2007 and 2006, are presented as follows:

|                          |  |            |   |   | Weighted        |  |   | Weighted         | 
|------------------------- |  | ---------- | - | - | --------------- |  | - | ---------------- | 
|                          |  |            |   |   | Average Grant   |  |   | Average          | 
|                          |  | Number of  |   |   | Date Fair Value |  |   | Grant Date       | 
|                          |  | shares     |   |   | Per
      Share |  |   | Fair
      Value | 
|                          |  |            |   |   |                 |  |   |                  | 
|Nonvested, March 31, 2005 |  | 719,066    |   | $ | 0.68 CDN        |  | $ | 0.34             | 
|Granted                   |  | 50,000     |   |   | 0.72 CDN        |  |   | 0.54             | 
|Vested                    |  | (386,566   | ) |   | 0.61 CDN        |  |   | 0.29             | 
|Forfeited                 |  | (240,000   | ) |   | 0.63
      CDN  |  |   | 0.31             | 
|Nonvested, March 31, 2006 |  | 142,500    |   |   | 0.69 CDN        |  |   | 0.37             | 
|                          |  |            |   |   |                 |  |   |                  | 
|Granted                   |  | 2,168,000  |   |   | 1.05 CDN        |  |   | 0.99             | 
|Vested                    |  | (1,094,000 | ) |   | 0.63 CDN        |  |   | 0.30             | 
|Forfeited                 |  | (145,000   | ) |   | 0.86 CDN        |  |   | 0.62             | 
|Nonvested, March 31, 2007 |  | 1,071,500  |   | $ | 0.96 CDN        |  | $ | 0.82             | 

As of March 31, 2007, there was $408,078 of total unrecognized
  compensation cost related to nonvested share-based compensation arrangements
  granted under the Plan. That cost is expected to be recognized over a weighted-average
  period of 1.5 years. The total fair value of shares vested during the years
  ended March 31, 2007, 2006, and 2005, was $992,778, $166,773, and $295,540,
  respectively.

Stock Purchase Warrants

As at March 31, 2007, no share purchase warrants are outstanding.

During the quarter ended September 30, 2006, stock purchase warrants
  representing 3,985,001 common shares at an exercise price of $1.25 CDN expired
  without being exercised, stock purchase warrants representing 280,000 common
  shares at an exercise price of $0.85 CDN were exercised, and stock purchase
  warrants representing 15,000 common shares at an exercise price of $1.25 CDN
  were exercised.

During the year ended March 31, 2006, stock purchase warrants
  representing 4,081,327 shares at an exercise price of $0.75 expired without
  exercise, stock purchase warrants representing 192,934 common shares at an exercise
  price of $0.75 were exercised, and stock purchase warrants representing 83,333
  common shares at an exercise price of $0.45 were exercised.

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NOTE 7 - RELATED PARTY TRANSACTIONS

At March 31, 2007 and March 31, 2006, the amounts of $9,510 and
  $10,083, respectively, are payable to directors and officers of the Company.
  These amounts are unsecured and due on demand.

At March 31, 2007, the Companys subsidiary Raft River Energy
  I, LLC owed the Company $154,277 for operating and maintenance expenses. The
  receivable balance is comprised of unsecured demand obligations due within the
  next year of operations.

The Company incurred the following transactions with directors,
  officers and a company with a common director:

| |                         |   | Year Ended |  |   | Year Ended | 
| | ----------------------- | - | ---------- |  | - | ---------- | 
| |                         |   | March 31,  |  |   | March 31,  | 
| |                         |   | 2007       |  |   | 2006       | 
| |                         |   |            |  |   |            | 
| | Administrative services | $ | 20,563     |  | $ | 19,584     | 
| | Director fees           |   | 23,250     |  |   | 21,500     | 
| | Consulting fees         |   | 24,000     |  |   | 24,960     | 
| | Legal fees              |   | -          |  |   | 871        | 
| | Rent                    |   | -          |  |   | 13,863     | 
| |                         |   |            |  |   |            | 
| |                         | $ | 67,813     |  | $ | 80,778     | 

NOTE 8 - DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP

The Companys consolidated financial statements have been
  prepared in accordance with U.S. generally accepted accounting principles (GAAP).
  The material difference in respect to these financial statements between U.S.
  and Canadian GAAP is reflected in the recording of Property, Plant and Equipment.
  Under Canadian GAAP, development and exploration costs associated with the Raft
  River project (property lease payments, geological consulting fees, well monitoring
  and permitting, etc.) are recorded as a capital asset. Under U.S. GAAP, these
  amounts are expensed. As a result of the above, under Canadian GAAP the following
  line items in the consolidated balance sheets and income statements would have
  been presented as follows:

Consolidated Balance Sheets
      U.S. GAAP March
        31, 2007
      Canadian GAAP
        March 31, 2007
      U.S. GAAP March
        31, 2006
      Canadian GAAP
        March 31, 2006Plant, Property & Equipment
      $ 4,138,386
      $ 4,578,997
      $ 1,726,115
      $ 2,166,726Total Assets
      22,673,340
      23,113,951
      21,895,933
      22,336,544Stockholders Equity
      21,216,878
      21,657,489
      21,615,019
      22,055,630Total Liabilities & Stockholders Equity
      22,673,340
      23,113,951
      21,895,933
      22,336,544





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Consolidated Statements of Operations
        and Comprehensive Loss
      U.S. GAAP Year
        Ended March 31, 2007
      Canadian GAAP
        Year Ended March 31, 2007
      U.S. GAAP Year
        ended December 31, 2006
      Canadian GAAP
        Year ended December 31, 2006Exploration Expenditures
      $ -
      $ -
      $ -
      $ -Loss from Operations
      (2,987,869)
      (2,987,869)
      (1,663,069)
      (1,607,755)Net Loss
      (1,792,584)
      (1,792,584)
      (1,523,385)
      (1,468,071)


NOTE 9 - COMMITMENTS AND CONTINGENCIES

Operating Lease AgreementsThe Company has entered into several lease agreements with terms expiring
  up to December 1, 2034 for geothermal properties adjoining the Raft River Geothermal
  Property and for Neal Hot Springs. The leases provide for the following annual
  payments within the next five fiscal years:

Year EndingMarch 31,2007
      $
      40,1002008
      
      45,4002009
      
      50,8002010
      
      53,8002011
      
      50,100Thereafter
      
      425,350


Power Sales AgreementThe Company has signed a 10 megawatt power purchase agreement with Idaho
  Power Company for sale of power generated from its planned phase one power plant.
  Sale of power generated from phase two power plants are currently under discussion.
  The Company has also signed a transmission agreement with Bonneville Power Administration
  for transmission of the electricity from this plant to Idaho Power, and from
  the phase two plants to other purchasers. These agreements are all contingent
  upon successful financing and construction of the power plant at Raft River.

Construction ContractOn December 5, 2005, the Company signed a contract (the Ormat EPC
  Agreement) with Ormat Nevada, Inc. (Ormat) for Ormat to construct a 13
  megawatt geothermal power plant at Raft River, Idaho for a lump sum price of
  $20,200,000 (exclusive of taxes). The Company expects the output of the plant
  will be used to meet power delivery requirements of the Companys agreements
  with Idaho Power Company. As part of the Ormat EPC Agreement, as amended, the
  Company has established a $1,000,000 letter of credit with Wells Fargo Bank
  to collateralize amounts committed by Ormat, but not paid by the Company. The
  amount will increase monthly until a maximum letter of credit amount of $10,252,000
  is reached. A $5,363,400 money market fund is pledged as collateral backing
  the letter of credit as of March 31, 2007, and is reported as restricted cash.

Partnership Agreement Construction CostsUnder the 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 us, Raft River I Holdings, LLC, a subsidiary of The Goldman
  Sachs Group Inc., will contribute in staged payments a total of $34 million
  in cash and we will contribute $5 million in cash and approximately $1.5 million
  in production and injection wells and geothermal leases to Raft River Energy
  I LLC, the Phase 1 project joint venture company. If total construction costs
  exceed budget, US Geothermal will contribute the required additional funding
  to the joint venture.

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Office LeaseThe Company leases general office space for an executive office in Boise
  at an annual cost of $31,051. The underlying lease is a year-to-year lease that
  expires on January 31, 2008.

NOTE 10 - SUBSQUENT EVENT

The Company entered into an agreement with a syndicate of Canadian
  investment dealers to underwrite a private placement of 6,818,182 shares of
  common shares at a cost of $2.20 CDN per share to raise gross proceeds of approximately
  $15 million in Canadian dollars ($13.5 million US Dollars). The Underwriters
  exercised their option to purchase an additional 2,272,727 common shares at
  the issue price under the offering which could provide aggregate proceeds of
  approximately $20 million in Canadian dollars ($18.8 million US Dollars). The
  proceeds will be used to fund current and future plant development. The offering
  closed June 5, 2007 and is subject to certain conditions including, but not
  limited to, the approval of the TSX Venture Exchange.

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