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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

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

For the fiscal year ended **March 31, 2007**

Or

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

For the transition period from ______ to ______

Commission File Number **333-117287**

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

|Delaware                                 | 84-1472231         
|---------------------------------------- | -------------------
|(State or Other Jurisdiction of          | (I.R.S. Employer   
|Incorporation or Organization)           | Identification No.)
|                                         |                    
|1509 Tyrell Lane, Suite B                |                    
|Boise, Idaho                             | 83706              
|(Address of Principal Executive Offices) | (Zip Code)         

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

Securities registered under Section 12(b) of the Exchange Act:
  **NONE**

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

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

Indicate by check mark if the registrant is not required to file
  reports pursuant to Section 13 or Section 15(d) of the Act. [   ]
  Yes [X]  No

Indicate by check mark whether the registrant (1) has filed all
  reports required to be filed by Section 13 or 15(d) of the Securities Exchange
  Act of 1934 during the preceding 12 months (or for such shorter period that
  the registrant was required to file such reports),

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and (2) has been subject to such filing requirements for at least
  the past 90 days. [X]  Yes [   ] No

Indicate by check mark if disclosure of delinquent filers pursuant
  to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein,
  and will not be contained, to the best of registrants knowledge, in definitive
  proxy or information statements incorporated by reference in Part III of this
  Form 10-K or any amendment to this Form 10-K. [X]

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

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

Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the Act). [   ] Yes [X]  No

The aggregate market value of the voting and non-voting common
  equity held by non-affiliates computed by reference to the price at which the
  common equity was sold, or the average bid and asked price of such common equity,
  as of June 5, 2007: **$109,233,008**

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

|Class of Equity         | Shares Outstanding as of June 5,
      2007
|----------------------- | -------------------------------------------
|Common stock, par value | 53,092,612                                 
|$ 0.001 per share       |                                            

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**U.S. Geothermal Inc. and Subsidiaries**

Form 10-K

INDEX

For the Year Ended March 31, 2007

|        |                                                                                                                          |                                                       |                                                    | Page
|------- | ------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------- | -------------------------------------------------- | ----
|        |                                                                                                                          |                                                       |                                                    |     
|PART I  |                                                                                                                          |                                                       |                                                    |     
|        |                                                                                                                          |                                                       |                                                    |     
|Item 1  | Description of
      Business                                                                                            | 5                                                    
|        |                                                                                                                          | General                                               | 5                                                 
|        |                                                                                                                          | Development of
      Business                         | 6                                                 
|        |                                                                                                                          |                                                       | Plan of Operations                                 | 7   
|        |                                                                                                                          |                                                       | Cash Requirements Next Six
      Months            | 7   
|        |                                                                                                                          |                                                       | Material Acquisitions/Development                  | 8   
|        |                                                                                                                          |                                                       | Material Changes in Employees                      | 10  
|        |                                                                                                                          |                                                       | Principal Products                                 | 10  
|        |                                                                                                                          |                                                       | Sources and Availability
      of Raw Materials    | 10  
|        |                                                                                                                          |                                                       | Significant Patents, Licenses, Permits,
      Etc. | 11  
|        |                                                                                                                          |                                                       | Seasonality of Business                            | 11  
|        |                                                                                                                          |                                                       | Industry Practices/Needs for Working Capital       | 11  
|        |                                                                                                                          |                                                       | Dependence on a Single Customer                    | 12  
|        |                                                                                                                          |                                                       | Competitive Conditions                             | 12  
|        |                                                                                                                          |                                                       | Environmental Compliance                           | 13  
|        |                                                                                                                          | Financial Information about
      Geographic Areas    | 13                                                
|        |                                                                                                                          | Available Information                                 | 13                                                
|        |                                                                                                                          | Governmental Approvals and Regulations                | 14                                                
|        |                                                                                                                          | Environmental Credits                                 | 15                                                
|Item 1A | Risk Factors                                                                                                             |                                                      
|        |                                                                                                                          | General Business
      Risks                          | 16                                                
|        |                                                                                                                          | Risks Relating to the Market
      for Our Securities | 21                                                
|Item 2  | Description
      of Property                                                                                            | 22                                                   
|        |                                                                                                                          | Raft River  Idaho                                    | 22                                                
|        |                                                                                                                          | Neal Hot Springs
       Oregon                       | 28                                                
|Item 3  | Legal Proceedings                                                                                                        | 29                                                   
|Item 4  | Submission of
      Matters to a Vote of Security Holders                                                                | 29                                                   
|        |                                                                                                                          |                                                       |                                                    |     
|PART II |                                                                                                                          |                                                       |                                                    |     
|        |                                                                                                                          |                                                       |                                                    |     
|Item 5  | Market for Registrants
      Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities | 30                                                   
|Item 6  | Selected Financial Data                                                                                                  | 32                                                   
|Item 7  | Managements
      Discussion and Analysis of Financial Condition and Results of Operations                              | 33                                                   
|Item 7A | Quantitative and Qualitative
      Disclosures About Market Risk                                                         | 41                                                   
|Item 8  | Financial Statements
      and Supplementary Data                                                                        | 41                                                   

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U.S. Geothermal Inc. and Subsidiaries

Form 10-K

INDEX

For the Year Ended March 31, 2007

|         |                                                                                                      |                                                  | Page
|-------- | ---------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ----
|         |                                                                                                      |                                                  |     
|Item 9   | Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure           | 42                                              
|Item 9A  | Controls and Procedures                                                                              | 42                                              
|Item 9B  | Other Information                                                                                    | 42                                              
|         |                                                                                                      |                                                  |     
|PART III |                                                                                                      |                                                  |     
|         |                                                                                                      |                                                  |     
|Item 10  | Directors, Executive Officers, and Corporate Governance                                              | 43                                              
|Item 11  | Executive Compensation                                                                               | 45                                              
|Item 12  | Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters | 50                                              
|Item 13  | Certain Relationships and Related Transactions, and Director
      Independence                      | 52                                              
|Item 14  | Principal Accountant Fees and Services                                                               | 53                                              
|         |                                                                                                      |                                                  |     
|PART IV  |                                                                                                      |                                                  |     
|         |                                                                                                      |                                                  |     
|Item 15  | Exhibits, Financial Statement Schedules                                                              | 54                                              
|         |                                                                                                      | Independent Audit Opinion                        |     
|         |                                                                                                      | Balance Sheet                                    |     
|         |                                                                                                      | Statement of Operations and Comprehensive Income |     
|         |                                                                                                      | Statement of Cash Flows                          |     
|         |                                                                                                      | Footnote Disclosures                             |     

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

This report contains forward-looking statements, including, but
not limited to, our statements on strategy, operating forecasts, and our working
capital requirements and availability. In addition, from time to time, the
company or its representatives have made or may make forward-looking statements,
orally or in writing. Such forward-looking statements may be included in, but
are not limited to, various filings made by the company with the Securities and
Exchange Commission (the SEC), press releases or oral statements made by or
with the approval of an authorized executive officer of the company.
Forward-looking statements consist of any statement other than a recitation of
historical fact and can be identified by the use of forward-looking terminology
such as may, expect, anticipate, estimate, or continue or the negative
thereof or other variations thereon or comparable terminology. Actual results
could differ materially from those projected or suggested in any forward-looking
statements as a result of a wide variety of factors and conditions, including,
but not limited to, the factors and conditions described in the discussions of
Risk Factors and Managements Plan of Operations in this report and in other
documents the company files from time to time with the Securities and Exchange
Commission. The reader is cautioned that the company does not have a policy of
updating or revising forward-looking statements and thus the reader should not
assume that silence by management of the company over time means that actual
events are bearing out as estimated in such forward-looking statements.

All references to dollars or $ are to United States dollars
and all references to Cdn$ are to Canadian dollars.

U.S. Geothermal Inc. (the Company, GTH or we or us or
words of similar import) is in the renewable green energy business. Through
its subsidiary, U.S. Geothermal Inc., an Idaho corporation (Geo-Idaho,
although our references to the company include and refer to our operations
through Geo-Idaho), we are engaged in the acquisition, development and
utilization of geothermal resources in the Pacific Northwest of the United
States. Geothermal energy is the natural heat energy stored within the earths
crust. In some areas of the earth, economic concentrations of heat energy result
from a combination of geological conditions that allow water to penetrate into
hot rocks at depth, become heated, and then circulate to a near surface
environment. In these settings, commercially viable extraction of the geothermal
energy and its conversion to electricity become possible and a geothermal
resource is present. Our principal focus is the development of the Raft River
project, a geothermal project encompassing approximately 8.4 square miles of
land located at Raft River, Idaho. As more thoroughly discussed in the sections
below, the company has entered into a power purchase agreement, at 10 megawatt
monthly average, with Idaho Power Company, and is in the process of developing
the power plant for the first phase of production.

-5-

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Development of Business

Geo-Idaho was formed as an Idaho corporation in February 2002
to conduct geothermal resource development. On March 5, 2002 Geo-Idaho entered
into a letter agreement with the previous owner, pursuant to which Geo-Idaho
agreed to acquire all of the real property, personal property and permits that
comprised the owners interest in the Raft River project. We generally refer to
this real and personal property interests as the Vulcan Property. On December
3, 2002 the letter agreement was replaced by a formal agreement with the
previous owner (the Vulcan Agreement), which provided for the acquisition, in
stages, of 100% of the Vulcan Property in consideration for shares and warrants
of Geo-Idaho and cash payments to or on behalf of the previous owner of up to
$600,000 (for 100% of the Vulcan Property). Geo-Idaho also agreed that, as a
condition to completing the purchase of and as an owner of the Vulcan Property,
it would work to advance the Raft River Project by expending at least $200,000
for a work program (which has since been completed). By August 1, 2005,
Geo-Idaho had paid the previous owner $617,000 in securities and cash payments,
and had completed the work program, to bring its percentage ownership in the
Vulcan Property to 100%.

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

We intend to develop the Raft River project in two or more
phases. For Phase 1 of development at Raft River, we intend to commercialize the
existing production wells and energy field by construction and operation of a 13
megawatt binary cycle geothermal power plant that will provide the energy to be
delivered under a power purchase agreement with Idaho Power Company. We have
signed an engineering, procurement and construction agreement for the first
power plant, and bids have been solicited from several engineering firms to
provide engineering, procurement and construction services on all remaining
aspects of Phase 1 that are not included in this agreement. Final engineering,
equipment procurement and construction is anticipated to take approximately 14
to 16 months from April 25, 2006, and the initial power plant is anticipated to
begin production by the end of the third quarter of 2007. The total Phase 1
construction and development costs are expected to be $39 to 41 million for the
construction of a geothermal power plant capable of producing 13 megawatts of
power. We have completed project financing for Phase 1 of the Raft River
project, whereby Raft River I Holdings, LLC, a subsidiary of The Goldman Sachs
Group Inc., will contribute $34 million in cash and we have contributed $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.

It is anticipated that Phase 2 will involve the construction
and operation of two additional 13 megawatt power plants. Strong regional
interest in geothermal power has resulted in several utilities entering into
discussions with us to purchase the electrical power output from the two
additional plants. Subject to drilling confirmation of the availability of
sufficient geothermal

-6-

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resource, the output from all three power plants at Raft River
  could be as much as 39 megawatts. We anticipate that the Unit 2 power plant
  may utilize the geothermal resource within the Unit 1 joint venture boundaries.
  Without the agreement and consent of our Unit 1 joint-venture partner, Raft
  River Holdings, we cannot fully develop the Unit 1 geothermal resource without
  incurring increased development costs and delays.

Announced on September 5, 2006, property for a second
geothermal project at Neal Hot Springs in eastern Oregon near the Idaho Border
was acquired by the Company. The new property consists of 8.5 square miles of
geothermal energy and surface rights and was leased from a private, third party.
The property has an identified geothermal resource and was recently made part of
U.S. Geothermals submittal to Idaho Power Companys Request for Proposals for
electricity produced from geothermal sources.

On February 6, 2007, a lease was entered into with Cyprus Gold
Exploration Corporation (Cyprus), a subsidiary of Phelps Dodge Corporation
(NYSE: PD), for and undivided interest in geothermal rights associated with
4,760 acres (7.4 square miles) at Neal Hot Springs. This lease adds 758 acres
(1.2 square miles) of new area to the lease announced on September 5, 2006, and
overlaps both surface and undivided geothermal rights that were previously
acquired at the site.

With the Cyprus lease, U.S. Geothermal has increased its total
Neal Hot Springs project holdings to 6,167 acres (9.6 square miles) and
increased ownership of the overlapping area to a majority of the geothermal
rights in that area. The Cyprus lease has a primary term of 10 years that
extends thereafter for as long as commercial production is maintained and
includes annual rental and production royalty payment provisions. U.S.
Geothermal has ongoing negotiations with additional geothermal rights holders in
the area.

Plan of OperationsThe Companys plan
of operations for the next 12 months includes the following elements:

| | (1) | Complete plant construction for the Raft River Unit 1
      power plant.                                                                    
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Begin commercial power generation at Raft River Unit
      1.                                                                               
| | (3) | Negotiate RFP full output contracts with Idaho Power
      Company for Units 1 and 3 at Raft River and Units and 2 at Neal Hot
      Spring.
| | (4) | Negotiate full output contract with Eugene Water and
      Electric Board for Raft River Unit 2.                                            
| | (5) | Conduct an expanded geoscience program to target new
      production zones at Raft River.                                                  
| | (6) | Plan, permit and drill production and injection wells for
      Raft River Unit 2.                                                          
| | (7) | Plan, permit and drill initial wells at Neal Hot
      Spring.                                                                              
| | (8) | Continue to seek and acquire additional geothermal
      resource properties and/or operations.                                             

Cash Requirements Next Six MonthsWe
believe our cash and liquid investments at March 31, 2007, added to our recent
private placement completed June 5, 2007, is adequate to fund our general
operating and development activities through March 31, 2009. The Company
obtained project capital to construct Raft River power plant through a
partnership arrangement. Through the arrangement, equity funds of approximately
$34 million were made available for the construction of the project. Total
capital

-7-

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expenditures for the phase one project are currently estimated
to be between $39 and $41 million. The majority of the funds needed for the
project will be provided by existing funds and through the partnership
arrangement. If additional funds are needed, we anticipate that the equity may
be raised through the issuance of shares, exercise of existing outstanding
warrants, and/or through the sale of ownership interest in tax credits and
benefits.

Material Acquisitions/Development

The main power island of the power plants construction is
under the direction of Ormat Nevada Inc., a subsidiary of Ormat Technologies
Inc. (NYSE: ORA). Additional associated construction activities including the
pipelines, transmission connection and production pump installation are under
the direction of the Company with services being provided by contractors. Plant
and project construction is proceeding on schedule and budget, and the following
status is reported:

- Industrial Builders of Ontario, Oregon was awarded the mechanical
  construction contract by Ormat, began fabrication work in February and is
  assembling the plant components,
- The electrical construction contract was awarded to Merit Electric
  Incorporated in May,
- All major equipment has been delivered to the site and has been set on
  its foundations,
- Piping and electrical connections are underway,
- The control room and motor control center building has been erected, and
- The cooling tower is approximately 35% complete.

In addition, Raft River Rural Electric Cooperative has finished
construction of the 3.2 -mile power transmission line that connects the power
plant to the Bonneville Power Administration substation at Bridge, Idaho.
Equipment upgrades to the substation including a breaker, relays, and
communications systems are underway.

U.S. Geothermal has awarded a $1.3 million dollar contract to
ITT Industries/Goulds Pumps to provide line-shaft geothermal production pumps
for the project. The first production pump has been delivered.

The well improvement drill program, which began in August 2006,
has been competed. Four existing wells were enhanced either by deepening or
adding directional legs to improve their production or injection
characteristics. Two new wells were drilled to expand the geothermal resource
for the planned second 13 megawatt net output power plant at Raft River.
Resource utilization studies have determined that production well RRG-3 will be
converted to an injection well and that injection well RRG-7 will be converted
to a production well. The hot fluid production capacity of each of the wells was
determined from the results of historical flow tests using estimates provided by
the independent engineering and reservoir consultant firm GeothermEx of Redmond,
CA. The Company is currently conducting additional field flow tests to gather
more information of the production and injection capacity of the well field and
expects to be able to refine the pump settings and number of wells required to
be placed in service for the fueling of the 13 megawatt power plant based on
this current test work.

On August 9, 2006, we completed project financing for Phase 1
of the Raft River project. In connection with the project financing, we entered
into (i) the Membership Admission Agreement, dated August 9, 2006, among Raft
River Energy I LLC, a Delaware limited liability

-8-

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company, us and Raft River I Holdings, LLC, a Delaware limited
liability company, (ii) 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, and (iii) the Management Services Agreement,
dated as of August 9, 2006, between Raft River Energy I LLC and U.S. Geothermal
Services, LLC, a Delaware limited liability company and our wholly-owned
subsidiary. 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.

Pursuant to the Management Services Agreement, we will provide
operating and management services to Raft River Energy I LLC. We expect to
receive annual cash distributions up to $1.6 million each year for the first
four project years pursuant to the Management Services Agreement and the Amended
and Restated Operating Agreement. The cash distributions made to us will come
from four sources: income-related cash distributions from our investment in Raft
River Energy I LLC, royalty income from our energy leases to Raft River Energy I
LLC, a management fee for providing operating and maintenance services, and
lease income from our cooling water leases to Raft River Energy I LLC. After the
first four years, we will receive a nominal percentage of the distributable Raft
River Energy I LLC cash flow until specified rates of return are achieved by our
partner, at which time we will receive a little more than half of the
distributable cash flow. If we develop the economic equivalent of 30 megawatts
of power sales during the initial 20-year term of the power purchase agreement
then, at the end of year 20, our share of the distributable cash flow increases
to a significant majority of cash flow for the remainder of the Phase I project
life.

On May 25, 2006, GTH signed a drilling contract with Union
Drilling for the re-work of four of the wells previously drilled for Phase I,
and for the drilling of two additional wells to be included in Phases I and II
of the Raft River project. The total cost of Phase I and II drilling completed
by Union Drilling was approximately $16,600,000 and has been completed, with $5
million attributed to the Phase I project and $11.6 million attributed to the
development of production and injection well capacity for a proposed second 13
megawatt power plant unit under consideration for development in Phase II. The
results of current well test work are expected to determine the amount of
potential well production actually needed for the Phase I power plant.

On February 22, 2006, we received and signed a letter of intent
from Eugene Water and Electric Board, of Eugene, Oregon, for Eugene Water and
Electric Boards purchase of the full 13 megawatt electrical output from the
second planned power plant of Phase 2 (Unit 2), and we are currently negotiating
a draft power purchase agreement with Eugene Water and Electric Board and expect
to finalize it by July 2007. Upon execution of the Eugene Water and Electric
Board power purchase agreement, and if Unit 1 is successful in the Idaho Power
Company Request for Proposal, then the total output from Units 1 and 2 of the
Raft River power plants will be 26 megawatts from two plants, instead of the
originally planned 30 megawatts from three plants, resulting in substantial
capital and operating cost savings through improved economies of scale.

We will seek additional power purchase agreements for future
phases, which may involve drilling new wells and determining the production
capacity of those wells for additional plant construction. At this time it is
not possible to estimate if or when future wells will be drilled.

-9-

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Future phases may involve additional power purchase agreements
with Idaho Power Company or other utilities in the service area and may or may
not include terms similar to the Phase 1 power purchase agreement.

Material Changes in EmployeesAt May
31, 2007, the Company had 16 full-time employees (9  administrative and project
development, 7  field and plant operations). During the last fiscal period, the
CEO and CFO positions were increased from part-time to full time. Two additional
administrative positions were needed for accounting, financial reporting and
systems documentation. We have added 7 field and plant operating employees as
part of the on-going operating requirements of the first power plant. The
Company also continuously considers acquisition opportunities; if the company is
successful in making acquisitions, additional management and administrative
staff may be added.

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

Principal ProductsUpon reaching
commercial production, the principal product will be based upon electrical power
produced from the utilization of geothermal resources. The primary product will
be the direct sale of power generated by our interests in our geothermal power
plants. Some revenues will be earned through consulting and management fees
obtained for our services provided to other interests. All power plants
currently being considered and currently under construction are for sites in the
Pacific Northwest of the United States of America.

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

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

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

-10-

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The final product of electrical power will be directly produced
through the utilization of geothermal resources; however, these resources are
not a direct component of the final product. Various forms of testing have been
conducted at both the Raft River, Idaho and the Neal Hot Springs, Oregon sites.
All testing performed to date indicates that the resources at both sites are
viable for the production of geothermal power. Unless major geological changes
occur that impact the geothermal reservoirs, the condition of the existing
resources is expected to remain consistent over time. Each power plant
constructed will have an impact on the temperature and pressure of the tapped
reservoir. The extent of this impact and the results of future drilling
exploration to determine the actual extent of the reservoir will be a limiting
factor on the number of plants that can be constructed at a particular
reservoir.

Significant Patents, Licenses, Permits, Etc.The Companys permitting activities are continuing as the project
develops. A Conditional Use Permit for the first two power plants was issued by
the Cassia County Planning and Zoning Commission on April 21, 2005. The Idaho
Department of Environmental Quality issued the Air Quality Permit to Construct
on May 26, 2006. The Department of Army Corps of Engineers and the Idaho
Department of Water Resources, after the submittal of a joint application by the
Company, have determined that the Raft River project does not need to obtain a
Section 404 Clean Water Act permit for the project as it is currently designed.
Various other county, state and federal permits will be required for the
project, including a Cassia County Building Permit.

An ALTA land title survey that covers all lands owned or leased
by RREI has been completed, and Land America Commercial Services issued an ALTA
Extended title insurance policy for the project on December 6, 2006.

A Wastewater Reuse Permit was issued by the Idaho Department of
Environmental Quality on February 23, 2007. The Reuse permit will allow the land
application of the non-contact cooling water from Unit 1 power plant cooling
towers.

The Transmission Business Line has issued a categorical
exclusion for modification of the existing substation from the requirements of
the National Environmental Policy Act. This exclusion fulfills federal
environmental permitting requirements for the substation work.

Seasonality of BusinessSince we are
in a developmental stage, there has been no operating trend information
generated to date. When the plant is operational, seasonal changes are not
expected to have a significant impact on elements that will drive operational
revenues or related costs. During plant development, some construction
activities could be impacted by inclement weather that can occur during the
winter months.

Industry Practices/Needs for Working CapitalDuring the development stage of operations, high levels of working
capital are committed, either directly or indirectly to the construction
efforts. After normal production operations have been established, the needs of
working capital are expected to be low. This assumption is primarily based upon
the projected revenues and relatively low levels of expected operational
expenses. The Company is expecting to be highly involved in development
activities for the next 5 to 10 years.

-11-

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Dependence on Single CustomerUltimately, the market for electrical power is vast; however, the number
of entities that can physically, logistically and economically acquire the
commodity in large quantities in our area of operations is limited. Currently,
the Company has a power purchase agreement with one customer (Idaho Power
Company). Negotiations are in process to sell to another customer and expand
sales to Idaho Power Company. During full scale operations, it is expected that
the Company will have a small number of direct customers that may amount to less
than 4 or 5.

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

In the Pacific Northwest there are currently no geothermal
facilities. There exist a number of wind farms, as well as biomass and
run-of-the river hydroelectric facilities. However, the Company believes that
the combination of greater reliability and baseload generation from geothermal,
access to infrastructure for deliverability, and a low "full life" cost will
allow it to successfully compete for long term power purchase agreements.

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

- number of market participants buying and selling;
- availability and cost of transmission;
- amount of electricity normally available in the market;
- fluctuations in electricity supply due to planned and unplanned outages of
  competitors generators;
- fluctuations in electricity demand due to weather and other factors;
- cost of fuel used by generators, which could be impacted by efficiency of
  generation technology and fluctuations in fuel supply;
- environmental regulations that impact us and our competitors;
- extension of the production tax credits past December 31, 2008;
- relative ease or difficulty of developing and constructing new facilities;
  and
- credit worthiness and risk associated with buyers.

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Environmental ComplianceAs the
Companys design and permitting activities have progressed, it has further
refined and clarified the environmental issues for which it will have to
demonstrate compliance in the construction and operation of a geothermal
facility at Raft River. The relevant legislation includes: Clean Air Act,
Endangered Species Act, Clean Water Act, Rivers and Harbors Act, National
Historic Preservation Act, National Pollutant Discharge Elimination System,
Resource Conservation and Recovery Act, Idaho Solid Waste Facilities Act and the
IDAPA Drilling for Geothermal Resource Rules.

In preparation for project financing, a Phase I Environmental
Site Assessment was completed by Kleinfelder on October 21, 2005. The Phase I
assessment identified two underground storage tanks, which have since been
removed.

We believe that a geothermal facility can be designed,
constructed and placed into operation at Raft River that will meet environmental
compliance requirements. At this time, the company does not believe that the
cost of compliance at the federal, state and local levels will be
significant.

During the Department of Energys development of the Raft River
project in the early 1980s, a multi-year survey of land, plant, animal,
archeological, weather, and human health was undertaken. The Department of
Energy published an extensive report in 1982. We contacted the Department of the
Interior Fish and Wildlife Service regarding any plants or animals in the region
that are listed as threatened or endangered species, and received a reply
stating that there are no issues identified for the project that require
consultation under Section 7 of the Endangered Species Act of 1973, as amended.

Financial Information about Geographic Areas

As described in detail in the Property section, the Companys
Phase I power plant scheduled to be placed into service in October 2007 is
located in the Raft River Area in the south eastern part of the State of Idaho.
Similar plants are in the planning stages at the same location. Also, land
acquisitions and rights have been obtained to explore the development and
construction of power plants in the south eastern part of the State of Oregon.

Available Information

We file all applicable financial reports required by the
Securities and Exchange Commission. We make filings available to the general
public. Copies can be obtained of any document we file with the SEC at the SECs
public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549.
You may obtain information on the operation of the SECs public reference
facilities by calling the SEC at 1-800-SEC-0330. Copies can be requested of
these documents, upon payment of a duplicating fee, by writing to the SEC at its
principal office at 100 F Street, NE, Room 1580, Washington, D.C. 20549-1004.
The SEC maintains an Internet website at http://www.sec.gov that contains
reports, proxy and information statements, and other

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information regarding issuers that file electronically with the
SEC. Our SEC filings are accessible through the Internet at that website.

We also file disclosure information as required by the British
Columbia Securities Commission and the TSX Venture Exchange. This information
can be found at the following Web site: www.sedar.com.

Governmental Approvals and RegulationGTH is subject
to both federal and state regulation in respect of the production, sale and
distribution of electricity. Federal legislation includes: The Energy Policy Act
of 2005, the Federal Power Act, as well as the Public Utility Regulatory
Policies Act of 1978 ("PURPA") and the Energy Policy Act of 1992. Because GTH is
defined as an independent power producer under the rules and regulations of the
Federal Energy Regulatory Commission ("FERC"), the relevant aspects of federal
legislation are that its electrical generating facilities qualify under the
policy set forth under PURPA which encourages alternative energy sources such as
geothermal, wind, biomass, solar and cogeneration.

The State of Idaho also regulates electricity through the Idaho
Public Utility Commission ("IPUC"). Regulated utilities have the exclusive right
to distribute and sell electricity within their service area. They may purchase
electricity in the wholesale market from independent producers like GTH. The
IPUC, in accordance with Federal PURPA legislation has the authority to set the
rules and regulations governing the sale of electricity generated from
alternative energy sources. Regulated utilities are required to purchase
electricity on an avoided cost basis from qualifying facilities.

Currently, the IPUC defines such a facility as having an
average output capacity of 10 megawatt monthly average and a contract term of up
to 20 years. All PURPA contracts in Idaho are subject to the approval of the
IPUC. GTH is not required to market any of the electricity that it may generate
at Raft River to Idaho utilities; it can transmit and sell its electricity in
another state. Nonetheless, GTH initially signed three 10 megawatt power
purchase agreements (PPA) with the Idaho Power Company (Idaho Power).

On May 8, 2006, GTH submitted proposals to Idaho Power in
response to their Request for Proposal for Geothermal Power. The Company
expects that under a new PPA with Idaho Power, which would replace the current
PPA, the Unit 1 power plant will be allowed to sell its full output capacity of
up to 13 megawatt annual average, instead of being capped at 10 average
megawatts as mandated under the current PPA. This 30% increase in plant output
would be achieved without major additional capital investment and is expected to
decrease the operating cost per kilowatt-hour.

With carbon regulation widely anticipated to increase the cost
of power sourced from coal, and limited opportunities to purchase baseload
geothermal power, the company has found that utilities across the Western United
States have been eager to discuss power purchases from its Raft River geothermal
resource. As a result of the increased interest, U.S. Geothermal elected to
withdraw its Unit 2 and Unit 3 Idaho Power PPAs without submitting them to the
IPUC for approval in order to pursue larger capacity PPAs with other utilities.
With the concurrence of Idaho Power, the Unit 2 and Unit 3 10 megawatt contracts
have been voided without further obligation on either party.

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Eugene Water and Electric Board (EWEB), from Eugene, Oregon
and U.S. Geothermal have signed a letter of intent for EWEB to purchase the full
13 megawatt electrical output of Raft River Unit 2. The parties have exchanged a
draft PPA and intend to complete negotiations by July 2007. Upon execution of
the EWEB PPA, and if Unit 1 is successfully negotiated with Idaho Power Request
for Proposal, then the total output from the Unit 1 and Unit 2 Raft River power
plants will be 26 megawatts from two plants, instead of the originally planned
30 megawatts from three plants, resulting in substantial capital and operating
cost savings through improved economy of scale. The point of sale for the PPA
will be at the Bridge Substation, with EWEB negotiating a swap with the
Bonneville Power Administration to take delivery in Oregon.

In addition, the strong regional interest in geothermal power
has resulted in several utilities from California to Washington entering into
discussions with U.S. Geothermal to purchase the electrical power output of Unit
3. Subject to drilling confirmation of sufficient geothermal resource, the power
plant output from three units at Raft River would be 39 megawatts, instead of
the maximum 30 megawatts under the previous Idaho Power PPA provisions.

The Company will require the approval of various federal, state
and local authorities for construction of future geothermal facilities at Raft
River. These authorities include the U.S. Fish and Wildlife Service,
Environmental Protection Agency, Idaho Department of Environmental Quality,
Idaho Department of Water Resources, Idaho Bureau of Hazardous Materials, Idaho
State Historical Society, Cassia County and the Southern Idaho Regional Solid
Waste District. We have retained Kleinfelder Inc. of Boise, Idaho, an
independent environmental and regulatory consultant, to advise GTH as to the
siting and design for purpose of governmental approvals. Additionally, David
Evans & Associates of Boise, Idaho is providing consulting and engineering
services for transmission and interconnection issues and the preparation of the
application for a conditional use permit. Centra Consulting, Inc. of Boise,
Idaho has been retained to assist with State of Idaho air quality and cooling
water reuse permitting.

Environmental CreditsAs a green
power producer, environmental-related credits, such as renewable energy credits
or carbon credits, may become available for sale to power companies (to allow
them to meet their green power requirements) or to businesses which produce
carbon based pollution. If available, these credits will belong exclusively to
us, and may provide an additional source of revenue.

On July 29, 2006, GTH signed a $4.6 million renewable energy
credits purchase and sales agreement with Holy Cross Energy, a Colorado
cooperative electric association. Holy Cross Energy will purchase the renewable
energy credits associated with Phase 1 power production from 2008 to 2017. We
retain the renewable energy credits associated with power production from Phase
1 after 2017. We expect to receive a majority of the annual revenue from the
ten-year renewable energy credits sales arrangement with Holy Cross Energy.

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ITEM 1A. Risk Factors

General Business Risks

We have a limited operating history, have incurred losses to
date, and cannot give any assurance that we can ever attain profitability.
Our company has been engaged in limited activities in the geothermal business
since Geo-Idahos incorporation in February 2002. As a result of our brief
operating history, our operating results from historical periods are not readily
comparable to and may not be indicative of future results. We have not generated
revenues from operations to date, and cannot give any assurance that we will be
able to generate revenues in the future. For the years ended March 31, 2003,
2004, 2005, 2006 and 2007, we incurred net losses of ($164,909), ($676,398),
($1,830,421), ($1,523,385), and ($1,792,584) respectively. At March 31, 2006,
and March 31, 2007, we had accumulated deficits of ($5,232,535) and
($7,025,115), respectively. We expect to incur losses for at least the next 6
months. We cannot give you any assurance that we will soon make a profit or that
we will ever make a profit.

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

We have a need for substantial additional financing and will
have to significantly delay, curtail or cease operations if we are unable to
secure such financing.We require substantial additional financing to fund
the cost of continued development of the Raft River project and other operating
activities, and to finance the growth of our business, including the
construction and commissioning of a power generation facility. We may not be
able to obtain the needed funds on terms acceptable to us or at all. Further, if
additional funds are raised by issuing equity securities, significant dilution
to our current shareholders may occur and new investors may get rights that are
preferential to current shareholders. Alternatively, we may have to bring in a
joint venture partner to fund further development work, which would result in
reducing our interest in the project.

We may be subject to liquidated damages in the event that a
resale registration statement is not declared effective by November 5, 2007.On June 5, 2007, we completed a private placement of 9,090,900 shares of
common stock at a price of Cdn $2.20 per share, for gross proceeds to the
company of Cdn $19,999,980. Upon completion of the placement, the company had
53,092,612 shares issued and outstanding. In connection with the offering, we
agreed to file a registration statement with the Securities and Exchange
Commission no later than July 30, 2007 and to use commercially reasonable
efforts to cause it to become effective and remain effective for two years. In
the event the registration statement is not effective by November 5, 2007, the
purchasers in the private placement are entitled to receive, as liquidated
damages, 0.1 common shares for each common share purchased

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We may not be able to fully develop the geothermal resource
within the Unit 1 joint venture boundaries.Without the agreement and
consent of our Unit 1 joint-venture partner, Raft River Holdings, we cannot
fully develop the geothermal resource without incurring increased development
costs and delays.

It is very costly to place geothermal resources into
commercial production.Before the sale of any power can occur, it will be
necessary to construct a gathering and disposal system, a power plant, and a
transmission line, and considerable administrative costs would be incurred,
together with the drilling of additional wells. For Phase I, we have estimated
these costs to be around US $39,000,000 to be incurred over an eighteen month
period. Future expansion of power production at Raft River and development of
new power production capability at Neal Hot Springs may result in significantly
increased capital costs related to increased production and injection well
drilling and higher costs for labor and materials. To fund expenditures of this
magnitude, we may have to find a joint venture participant with substantial
financial resources. There can be no assurance that a participant can be found
and, if found, it would result in the Company having to substantially reduce its
interest in the project.

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

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

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

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requirements of such agreements were
not satisfied, the lenders would be entitled to accelerate the payment of all
outstanding indebtedness and foreclose on the collateral securing payment of
that indebtedness, which would likely include our interest in the project.

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

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

Our development activities are inherently very risky.The high risks involved in the development of a geothermal resource cannot
be over-stated. The development of a geothermal resource is such that there
cannot be any assurance of success. Exploration costs are not fixed, and the
resource cannot be relied upon until substantial development has taken place,
which entails high exploration and development costs. The costs of development
drilling are subject to numerous variables which could result in substantial
cost overruns. Drilling for geothermal resource may involve unprofitable
efforts, not only from dry wells, but from wells that are productive but do not
produce sufficient net revenues to return a profit after drilling, operating and
other costs.

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

In addition to the substantial risk that wells drilled will not
be productive, or may decline in productivity after commencement of production,
hazards such as unusual or unexpected geologic formations, pressures, downhole
conditions, mechanical failures, blowouts, cratering, explosions, uncontrollable
flows of well fluids, pollution and other physical and environmental risks are
inherent in geothermal exploration and production. These hazards could result in
substantial losses to us due to injury and loss of life, severe damage to and
destruction of property and equipment, pollution and other environmental damage
and suspension of operations. As protection against operating hazards, we
maintain insurance coverage against some, but not all, potential losses. We do
not fully insure against all risks associated with our business either because
such insurance is not available or because the cost of such coverage is
considered prohibitive. The occurrence of an event that is not covered, or not
fully covered, by insurance could have a material adverse effect on our
financial condition and results of operations.

The impact of governmental regulation could adversely affect
our business.Our business is subject to certain federal, state and local
laws and regulations, including laws and regulations on

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taxation, the exploration for and development, production and
distribution of electricity, and environmental and safety matters. Many laws and
regulations require drilling permits and govern the spacing of wells, rates of
production, prevention of waste and other matters. Such laws and regulations may
increase the costs of planning, designing, drilling, installing, operating and
abandoning our geothermal wells, the power plant and other facilities. In
addition, our operations are subject to complex environmental laws and
regulations adopted by federal, state and local jurisdictions where we operate.
We could incur liability to governments or third parties for any unlawful
discharge of pollutants into the air, soil or water, including responsibility
for remedial costs. We could potentially discharge such materials into the
environment in any of the following ways:

- from a well or drilling equipment at a drill site;
- leakage from gathering systems, pipelines, power plant and storage tanks;
- damage to geothermal wells resulting from accidents during normal
  operations; and
- blowouts, cratering and explosions.

In addition, the submission and approval of environmental
impact assessments may be required. Environmental legislation is evolving in a
manner which means stricter standards, and enforcement, fines and penalties for
non-compliance are more stringent. Environmental assessments of proposed
projects carry a heightened degree of responsibility for companies and
directors, officers and employees. The cost of compliance with changes in
governmental regulations has a potential to reduce the profitability of
operations.

Because the requirements imposed by such laws and regulations
are frequently changed, we cannot assure you that laws and regulations enacted
in the future, including changes to existing laws and regulations, will not
adversely affect our business. In addition, because we acquire interests in
properties that have been operated in the past by others, we may be liable for
environmental damage caused by such former operators.

Industry competition may impede our growth.The
electrical power generation industry, of which geothermal power is a
sub-component, is highly competitive and we may not be able to compete
successfully or grow our business. We compete in areas of pricing, grid access
and markets. The industry in the Pacific Northwest, in which the Raft River
project is located, is complex as it is composed of public utility districts,
cooperatives and investor-owned power companies. Many of the participants
produce and distribute electricity. Their willingness to purchase electricity
from an independent producer may be based on a number of factors and not solely
on pricing and surety of supply.

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

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subject to similar claims and litigation, which may adversely
impact our operations and financial condition.

Actual costs of construction or operation of a power plant
may exceed estimates used in negotiation of power purchase and power financing
agreements.The companys initial power purchase contract is under rates
established by the Idaho Public Utility Commission, using an avoided-cost
model for cost of construction and operating costs of a power plant. If the
actual costs of construction or operations exceed the model costs, the company
may not be able to build the contemplated power plant, or if constructed, may
not be able to operate profitably. The Companys financing agreements provide
for a priority payback to our partner. If the actual costs of construction or
operations exceed the model costs, we may not be able to operate profitably or
receive the planned share of cash flow and proceeds from the project.

Payments under our initial power purchase agreement may be
reduced if we are unable to forecast our production adequately.Under the
terms of our initial power purchase agreement, if we do not deliver electricity
output within 90% to 110% of our forecasted amount, payments for the amount
delivered will be reduced, possibly significantly. If the company consistently
mis-forecasts its output, its revenues will be reduced, and we may not be able
to operate profitably.

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

Our officers and directors may have conflicts of interests
arising out of their relationships with other companies.Several of our
directors and officers serve (or may agree to serve) as directors or officers of
other companies or have significant shareholdings in other companies. To the
extent that such other companies may participate in ventures in which GTH may
participate, the directors may have a conflict of interest in negotiating and
concluding terms respecting the extent of such participation. If a conflict of
interest arises, a director who has such a conflict will abstain from voting for
or against the approval of such a participation or such terms. From time to time
several companies may participate in the acquisition, exploration and
development of natural resource properties thereby allowing for their
participation in larger programs, permitting involvement in a greater number of
programs and reducing financial exposure in respect of any one program. It may
also occur that a particular company will assign all or a portion of its
interest in a particular program to another of these companies due to the
financial position of the company making the assignment. Under the laws of the
State of Delaware, the directors of GTH would be required to act honestly, in
good faith and in the best interests of GTH.

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In determining whether or not GTH would participate in a
particular program and what interest GTH would acquire in it, the directors
would primarily consider the degree of risk to which GTH would be exposed and
its financial position at that time.

Risks Relating To the Market for Our
Securities

A significant number of shares of our common stock are
eligible for public resale. If a significant number of shares are resold on the
public market, the share price could be reduced and could adversely affect our
ability to raise needed capital.Currently, the number of shares in the
general market is approximately 53,092,612. The market price for our common
stock could decrease significantly and our ability to raise capital could be
adversely affected by the availability and resale of such a large number of
shares in a short period of time.

Our officers and directors hold sufficient shares that
acting collectively they may be able to influence the outcome of matters
submitted to the shareholders.Our officers and directors own in the
aggregate approximately 13% of the companys securities, on a fully diluted
basis. If the officers and directors were to act collectively, assuming they
continue to own all of their shares, there is a substantial likelihood that they
would be able to influence the election of the directors of the company and the
outcome of all corporate actions requiring the approval of the shareholders,
such as mergers and acquisitions, in their own interests and to the detriment of
the other shareholders.

The possible issuance of substantial amounts of additional
shares without shareholder approval may dilute the percentage ownership of our
shareholders.There are 53,092,612 shares of our common stock outstanding
and 4,671,973 shares of common stock issuable upon exercise or conversion of
outstanding options and warrants. There are 100,000,000 shares of our common
stock authorized for issuance. All of our authorized shares in excess of those
currently outstanding may be issued without any action or approval by our
shareholders and may dilute the percentage ownership of our current
shareholders.

Because the public market for shares of our common stock is
limited, investors may be unable to resell their shares of common stock.There is currently only a limited public market for our common stock on the
TSX Venture Exchange and on the Over-the-Counter Bulletin Board in the United
States, and investors may be unable to resell their shares of common stock. The
development of an active public trading market depends upon the existence of
willing buyers and sellers that are able to sell their shares and market makers
that are willing to make a market in the shares. Under these circumstances, the
market bid and ask prices for the shares may be significantly influenced by the
decisions of the market makers to buy or sell the shares for their own account,
which may be critical for the establishment and maintenance of a liquid public
market in our common stock. Market makers are not required to maintain a
continuous two-sided market and are free to withdraw firm quotations at any
time. We cannot give you any assurance that an active public trading market for
the shares will develop or be sustained.

The price of our common stock is volatile, which may cause
investment losses for our shareholders.The market for our common stock is
highly volatile, having ranged in the last fiscal year from a low of CDN$0.75 to
a high of CDN$1.79 on the TSX Venture Exchange and from a low of US$0.70 to a
high of US$1.65 on the Over-the-Counter Bulletin Board. The

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trading price of our common stock on the TSX Venture Exchange
and on the OTCBB is subject to wide fluctuations in response to, among other
things, quarterly variations in operating and financial results, and general
economic and market conditions. In addition, statements or changes in opinions,
ratings, or earnings estimates made by brokerage firms or industry analysts
relating to our market or relating to our company could result in an immediate
and adverse effect on the market price of our common stock. The highly volatile
nature of our stock price may cause investment losses for our shareholders.

Our common stock is considered to be a penny stock, which
may make it more difficult for investors to sell their shares.Our common
stock is considered to be a penny stock. The Securities and Exchange
Commission has adopted rules that regulate broker-dealer practices in connection
with transactions in penny stocks. Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on NASDAQ, provided that current
price and volume information with respect to transactions in such securities is
provided by the exchange or system). Prior to a transaction in a penny stock, a
broker-dealer is required to:

- deliver a standardized risk disclosure document prepared by the Securities
  and Exchange Commission that provides information about penny stocks and the
  nature and level of risks in the penny stock market;
- provide the customer with current bid and offer quotations for the penny
  stock;
- explain the compensation of the broker-dealer and its salesperson in the
  transaction;
- provide monthly account statements showing the market value of each penny
  stock held in the customers account; and,
- make a special written determination that the penny stock is a suitable
  investment for the purchaser and receive the purchasers written agreement to
  the transaction.

These requirements may have the effect of reducing the level of
trading activity in the secondary market for our stock and investors may find it
more difficult to sell their shares.

Item 2. Description of Property

The Company has significant interests in two locations in the
Pacific Northwest. The first location is the Raft River area located in
Southeastern Idaho. The second location is the Neal Hot Springs area located in
Eastern Oregon, near the Idaho/Oregon boarder.

Raft River - (Idaho)

Phase I at Raft River is in the development stage. The resource
has been verified by a certified consultant, contracts signed for sale and
transmission of the electricity, and construction of the power plant, pipelines
and transmission lines are underway. Commercial operations of the facility
should commence during the 4th quarter of 2007.

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Although geologic and geophysical studies of the reservoir
indicate sufficient geothermal resource for additional phases at Raft River,
drilling confirmation will be required before additional work on Phase II can be
initiated.

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

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



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

The U.S. Geothermal Property - Idaho.The U.S.
Geothermal Property is comprised of three separate properties that total 783.93
acres; the Vulcan Property, the Elena Corporation Property

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and the Dewsnup property. The Vulcan Property includes both
surface and geothermal rights and consists of two parcels. The first parcel has
a total area of approximately 240 acres and three geothermal wells (RRGE-1,
RRGP-4 and RRGP-5) are located on this parcel. The second parcel has a total
area of approximately 320 acres, and three additional geothermal wells (RRGE-3,
RRGI-6 and RRGI-7) are located on this parcel. A fourth well, RRGE-2, although
located on the property covered by the Crank lease, was acquired by the company
as part of its purchase of the Vulcan Property.

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

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

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

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

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

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

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

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

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

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

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Raft River Phase I

As a result of the project financing for Phase I of the Raft
River project, the Company has contributed $5 million in cash and approximately
$1.5 million in property to Raft River Energy I LLC, the Phase I project joint
venture company. Raft River Holdings, an affiliate of Goldman Sachs Group, will
contribute $34 million to the project. Property assigned to Raft River Energy by
the Company includes seven production and injection wells, seven monitoring
wells, the Stewart lease, the Crank lease, the Newbold lease, the Doman lease,
and the Glover lease. All appropriate permits and contracts have also been
assigned to Raft River Energy for Phase I.

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

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Lease/Royalty Terms

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

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

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

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

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

The Crank Lease.The lease agreement with Janice Crank
was originally entered into June 28, 2002, and had a primary term of 5 years.
After GTH provided evidence to the lessor that the well (RRGE-2) located on
lessors property is not owned by the lessor (but instead is included in the
Vulcan Property), a new lease was entered into on June 28, 2003, which excluded
the ownership of RRGE-2, with a four-year initial term. Advance production
royalties (on a June to June basis) are payable under the Crank lease as
follows:

- Year 1 (Paid June 2002 under original lease): $5,000
- Year 2 (Paid June 2003 under original lease): $10,000
- Year 3 (Paid June 2004 under renegotiated lease): $10,000
- Year 4: Due June 2005: $10,000
- Year 5: Due June 2006: $10,000

Payments for years 2002 through 2006 have been recorded as
lease expense. When commercial production is attained, these lease payments can
be deducted from future production royalties. For later years, during commercial
production, there is a minimum annual production royalty of $18,000. If the
initial commercial production from the well is delayed past the primary lease

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term, we will seek an amendment to extend the primary term to
the initial commercial plant production date. The minimum amount that will be
payable over the course of the leases is $45,000. Maximum amounts payable will
depend on production from the property.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The total minimum amount payable under all of the leases during
their primary terms is $522,393. The above listed lease payments are payable
annually in advance, and are current through lease years beginning in 2005. The
leases can be renewed for extended periods as long as the power plant continues
to produce power.

We lease general office space for our 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.

With the construction of the power plant included in phase one
of the Raft River project, management has increased the general liability and
umbrella liability insurance coverage, as deemed necessary. Additional builders
risk insurance will be obtained prior to construction of the power plant.

Neal Hot Springs  (Oregon)

Announced on September 5, 2006, property for a second
geothermal project at Neal Hot Springs in eastern Oregon near the Idaho Border
was acquired by the Company. The new property consists of 8.5 square miles of
geothermal energy and surface rights and was leased from a

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private, third party. The property has an identified geothermal
resource and was recently made part of U.S. Geothermals submittal to Idaho
Power Companys Request for Proposals for electricity produced from geothermal
sources.

On February 6, 2007, a lease was entered into with Cyprus Gold
Exploration Corporation (Cyprus), a subsidiary of Phelps Dodge Corporation
(NYSE: PD), for and undivided interest in geothermal rights associated with
4,760 acres (7.4 square miles) at Neal Hot Springs. This lease adds 758 acres
(1.2 square miles) of new area to the lease announced on September 5, 2006, and
overlaps both surface and undivided geothermal rights that were previously
acquired at the site.

With the Cyprus lease, U.S. Geothermal has increased its total
Neal Hot Springs project holdings to 6,167 acres (9.6 square miles) and
increased ownership of the overlapping area to a majority of the geothermal
rights in that area. The Cyprus lease has a primary term of 10 years that
extends thereafter for as long as commercial production is maintained and
includes annual rental and production royalty payment provisions. U.S.
Geothermal has ongoing negotiations with additional geothermal rights holders in
the area.

Item 3. Legal Proceedings

As of May 31, 2007, management is not aware of any legal
proceedings in which the Company is a party, as plaintiff or defendant, or which
involve any of its properties.

Item 4. Submission of Matters to a Vote of Security Holders

None.

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PART II

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

Over-The-Counter Bulletin BoardEffective June 3, 2005, the common stock of U.S. Geothermal Inc. has
been quoted on the Over-The-Counter Bulletin Board (the Bulletin Board) under
the trading symbol UGTH. The first trades of our shares on the Bulletin Board
started June 8, 2005, and trading has been limited since then; there can be no
assurance that a viable and active trading market will develop. There can be no
assurance that even if a market is developed for our shares, there will be a
sufficient market so that holders of common shares will be able to sell their
shares, or with respect to any price at which holders may be able to sell their
shares. Future trading prices of our common shares will depend on many factors,
including, among others, our operating results and the market for similar
securities.

The following sets forth information relating to the trading of
our common stock on the Over-The-Counter Bulletin Board, from the date our
common stock began trading on the Over-The-Counter Bulletin Board on June 8,
2005.

Bid Prices on the Over-The-Counter
      BulletinFiscal Year Ended March 31, 2006
    High
    LowFirst Quarter
    0.65
    0.50Second Quarter
    1.24
    0.52Third Quarter
    0.85
    0.55Fourth Quarter
    1.30
    0.64Fiscal Year Ended March 31, 2007First Quarter
    1.02
    0.70Second Quarter
    1.49
    0.70Third Quarter
    1.23
    0.80Fourth Quarter
    1.65
    1.10


TSX Venture ExchangeThe TSX Venture Exchange
is a segment of the Toronto Stock Exchange Group that provides the global
financial community with access to Canada's equity capital and energy markets.
The TSX Venture Exchange provides access to capital for companies at the early
stages of their growth while offering investors a well-regulated market for
making venture investments. Our common shares are traded on the TSX Venture
Exchange under the symbol GTH. The following sets forth information relating
to the trading of GTH shares on the TSX Venture Exchange.

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Sales Prices on the TSX Venture Exchange
      (CDN$)Fiscal Year Ended March 31, 2005
    High
    LowFirst Quarter
    $ 0.90
    $ 0.54Second Quarter
    1.05
    0.70Third Quarter
    1.10
    0.76Fourth Quarter
    1.05
    0.80Fiscal Year Ended March 31, 2006First Quarter
    1.10
    0.80Second Quarter
    0.90
    0.61Third Quarter
    0.90
    0.67Fourth Quarter
    0.86
    0.66Fiscal Year Ended March 31, 2007First Quarter
    1.45
    0.75Second Quarter
    1.60
    0.80Third Quarter
    1.33
    0.95Fourth Quarter
    1.79
    1.20


As of May 31, 2007, we had approximately 2,300 stockholders of
record.

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

The following table details the number of securities authorized
for issuance under the Companys equity compensation plans for the fiscal year
ended March 31, 2007:

Plan Category
    Number of securities to be issued upon
      exercise of outstanding options, warrants and rights
    Weighted average exercise price of
      outstanding options, warrants and rights
    Number of securities remaining
      available for future issuanceEquity compensation plans approved by
      security holders
    2,936,128
    CDN $0.96
    1,444,923Equity compensation plans not approved by
      security holders
    Nil
    Nil
    NilTotal
    2,936,128
    CDN $0.96
    1,444,923


Recent Sales of Unregistered SecuritiesDuring the prior fiscal year, GTH has engaged in the following
significant equity transactions:

1. On April 3, 2006, GTH sold 25,000,000 shares of common stock
in a private offering under Regulation D, at a price of CDN $1.00 per share for
gross proceeds of CDN $25,000,000. The securities were issued in transactions
exempt from the registration requirements of the Securities Act in reliance on
and compliance with Regulation D. Each of such persons represented to the

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company that it purchased the securities for its own account,
for investment and not with a view to the distribution of the securities. The
certificates for the securities bear a restrictive legend and stop transfer
instructions have been placed against the transfer of the securities. Dundee
Securities Corporation of Toronto, Canada, was paid a cash fee of CDN
$1,522,500, and issued a compensation option to acquire 1,522,500 shares at an
exercise price per share of CDN $1.00, until April 3, 2008. An additional CDN
$202,200 was incurred in legal expenses relating to the offering, as well as CDN
$32,100 in fees to the TSX Venture Exchange which together with the CDN
$1,522,500 cash paid to Dundee made up the $1,756,800 cash component of issuance
costs.

2. On April 13, 2006, the Company announced that it has granted
1,763,000 options to acquire 1,763,000 shares of common stock to directors,
employees, and consultants. Options that amounted to 1,388,000 are exercisable
at $0.85 CDN per share, and the remaining 375,000 are exercisable at $1.00 CDN
per share. All options expire after a 5 year term on April 12, 2011.

3. On May 23, 2006, GTH issued 40,000 common shares to a
consultant of the Company upon the exercise of stock options issued under the
companys stock option plan. He represented to the company that he purchased the
securities for his own account for investment, and not with a view to the
distribution of the securities. The certificates for the securities bear a
restrictive legend and stop transfer instructions have been placed against the
transfer of the securities. No commissions were paid in respect to the issuance.

4. 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.

5. On January 22, 2007, the Board of Directors approved an
action to grant 235,000 incentive stock options to purchase capital stock at a
price of $1.12 for a five year period. The options were granted to two employees
and a director.

6. On June 5, 2007, the Company entered into an agreement 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 had the option to
purchase up to an additional 2,272,727 common shares at the issue price under
the offering that could gross up to approximately $20 million in Canadian
dollars ($18.0 million US Dollars).

Item 6. Selected Financial Data

For the Fiscal Year Ended March 31,2007
      2006
      2005
      2004
      2003Operating Revenues
      $                   
        0
      $                   
        0
      $                   
        0
      $                   
        0
      $                   
        0Loss from Continuing Operations
      (1,792,584)
      (1,523,385)
      (1,830,421)
      (676,398)
      (164,905)Loss per share from Continuing Operations
      (0.04)
      (0.09)
      (0.12)
      (0.11)
      (0.03)Cash dividends declared and paid per common share
      0
      0
      0
      0
      0


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As of March 31,2007
      2006
      2005
      2004
      2003Total Assets
      $ 22,673,340
      $ 21,895,933
      $ 2,584,970
      $ 1,373,831
      $ 384,664Total Long-term Obligations (1)
      2,397,564
      1,707,548
      0
      0
      0


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

Operating Revenues
    Gross Profit
    Loss from Operations
    Net Loss from Continued
      OperationsFiscal Year Ended March 31, 20061stQuarter (1)
    $                   
      0
    $                   
      0
    $ (370,259)
    $ (254,801)2ndQuarter (1)
    0
    0
    (594,601)
    (570,119)3rdQuarter (1)
    0
    0
    (502,083)
    (503,917)4thQuarter
    0
    0
    (196,126)
    (194,548)Fiscal Year Ended March 31, 20071stQuarter
    0
    0
    (961,777)
    (372,486)2ndQuarter
    0
    0
    (746,292)
    (680,021)3rdQuarter
    0
    0
    (610,310)
    (338,278)4thQuarter
    0
    0
    (669,490)
    (401,799)


(1) Restated figures. During the fiscal year ended March 31,
2006, approximately $646,353 in professional fees incurred for plant development
were expensed prior to the realization that a viable resource was going to
result from development efforts. After this determination, all direct
development costs incurred during the fiscal period were capitalized. The effect
of this restatement increased construction in progress assets and reduced the
operating loss for the first three quarters of the fiscal year ended March 31,
2006.

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

U.S. Geothermal Inc. is a Delaware corporation. The Companys
shares of common stock trade on the TSX Venture Exchange under the symbol GTH
and on the Bulletin Board under the symbol UGTH. On December 19, 2003, the
Company acquired all of the outstanding securities of U.S. Geothermal Inc., an
Idaho corporation (Geo-Idaho) incorporated in February 2002, through a
transaction merging Geo-Idaho into Evergreen Power Inc., a wholly-owned Idaho
subsidiary formed for purposes of the merger transaction. Following the merger,
the Company changed its name from U.S. Cobalt Inc. to U.S. Geothermal Inc.
Pursuant to the merger, Geo-Idaho became the surviving subsidiary of the
Company, and Evergreen Power, Inc. ceased to exist. GTH is still a development
stage company and has produced no revenues to date.

During the three months ended March 31, 2007, GTH was focused
on (1) supporting construction of Phase I of the Raft River, Idaho geothermal
project (Raft River), (2) the completion of drilling of production and
injection wells for Phase I, and (3) the evaluation of potential new geothermal
project acquisitions.

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The plants construction is under the direction of Ormat Nevada
Inc., a subsidiary of Ormat Technologies Inc. Plant construction is proceeding
on schedule and budget, and the following status is reported:

- Industrial Builders of Ontario, Oregon was awarded the mechanical
  construction contract by Ormat, began fabrication work in February and is
  assembling the plant components,
- The electrical construction contract was awarded to Merit Electric
  Incorporated in May,
- All major equipment has been delivered to the site and has been set on
  its foundations,
- Piping and electrical connections are underway,
- The control room and motor control center building has been erected, and
- The cooling tower is approximately 35% complete.

In addition, Raft River Rural Electric Cooperative has finished
construction of the 3.2 -mile power transmission line that connects the power
plant to the Bonneville Power Administration substation at Bridge, Idaho.
Equipment upgrades to the substation including a breaker, relays, and
communications systems are underway.

On April 26, 2006, GTH issued a Notice to Proceed to Ormat
under the Ormat EPC agreement as amended April 25, 2006. An initial payment of
$2,020,000 allows Ormat to proceed with ordering of equipment with significant
manufacturing lead times. Under the amendment, Ormat commits to a guaranteed
final completion date of November 25, 2007 on the Phase I facility.

On May 8, 2006, Idaho Power confirmed that GTH would be allowed
to bid the Raft River Unit 1 project into the recently issued Idaho Power
geothermal Request for Proposal for Geothermal Power. If Idaho Power selects
GTH as a successful bidder, the Company expects that under a new PPA with Idaho
Power which could replace the current PPA, the Unit 1 power plant will be
allowed to sell its full output capacity of up to 13 megawatt annual average,
instead of being capped at 10 average megawatt per month as mandated under the
current PPA. This 30% increase in plant output would be achieved with no
additional capital investment and is expected to decrease the operating cost per
kilowatt-hour.

With carbon regulation widely anticipated to increase the cost
of power sourced from coal, and limited opportunities to purchase baseload
geothermal power, the company has found that utilities across the Western United
States have been eager to discuss power purchases from the Raft River geothermal
resource. As a result of the increased interest, U.S. Geothermal elected to
withdraw its Unit 2 and Unit 3 Idaho Power PPAs without submitting them to the
IPUC for approval in order to pursue larger capacity PPAs with other utilities.
With the concurrence of Idaho Power, the Unit 2 and Unit 3 10 megawatt contracts
have been voided without further obligation on either party.

Eugene Water and Electric Board (EWEB), from Eugene, Oregon
and U.S. Geothermal have signed a letter of intent for EWEB to purchase the full
13 megawatt electrical output of Unit 2. The parties have exchanged a draft PPA
and intend to complete it by October 2007. Upon execution of the EWEB PPA, and
if Unit 1 is successful in the Idaho Power Request for Proposal, then the total
output from the Unit 1 and Unit 2 Raft River power plants will be 26 megawatts
from two plants, instead of the originally planned 30 megawatts from three
plants, resulting in substantial capital and operating cost savings through
improved economy of scale.

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In addition, the strong regional interest in geothermal power
has resulted in several utilities from California to Washington entering into
discussions with U.S. Geothermal to purchase the electrical power output of Unit
3. Subject to drilling confirmation of sufficient geothermal resource, the power
plant output from three units at Raft River would be 39 megawatts, instead of
the maximum 30 megawatts under the previous Idaho Power PPA provisions.

On May 16, 2006, a $225,000 contract was signed with Raft River
Rural Electrical Co-op to build the production well power distribution lines for
delivery of electricity from the power plant to the well heads. At fiscal year
end, the distribution lines were approximately 90% complete.

On May 22, 2006, a $2.6 million contract was signed with
Industrial Builders of Ontario, Oregon to construct the geothermal pipeline
gathering and distribution system which will connect the production and
injection wells with the power plant. At fiscal year end, this component was
approximately 90% complete.

On May 24, 2006, GTH signed a geothermal lease agreement with
JR Land and Livestock Inc. for the lease of approximately 5,409 acres of
surface, mineral and geothermal rights in Malheur County, Oregon. The lease term
is for ten years with lease payments of $15,000 at signing, $20,000 in first
year, $25,000 in second year, and $30,000 for each subsequent year. A geothermal
program was completed in early 2007, and plans are in progress for a drilling
program.

On August 3, 2006, the Company announced the signing of $4.6
million renewable energy credit (REC) purchase and sale agreement encompassing
the first 10 years of Phase I of the Raft River project with Holy Cross Energy.

As of July 2006, the Company completed the acquisitions of two
new properties with ground water rights that will provide cooling water to the
Phase One and Phase Two power plants and surface access for pipelines and
project facilities. The two land parcels total 1,083 acres and have irrigation
water rights for 1,904 acre-feet of water. A third purchase of water rights only
was also completed for an additional 544 acre-feet of ground water.

On August 10, 2006, the $34 million project finance was
announced for Phase I of the Raft River development. The project finance
structure is channeled through a qualified special purpose entity, Raft River
Energy I, LLC (RREI). Raft River Holdings is an affiliate of The Goldman Sachs
Group, and is the Companys investment partner in RREI. The Company has made a
$5 million dollar cash contribution and is transferring to RREI the existing
seven production and injection wells, and certain geothermal rights and leases
covering the 1,800 acres from the 5,238 total acres of geothermal rights
currently held. Raft River Holdings will make capital contributions totaling $34
million in accordance with the construction payments schedule. The partnership
does not restrict further development of the Companys geothermal rights and
allows for the development of the planned Phase Two power plants.

Announced on September 5, 2006, property for a second
geothermal project at Neal Hot Springs in eastern Oregon near the Idaho Border
was acquired by the Company. The new property consists of 8.5 square miles of
geothermal energy and surface rights and was leased from a

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private, third party. The property has an identified geothermal
resource and was recently made part of U.S. Geothermals submittal to Idaho
Power Companys Request For Proposals for electricity produced from geothermal
sources.

On February 6, 2007, a lease was entered into with Cyprus Gold
Exploration Corporation (Cyprus), a subsidiary of Phelps Dodge Corporation
(NYSE: PD), for and undivided interest in geothermal rights associated with
4,760 acres (7.4 square miles) at Neal Hot Springs. This lease adds 758 acres
(1.2 square miles) of new area to the lease announced on September 5, 2006, and
overlaps both surface and undivided geothermal rights that were previously
acquired at the site.

With the Cyprus lease, U.S. Geothermal has increased its total
Neal Hot Springs project holdings to 6,167 acres (9.6 square miles) and
increased ownership of the overlapping area to a majority of the geothermal
rights in that area. The Cyprus lease has a primary term of 10 years that
extends thereafter for as long as commercial production is maintained and
includes annual rental and production royalty payment provisions. U.S.
Geothermal has ongoing negotiations with additional geothermal rights holders in
the area.

U.S. Geothermal has awarded a $1.3 million dollar contract to
ITT Industries/Goulds Pumps to provide line-shaft geothermal production pumps
for the project. The first production pump has been delivered.

The well improvement drill program, which began in August 2006,
has been completed. Four existing wells were enhanced either by deepening or
adding directional legs to improve their production or injection
characteristics. Two new wells were drilled to expand the geothermal resource
for the planned second 13 megawatt net output power plant at Raft River.
Resource utilization studies have determined that production well RRG-3 will be
converted to an injection well and that injection well RRG-7 will be converted
to a production well.

On December 28, 2006, the Company entered into an agreement
with Disco Associates, Inc. for well-head construction for the initial base
amount of $478,475. At fiscal year end, this project was approximately 13%
complete.

On March 21, 2007, the Company was named successful bidder in
Idaho Power Companys request for geothermal electricity. Negotiations began on
the terms of a purchase power agreement for an annual average of 45.5 megawatts
from the Raft River and Neal Hot Springs projects.

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 had the option to purchase up to an additional 2,272,727 common
shares at the issue price under the offering that could gross up to
approximately $20 million in Canadian dollars ($18.0 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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Liquidity and Capital Resources

We believe our cash and liquid investments at March 31, 2007,
added to our recent private placement completed June 5, 2007, is adequate to
fund our general operating and development activities through March 31, 2009.
The Company obtained project capital to construct Raft River power plant through
a partnership arrangement. Through the arrangement, equity funds of
approximately $34 million were made available for the construction of the
project. Total capital expenditures for the phase one project are currently
estimated to be between $39 and $41 million. The majority of the funds needed
for the project will be provided by existing funds and through the partnership
arrangement. If additional funds are needed, we anticipate that the equity may
be raised through the issuance of shares, exercise of existing outstanding
warrants, and/or through the sale of ownership interest in tax credits and
benefits

Potential Acquisitions

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

Critical Accounting Policies

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

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

The Company does not consider such items to be cash equivalents
if there is a significant restriction placed upon the use of those assets. At
fiscal year end, the Company held deposits

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that were restricted according to a contractual arrangement
with a major vendor. Accordingly, these deposits were classified as restricted
cash, rather than cash equivalents.

Going Concern Based on our projected spending over
the next 12 months, our current operating funds and approximately $18 million
that was raised from the private placement completed June 5, 2007, our auditors
have determined that the going concern qualification from our financial
statements is not needed. Management believes that sufficient funding will be
available to meet our business objectives, including anticipated cash needs for
working capital, and financing for construction of the Phase 1 power plant. As
shown in the accompanying consolidated financial statements, we have incurred an
accumulated deficit of $7,025,115 for the period from February 26, 2002
(inception) to March 31, 2007, and have 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, 2007 would jeopardize the production tax credit, and
could materially affect the ability of U.S. Geothermal to operate as a going
concern.

Property, Plant and Equipment During the development
stage of operations, the Company has purchased and otherwise acquired geothermal
properties for the production of power. The geothermal properties include:
drilled wells, power plant components, power plant support components, land,
land rights, surface water rights, and mineral rights. Since the costs of land
and the rights surrounding the access geothermal and surface water reservoirs
are relatively small, these items have been included, but have not been reported
separately in our financial statements. The Companys first power plant is
scheduled to be operational in October 2007; however, it was still under
construction at fiscal year end. The costs of this power plant are being
accumulated in construction in process accounts until the plant becomes
operational. Once the plant is operational, these costs will be charged to
operations in a systematic manner based upon the total estimated gallons of
water the plant is expected to produce over its useful life. The factors and
assumptions that comprise this allocation process will be based upon the best
information available to us, and will be evaluated, at least, annually for
viability. If it is determined that our cost allocations have produced results
that vary significantly from the conditions surrounding the value of the
Companys geothermal properties, a gain or loss adjustment will be made in the
period in which this determination is made. The cost allocation or amortization
process is not intended to present the fair market value of our geothermal
properties; rather to allocate the actual historical costs of those properties
over their service lives.

The costs of machinery, vehicles and other equipment, currently
in operation, are being depreciated in a systematic manner. For these assets,
depreciation is calculated based upon the straight-line method at a rate of 30%,
which allocates the costs evenly over the assets estimated service life.
Depreciation costs calculated for assets that are not directly involved in the
production of geothermal properties are charged to operations.

Income Taxes According to generally accepted
accounting practices, entities must recognize assets and/or liabilities that
originate with the differences in revenues and expenses presented for financial

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

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

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

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Operating Results

March 31, 2007 compared to March 31, 2006

For the year ended March 31, 2007, we incurred a loss of
$1,793,000 or $0.04 per share. The compares to a loss for the year ended March
31, 2006 of $1,491,000 or $0.09 per share. The main reason for this increased
loss is that non-cash stock-based compensation granted to directors, officers
and employees increased by $798,000 in a year to year comparison. Stock options
granted during the year were 2,168,000 options in 2007 as compared to 50,000
options in 2006.

In addition, professional fees totaled $663,000 in 2007 as
compared to $386,000 in 2006. Legal and accounting fees increased $277,000 in
2007 due to legal fees associated with an SB-2 registration statement and the
negotiation of the Raft River Energy operating agreement, and an increase in
accounting fees associated with amendments to prior year federal tax returns.
Losses incurred at Raft River Energy of $102,000 were recorded in 2007.

Increases in interest income of $670,000 and foreign currency
gain of $262,000 helped to offset partially the increased costs. The foreign
currency resulted from timing on transferring funds from the April 2006 private
placement from our Canadian accounts into the U.S. The interest income resulted
from money market fund interest on the balance of the Companys cash balances.

March 31, 2006 compared to March 31, 2005

For the year ended March 31, 2006, we incurred a loss of
$1,491,000 or $0.09 per share. The compares to a loss for the year ended March
31, 2005 of $1,830,000 or $0.12 per share. The main reason for this decreased
loss is that exploration expenditures decreased by $439,000 in a year to year
comparison. U.S. Geothermal development costs were capitalized in 2006 as a
geothermal reservoir had been identified, and determined to be economic.

In addition, consulting fees decreased by $461,000 in 2006,
which was offset partially by an increase in salaries and wages of $355,000.
Individuals previously paid as consultants were hired as employees effective
April 1, 2006.

Travel and promotion expenses increased $ 271,000 as the
Company increased marketing and promotional efforts to attract and retain
investors. Foreign currency gain increased by $245,000 as funds were transferred
from our Canadian accounts into the U.S.

Contractual Obligations

The following table denotes contractual obligation by payments
due for each period.

Total
    < 1 year
    1-3 years
    3-5 years
    > 5 yearsCapital Leases
    $ 665,550
    $ 40,100
    $ 96,200
    $ 103,900
    $ 425,350


Raft River Energy I LLC is the joint venture partnership
constructing the power plant at Raft River, Idaho. This subsidiary is not
consolidated into the financial statements. As such, the obligations of Raft
River Energy are not reflected in this table.

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Off Balance Sheet Arrangements

As of March 31, 2007, the Company does not have any off balance
sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures About
Market Risk

Interest Risk on InvestmentsAt March 31, 2007, the
Company held investments of $12,081,369 in money market accounts. These are
highly liquid investments that are subject to risks associated with changes in
interest rates. The money market funds are invested in governmental obligations
with minimal fluctuations in interest rates and fixed terms.

Foreign Currency RiskThe Company is subject to
limited amount of foreign currency risks associated with cash deposits
maintained in Canadian currency. The Company has utilized and it is continuing
to utilize the Canadian markets for raising capital. By proper timing of the
transactions and then maintenance of adequate operating funds in other financial
resources, the Company has been able to mitigate some of the risks surrounding
foreign currency exchanges. At fiscal year end, the company held deposits that
amounted to less than $30,000 in U.S. dollar equivalents. Also, the Canadian
currency exchange rate has been reasonably consistent over the past fiscal year.
As a matter of standard operating practice, the Company does not maintain large
balances of Canadian currency; and, substantially, all operating transactions
are conducted in U.S. dollars.

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

Commodity Price RiskThe Company is exposed to risks
surrounding the volatility of energy prices. These risks are impacted by various
circumstances surrounding the energy production from natural gas, nuclear,
hydro, solar, coal and oil. The Company has been able to mitigate, to a certain
extent, this risk by signing a power purchase contract for a 20 year period for
the first power plant scheduled to go into production. This type of arrangement
will be the model for power purchase contracts planned for future power
plants.

Item 8. Financial Statements and Supplementary
Data

The information required hereunder is set forth under Report
  of Independent Registered Public Accounting Firm, Consolidated Balance
  Sheets, Consolidated Statements of Operations, Consolidated
  Statements of Comprehensive Income (Loss) and Stockholders Equity (Deficit),
  Consolidated Statements of Cash Flows, and Notes to Consolidated
  Financial Statements included in the consolidated financial statements
  that are a part of this Report (See Part IV, Item 15, exhibit 10.37) . Other
  financial information and schedules are included in the consolidated financial
  statements that are a part of this Report.

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

None.

Item 9A. Controls and Procedures

An evaluation was performed under the supervision and with the
participation of our management, including the Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), of the effectiveness of our disclosure
controls and procedures as defined in Rule 13(a)-15(e) or 15d-15(e) as of March
31, 2007. Based on that evaluation, our management, including the CEO and CFO,
concluded that the disclosure controls and procedures were effective.

There has been no change to our internal control over financial
reporting during the quarter or fiscal year ended March 31, 2007 that has
materially affected, or is likely to materially affect, our internal control
over financial reporting.

The company is not required to have, nor was Williams &
Webster engaged to perform, an audit of internal control over financial
reporting. The audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectives of the companys internal control over financial reporting.
Accordingly, Williams & Webster expressed no such opinion.

Item 9B. Other Information

Williams & WebsterOn June 12,
2007, the Public Company Accounting Oversight Board (PCAOB) in their release
No. 105-2007-001 instituted disciplinary proceedings, making findings, and
imposing sanctions against Williams & Webster, P.S., Kevin J. Williams, CPA,
and John G. Webster, CPA. Pursuant to Section 105(c) of the Sarbanes-Oxley Act
of 2002 and PCAOB Rule 5200(a)(1), Williams & Webster is censured, Kevin J.
Williams is barred from being an associated person of a registered accounting
firm, and John G. Webster is suspended for one year from being an associated
person of a registered public accounting firm. Williams & Webster, P.S.,
will continue to provide audit services to their SEC clients under the direction
of two other partners not subject to the disciplinary proceedings.

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PART III

Item 10. Directors, Executive Officers, and Corporate
Governance

Identification of Directors, Executive Officers and
Significant EmployeesThe following sets forth certain
information concerning the current directors, executive officers and significant
employees of our company. Each director has been elected to serve until our next
annual meeting of stockholders and until his successor has been elected and
qualified. Each executive officer serves at the discretion of the board of
directors of our company.

|NAME                     | AGE | POSITION                                             
|------------------------ | --- | -----------------------------------------------------
|                         |     |                                                      
|Daniel J. Kunz           | 55  | Chief Executive Officer,
      President and Director
|Douglas J. Glaspey (1)   | 54  | Chief Operating Officer and Director                 
|John H. Walker (1)(3)    | 58  | Chairman of the Board and
      Director             
|Paul A. Larkin (1)(2)(3) | 57  | Director                                             
|Leland R. Mink(3)        | 67  | Director                                             
|Kerry D. Hawkley         | 53  | Chief Financial Officer and Corporate Secretary      
|Kevin Kitz               | 46  | Vice President, Development,
      Geo-Idaho         
|Robert Cline             | 50  | Vice President, Engineering, Geo-Idaho               
|Christopher S. Harriman  | 49  | President, U.S. Geothermal
      Services LLC        

| | (1) | Member of the Audit Committee.   
| | --- | ---------------------------------
| | (2) | Audit Committee Financial Expert.
| | (3) | Independent Director.            

Background and Business ExperienceDaniel J. Kunzis the President and Chief Executive Officer and a
director of GTH and the President of Geo-Idaho. He has served as a director of
the company since March 2000, and was Chairman of the Board of Directors from
March 2000 until December 2003. Prior to the acquisition of Geo-Idaho, he served
as a director and the President for that company from February 2002 until the
acquisition. Mr. Kunz was an executive of Ivanhoe Mines Ltd. from 1997, and
served as its President, Chief Executive Officer and Director from November 1,
2000 until March 1, 2003. From March 2, 2003 until March 8, 2004, Mr. Kunz
served as Interim President of Jinshan Gold Mines Inc. Mr. Kunz has more than 30
years of experience in international mining, engineering and construction,
including, marketing, business development, management, accounting, finance and
operations, having held key positions in MK Gold Company (President & CEO)
and Morrison Knudsen Corporation (Vice President & Controller, and as CFO to
the Mining Group). Mr. Kunz holds a Masters of Business Administration and a
Bachelor of Science in Engineering Science. He is currently a director of
several companies publicly traded on the Toronto Stock Exchange and the TSX
Venture Exchange, including Jinshan Gold Mines Inc., Kenai Resources Ltd., and
Chesapeake Gold Corp.

Douglas J. Glaspeyis the Chief Operating Officer and a
director of GTH. He has served as a director of the company since March 2000,
and served as its President from March 2000 until the acquisition of Geo-Idaho.
He also served as a director and the Chief Executive Officer of Geo-Idaho from
February 2002 until the acquisition, and continues to serve as President. From

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December 1986 to the present, Mr. Glaspey has been a
Metallurgical Engineer and Project Manager with Twin Gold Corporation. Mr.
Glaspey has 29 years of operating and management experience. He holds a Bachelor
of Science in Mineral Processing Engineering and an Associate of Science in
Engineering Science. His experience includes production management, planning and
directing resource exploration programs, preparing feasibility studies and
environmental permitting. He has formed and served as an executive officer of
several private resource development companies in the United States, including
Drumlummon Gold Mines Corporation and Black Diamond Corporation.

John H. Walkeris a director and the Chairman of the
Board of directors of GTH. He has held that position since December 2003. He has
served (and continues to serve) as Chief Executive Officer of Mihaly
International Canada Limited since 1987. Prior to that Mr. Walker was a Senior
Advisor to Falconbridge Limited from September 2000 to April 2002; and Managing
Director of Loewen, Ondaatje, McCutcheon, from November 1996 to August 2000. Mr.
Walker holds a Master of Environmental Studies degree from York University in
Toronto. For many years he was an executive with Ontario Hydro where he directed
programs in renewable energy and international business development,
specifically in respect of thermal power generation. Currently as CEO of Mihaly
International Canada Limited, based in Oakville, Ontario, he provides services
to development and mining companies, corporations, banks, and insurance
companies on a range of issues related to project management, construction, fuel
supply, build own operate and transfer, project finance and risk management.

Paul Larkin serves as a director of GTH, a position he
has held since March 2000. He served as Secretary of GTH until December, 2003,
and served as a director and the Secretary-Treasurer of Geo-Idaho from February
2002 until the acquisition.Since 1983, Mr. Larkin has also been the
President of the New Dawn Group, an investment and financial consulting firm
located in Vancouver, British Columbia, and the President of Tyner Resources
Ltd., a TSX Venture Exchange listed company. New Dawn is primarily involved in
corporate finance, merchant banking and administrative management of public
companies. Mr. Larkin held various accounting and banking positions for over a
decade before founding New Dawn in 1983, and currently serves on the boards of
the following companies which are listed on the TSX Venture Exchange: Eventure
Capital Corp., and Tyner Resources Ltd.

Dr. Leland Roy Mink is the former Program Director for
the Geothermal Technologies Program, U.S. Department of Energy (DOE). Prior to
working for the DOE Dr. Mink was the Vice President of Exploration for U.S.
Geothermal Inc. He has also worked for Morrison-Kundson, Idaho Bureau of Mines
and Geology and Idaho Water Resources Research Institute.

Kerry D. Hawkley serves as the companys Chief Financial
Officer and Corporate Secretary. He has served as the companys controller since
July 2003, and became CFO as of January 1, 2005. Since July 2003, he has also
provided, and continues to provide, consulting services to Triumph Gold Corp.
From 1998 to June 2003, Mr. Hawkley served as controller, director and treasurer
of LB Industries. Mr. Hawkley has over 30 years experience in all areas of
accounting, finance and administration. He holds Bachelor of Business
Administration degrees in Accounting and Finance. He started his career as an
internal auditor with Union Pacific Corporation and has held various accounting
management positions in the oil and gas, truck leasing, mining and energy
industries.

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Kevin Kitz is the Vice President-Development of
Geo-Idaho. He joined the company in April 2003. He is a mechanical engineer with
19 years of geothermal power plant design, construction and operating experience
with UNOCAL, with whom he worked until November 2002. He holds a Bachelor of
Science in Mechanical Engineering and Material Science, and is a Professional
Engineer in California. During his career with Unocal, he was a Production and
Operations Engineer at the 75 megawatt Salton Sea geothermal power plant in
southern California, a Senior Production Engineer at the Geysers geothermal
field in northern California, and a Power Plant Engineering Advisor in the
Philippines for geothermal power plants ranging from 12 to 55 megawatts.

Robert Cline is the Vice President-Engineering of
Geo-Idaho. He joined the company in February 2005. He is a civil engineer with
24 years experience developing energy and water resources projects in the
western U.S. He holds Bachelor of Science degrees in Civil Engineering and
Physics, and is a Professional Engineer in Arizona and Oregon. Prior to joining
US Geothermal, he was the Manager Engineering at Ida-West Energy Company,
playing a key role in developing several hydroelectric and gas-fired generating
facilities, and was instrumental in several highly successful hydroelectric
acquisitions. Prior to 1991, he worked nine years for the US Bureau of
Reclamation where he was involved in engineering, contracting and construction
of various water resources related projects in Arizona.

Christopher S. Harrimanis the President
of US Geothermal Services LLC.He has over ten years of power management
experience and has eighteen years of industry experience. He worked for Black
Hills Generation as plant manager of two 10 megawatt cogeneration facilities in
southern Idaho. He also spent eight years with Exxon Shipping, and served in the
U.S. Coast Guard. He joined us in July 2006.

Family RelationshipsThere are no
family relationships between directors and the executive officer or any persons
nominated to be a director.

Code of EthicsManagement submitted a
proposed Code of Ethics to the Board of Directors for review and comment. The
Board approved the code of ethics at the board meeting held in conjunction with
the annual general meeting in September 2005. The code of ethics applies to all
directors, officers and employees of the company. The Code of Ethics is included
in the Companys web page at www.usgeothermal.com.

Item 11. Executive Compensation

The Compensation and Benefits Committee is appointed annually
by the Board of Directors to discharge the Board's responsibilities relating to
compensation and benefits of the executive officers of the Company. The goals of
the committee is to attract, retain and motivate our executive officers by
providing appropriate levels of compensation and benefits while taking into
consideration, among such other factors as it may deem relevant, the Company's
performance, shareholder returns, the value of similar incentive awards to
executive officers at comparable companies and the awards given to the executive
officers in past years. The main categories of

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compensation available to the committee are base salary,
discretionary annual performance bonuses, stock option grants, stock awards, and
insurance reimbursements.

We compete with a variety of companies for our executive-level
employees. The Compensation and Benefits Committee uses base salary to
compensate the executive officers for services rendered as well as for
motivation and retention purposes. Base salaries are intended to be competitive
for companies of similar size and purpose, also taking into consideration
individual factors such as experience, tenure, institutional knowledge and
qualifications. Base salaries are reviewed annually to determine whether they
are consistent with our overall compensation objectives. In considering
increases in base salary, the Compensation and Benefits Committee reviews
individual and corporate performance, market and industry conditions, and our
overall financial health.

The Compensation and Benefits Committee may grant annual
performance bonuses as a reward for achievement of individual and corporate
short-term goals. Any grant of an annual performance bonus is discretionary and
the amount is determined after recommendation from the chief executive officer.
Bonus amounts should be dependent upon our financial and operational performance
as well as the performance of the individual executive officer.

Generally, the Compensation and Benefits Committee grant stock
options to all employees, including executive officers, annually after
completion of our annual financial reports. Stock options are granted with an
exercise price equal to the market value of our common stock on the date of the
grant, and with a term of five years. The timing of the stock option grant is
not coordinated with the release of material non-public information and is
typically in the first or second fiscal quarter. The options vest 25% on date of
grant, and another 25% each six months thereafter. In 2006, stock option grants
to executive officers represented approximately 45% of the total stock option
grants to all employees.

Our executive officers do not receive any material incremental
benefits that are not otherwise available to all of our employees. Our health
and dental insurance plans are the same for all employees.

Effective April 1, 2006, Daniel J. Kunz signed an employment
agreement that increases the amount of time devoted to the business of the
company to 140 hours per month at a compensation of $132,000 annually. Mr. Kunz
is entitled to receive performance bonuses and incentive stock options as
determined by the Companys board of directors, benefits (including for
immediate family) as are or may become available to other employees, and
vacation. The Company will also provide reasonable life insurance and accidental
death coverage with the proceeds payable to Mr. Kunzs estate or specified
family member. The employment agreement may be terminated by the company without
notice, payment in lieu of notice, severance or other sums for causes which
include failure to perform in a competent and professional manner, appropriation
of corporate opportunities or failure to disclose a conflict of interest,
conviction which has become final for an indictable offense, fraud, dishonesty,
refusal to follow reasonable and lawful direction of the company, breach of
fiduciary duty, and a declaration of bankruptcy by or against Mr. Kunz.
Otherwise, the Company may terminate the agreement upon one month written
notice. The agreement includes covenants by Mr. Kunz of confidentiality and
non-competition, and provides for equitable relief in the event of breach. In
the case of a change of control, Mr. Kunz can elect to receive compensation of
$250,000 no later than five working days

-46-

---

after the effective date of the change of control. A copy of
the employment agreement is included as Exhibit 10.15 in Part IV of this report.

Douglas J. Glaspey, Chief Operating Officer, signed an
employment agreement on April 1, 2006, that will remain in effect until December
31, 2008, which provides for an annual salary of $108,000. Mr. Glaspey is
entitled to receive performance bonuses and incentive stock options as
determined by the Companys board of directors, benefits (including for
immediate family) as are or may become available to other employees, and
vacation. The employment agreement may be terminated by the company without
notice, payment in lieu of notice, severance or other sums for causes which
include failure to perform in a competent and professional manner. In the event
of early termination due to failure to comply with the agreement, the employee
would be entitled to compensation earned through the date of termination. A copy
of the employment agreement is included as Exhibit 10.17 in Part IV of this
report.

Kerry D. Hawkley, Chief Financial Officer, signed an employment
agreement on April 1, 2006, that will remain in effect until December 31, 2008,
which provides for an annual salary of $96,000. Mr. Hawkley is entitled to
receive performance bonuses and incentive stock options as determined by the
Companys board of directors, benefits (including for immediate family) as are
or may become available to other employees, and vacation. The employment
agreement may be terminated by the company without notice, payment in lieu of
notice, severance or other sums for causes which include failure to perform in a
competent and professional manner. In the event of early termination due to
failure comply with the agreement; the employee would be entitled to
compensation earned through the date of termination. A copy of the employment
agreement is included as Exhibit 10.16 in Part IV of this report.

Executive CompensationName and Principal position(s) 
        (a)
      Year Ended 
        March 31, 
        (b)
      Salary 
        ($) 
        (c)
      Bonus ($) 
        (d)
      Option 
        Awards 
        ($) 
        (f)
      All Other 
        Comp 
        ($) 
        (i)
      Totals 
        ($) 
        (j)Daniel J. Kunz, Chief Executive 
        Officer and President
      2007
      132,000
      30,000
      532,257
      37,960
      732,217Douglas J. Glaspey, Chief 
        Operating Officer
      2007
      108,000
      22,500
      381,619
      0
      512,119Kerry D. Hawkley, Chief 
        Financial Officer
      2007
      96,000
      25,000
      135,575
      0
      256,575


(c)  Annual compensation that includes
the dollar value of base salary (cash and non-cash). (d) - Dollar value of
bonuses (cash and non-cash) are eligible to all employees. Bonus plans are
submitted and approved by the Board annually. (f)  Stock options are valued
at the grant date using the SFAS 123R value. (i)  Other compensation
consists of all other compensation not disclosed in another category.

The increases in officer salaries are primarily due to the
change in employment status from part-time to full time. Daniel J. Kunz and
Kerry D. Hawkley became full time employees of the

-47-

---

Company after April 1, 2006, and their salaries were adjusted
to reflect these changes. Douglas J. Glaspey has been a full time employee for
the past three fiscal years. All employees of the Company are eligible to
receive a performance bonus based upon goals submitted and approved annually by
the Board of Directors. Performance goals were earned and paid for the fiscal
year ended March 31, 2007.

GRANTS OF PLAN-BASED AWARDS

|                |         | Estimated Future Payouts Under |                                    |           |           |        | All Other |           |           
|--------------- | ------- | ------------------------------ | ---------------------------------- | --------- | --------- | ------ | --------- | --------- | ----------
|                |         | Non-Equity Incentive Plan      | Estimated Future Payouts Under     |           | Option    |        |          
|                |         | Awards                         | Equity
      Incentive Plan Awards | All Other | Awards:   |        |          
|                |         |                                |                                    |           |           |        |           | Stock     | Number    
|                |         |                                |                                    |           |           |        |           | Awards:   | of        
|                |         |                                |                                    |           |           |        |           | Number    | Securities
|                |         |                                |                                    |           |           |        |           | of Shares | Under-    
|                |         |                                |                                    |           |           |        |           | of Stock  | lying     
|                | Grant   | Threshold                      | Target                             | Maximum   | Threshold | Target | Maximum   | or Units  | Options   
|Name            | Date    | ($)                            | ($)                                | ($)       | (#)       | (#)    | (#)       | (#)       | (#)       
|(a)             | (b)     | (c)                            | (d)                                | (e)       | (f)       | (g)    | (h)       | (i)       | (j)       
|Daniel J. Kunz, |         |                                |                                    |           |           |        |           |           |           
|Chief           |         |                                |                                    |           |           |        |           |           |           
|Executive       | 4/12/07 |                                |                                    |           |           |        |           |           | 530,000   
|Officer         |         | $                              | $                                  | $         |           |        |           |           |           
|Douglas J       |         |                                |                                    |           |           |        |           |           |           
|Glaspey, Chief  |         |                                |                                    |           |           |        |           |           |           
|Operating       | 4/12/07 |                                |                                    |           |           |        |           |           | 380,000   
|Officer         |         |                                |                                    |           |           |        |           |           |           
|Kerry D         |         |                                |                                    |           |           |        |           |           |           
|Hawkley,        |         |                                |                                    |           |           |        |           |           |           
|Chief Financial | 4/12/07 |                                |                                    |           |           |        |           |           | 135,000   
|Officer         |         |                                |                                    |           |           |        |           |           |           

Outstanding Equity Awards
        at Fiscal Year EndExecutive Name 
        (a)
      Option Awards
      Stock AwardsNumber of 
        securities 
        underlying 
        unexercised 
        options (#) 
        exercisable 
        (b)
      Number of 
        securities underlying 
        unexercised 
        options (#) 
        unexer- 
        cisable 
        (c)
      Equity 
        incentive 
        plan 
        awards; 
        number of 
        securities 
        underlying 
        unexcersised 
        unearned 
        options (#) 
        (d)
      Option 
        exercise 
        price 
        ($) 
        (e)
      Option 
        expiration  date 
        (f)
      Number of 
        shares not
        vested (#) 
        (g)
      Market  
        value of 
        shares not 
        vested (#) 
        (h)
      Equity 
        incentive 
        plan awards:
        number of 
        unearned 
        shares or 
        other rights 
        that have not 
        vested (#) 
        (i)
      Equity 
        incentive 
        plan awards: 
        market or
        payout value 
        of unearned 
        shares or 
        other rights 
        that have not 
        vested ($) 
        (j)Daniel J. Kunz
      13,494
      
      
      0.60
      1/3/09
      0
      0John H. Walker
      40,000
      
      
      0.60
      1/3/09
      0
      0Douglas J. Glaspey
      22,134
      
      
      0.60
      1/3/09
      0
      0Kerry D. Hawkley
      40,000
      
      
      0.60
      1/3/09
      0
      0Kerry D. Hawkley
      60,000
      
      
      0.85
      11/10/09
      0
      0Daniel J. Kunz
      530,000
      
      
      1.00
      4/12/11
      265,00
      179,697Douglas J. Glaspey
      380,000
      
      
      1.00
      4/12/11
      190,000
      128,839John H. Walker
      115,000
      
      
      1.00
      4/12/11
      57,500
      37,300Paul A. Larkin
      180,000
      
      
      1.00
      4/12/11
      90,000
      58,383Kerry D. Hawkley
      135,000
      
      
      1.00
      4/12/11
      67,500
      45,772Leland R. Mink
      100,000
      
      
      1.40
      1/22/12
      75,000
      102,405


-48-

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Daniel J. Kunz (January 10, 2006) and Douglas J. Glaspey
(December 29, 2005) exercised options granted in a previous year.

|                   | Shares      | CDN      | Number of Shares    | Value of in-the-money
|------------------ | ----------- | -------- | ------------------- | ---------------------
|                   | Acquired on | $Value   | Underlying          | Unexercised          
|Name               | Exercise    | Realized | Unexercised Options | Stock Options        
|Daniel J. Kunz     | 100,000     | $18,500  | 13,494/0            | CDN$ 6,949/$0        
|Douglas J. Glaspey | 100,000     | $25,000  | 22,134/0            | CDN$11,399/$0        

U.S. Geothermal and their Board of Directors have previously
provided additional incentive to our United States (U.S.A.) officers,
directors, 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) have issued 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 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 amendments 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.

GTH did not award any shares, units or rights to any executive
officer under a Long-Term Incentive Plan during the fiscal years ended March 31,
2005, 2006, and 2007.

Director CompensationName 
        (a)
      Fees earned or 
        paid in cash 
        ($) 
        (b)
      Stock 
        awards 
        ($) 
        (c)
      Option 
        awards 
        ($) 
        (d)
      Non-equity 
        incentive 
        plan 
        compens- 
        ation 
        ($) 
        (e)
      Change in 
        pension value 
        and 
        nonqualified 
        deferred 
        compensa- 
        tion earnings 
        ($) 
        (f)
      All other 
        compensa- 
        tion 
        ($) 
        (g)
      Totals 
        ($) 
        (h)John H. Walker
      16,250
      
      74,602
      
      
      0
      90,852Daniel J. Kunz
      162,000
      
      532,257
      
      
      37,960
      732,217Paul A. Larkin
      24,000
      
      116,768
      
      
      0
      140,768Douglas J. Glaspey
      130,500
      
      381,619
      
      
      0
      512,119Jon Wellinghoff
      5,750
      
      0
      
      
      0
      5,750Leland R. Mink
      0
      
      95,026
      
      
      0
      95,026


-49-

---

Directors who are not otherwise remunerated per an employment
agreement are paid $3,750 per quarter and $500 per board meeting attended in
person. Directors who are also officers do not receive any cash compensation for
serving in that capacity. However, all directors are reimbursed for their
out-of-pocket expenses in attending meetings.

Compensation Committee Interlocks and Insider
Participation

During the year ended March 31, 2007:

• Mr. Daniel J. Kunz, our Chief Executive Officer, was
  a member of the Compensation and Benefits Committee;

• none of the members of the Compensation Committee entered
  into (or agreed to enter into) any transaction or series of transactions with
  us or any of our subsidiaries in which the amount involved exceeded $120,000
  in which he had or will have a direct or indirect material interest, which were
  required to be reported under Item 13 of this report;

• none of our executive officers was a director or Compensation
  Committee member of another entity an executive officer of which served on our
  Compensation Committee; and

• none of our executive officers served on the Compensation
  Committee (or another board committee with similar functions) of another entity
  an executive officer of which served as a director on our board of directors.

Compensation Committee ReportThe Compensation
and Benefits Committee has reviewed and discussed with management the
Compensation Discussion and Analysis contained in this Annual Report. Based on
this review and discussion, the Compensation and Benefits Committee recommended
to the Board of Directors that the Compensation Discussion and Analysis be
included in the Companys Annual Report.

Compensation and Benefits
Committee

John H. Walker. Paul A. Larkin &
Daniel J. Kunz

Item 12. Security Ownership of Certain Beneficial Owners
and Management and RelatedStockholder Matters

The following table details the number of securities authorized
for issuance under the Companys equity compensation plans for the fiscal year
ended March 31, 2007:

Equity Compensation Plan InformationPlan Category
      Number of securities to 
        be issued upon exercise 
        of outstanding options, 
        warrants and rights
      Weighted average 
        exercise price of 
        outstanding options, 
        warrants and rights
      Number of 
        securities 
        remaining available 
        for future issuanceEquity compensation plans approved by security holders
      2,936,128
      CDN $0.96
      1,444,923Equity compensation plans not approved by security holders
      Nil
      Nil
      NilTotal
      2,936,128
      CDN $0.96
      1,444,923


-50-

---

The following table sets forth certain information known to the
Company regarding the beneficial ownership of common stock as of March 31, 2007,
or as of such later date as is listed below, of each person known to be the
holder of more than 5% of our issued and outstanding stock.

Significant OwnersTitle of Class 
        (1)
      Name and Address of Beneficial 
        Owner 
        (2)
      Amount and Nature of 
        Beneficial Owner 
        (3)
      Percent of Class 
        (4)Common Stock
      Goldman, Sachs & Co, 295 Chipeta 
        Way, Salt Lake City, UT 84108
      4,200,000
      9.60Common Stock
      SPCP Group LLC, 2 Greenwhich 
        Plaza, Greenwhich, CT 06830
      8,300,000
      18.97Common Stock
      S.A.C. Capital Associates LLC, PO 
        Box 58, Victoria House, The Valley, 
        Anguilla
      3,000,000
      6.86Common Stock
      Winslow Green Growth Fund, PO 
        Box 7247- 7057, Philadelphia, PA 
        19170-7057
      2,700,000
      6.17Common Stock
      Wexford Capital, Walker House, 
        Mary Street, Georgetown, Cayman 
        Islands
      3,000,000
      6.86Common Stock
      Daniel J. Kunz ; 1509 Tyrell 
        Lane, Suite B; Boise, Idaho
      2,541,026
      6.44


The following table sets forth certain information known to the
Company regarding the beneficial ownership of the common stock as of March 31,
2007, or as of such later date as indicated below, by (i) each of our directors,
(ii) each of our named executive officers, and (iii) all of our executive
officers and directors, serving at the time of the filing of this Report, as a
group.

Name (1)
    Common Shares Beneficially
      Owned (2)
    Shares Individuals have the
      right to acquire within 60 days (3)
    Total Number of Shares
      Beneficially Owned (4)
    Percent of Class
      (5)Daniel J. Kunz
    2,541,026
    410,994
    2,952,020
    6.68Douglas J. Glaspey
    1,160,425
    307,134
    1,467,559
    3.24Kerry D. Hawkley
    40,000
    201,250
    241,250
    0.55John H. Walker
    67,334
    126,250
    193,584
    0.44Paul A. Larkin
    687,638
    135,000
    822,638
    1.84Leland R. Mink
    0
    25,000
    25,000
    0.06


-51-

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

Equity Transactions with Owners and Directors

1. In September, 2004, the company agreed to pay past due
compensation for services rendered in calendar year 2004 to Messrs. Kunz,
Glaspey, Bourgeois (who was then the Chief Financial Officer and Secretary of
the company) and Larkin, which, on October 19, 2004, each used to exercise
options as follows:

OPTIONEE
    Amount exercised
      (USD)
    Amount exercised
      (CDN)
    Exercise price
      (CDN)
    Number of common
      sharesDaniel Kunz
    $ 40,550.00
    $ 51,903.60
    $ 0.60
    86,506Doug Glaspey
    $ 36,500.00
    $ 46,719.60
    $ 0.60
    77,866Ron Bourgeois
    $ 13,000.00
    $ 16,639.80
    $ 0.60
    27,733Paul Larkin
    $ 40,607.42
    $ 51,978.00
    $ 0.60
    86,630Totals
    $130,657.42
    
    
    278,735


Transactions with Management and Others

No material business transactions exist between the Company and
management, or family or affiliates of management as at March 31, 2007. The
Board of Directors must be notified in advance, and authorize, any transaction
with the Company that may involve a member of management, or family or
affiliates of management.

Certain Business Relationships

No material business relationships exist between the Company
and directors, or family or affiliates of directors as at March 31, 2007.

Indebtedness of ManagementThroughout the
fiscal year and at fiscal year end, management was not indebted to the Company
or any of its subsidiaries.

Code of EthicsManagement submitted a proposed
Code of Ethics to the Board of Directors for review and comment. The Board
approved the code of ethics at the board meeting held in conjunction with the
annual general meeting in September 2005. The code of ethics applies to all
directors, officers and employees of the company. The Code of Ethics is included
in the Companys web page at www.usgeothermal.com.

-52-

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Item 14. Principal Accountant Fees and Services

The aggregate fees billed by the Companys principal accountant
for the fiscal years ended March 31, 2005, 2006 and 2007 are as follows:

Year Ended March 31,
    Audit Fees (1)
    Audit Related (2)
    Tax Preparation (3)
    Other Fees (4)2007
    $ 35,333
    $ 3,725
    $ 22,757
    $ 7,0432006
    31,116
    0
    0
    02005
    38,300
    0
    0
    0


| | (1) | Includes services for the annual audit of the Companys
      financial statements and services associated with SB-2 registration
      statements filed with the SEC.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Fees charged for assurance and related services
      reasonably related to the performance of an audit, and not included under
      Audit Fees.                   
| | (3) | Fees charged for tax compliance, tax advice and tax
      planning services.                                                                                          
| | (4) | Fees for services other than disclosed in any other
      column.                                                                                                     

The Audit Committee reviews the Companys financial statements,
MD&A and any annual and interim earnings press releases before the Company
publicly discloses this information and any reports or other financial
information (including quarterly financial statements) which are submitted to
any governmental body, or to the public, including any certification, report,
opinion, or review rendered by the principal accountant performing the external
audit of the Companys records. The Audit Committee also confirms that adequate
procedures are in place for the review of the Companys public disclosure of
financial information extracted or derived from the Companys financial
statements.

The Audit Committee engaged Williams & Webster to perform
the annual audit of the financial statements of the company. Audit fees and
scope of work are monitored and approved by the Audit Committee as part of the
engagement process. Items not included in the engagement process are reviewed
and authorized by senior management, after consulting with the Audit Committee
members.

-53-

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PART IV

Item 15. Exhibits, Financial Statement
Schedules

EXHIBIT LIST

|EXHIBIT |                                                                                                                                                                                                                                                                                                                  
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NUMBER  | DESCRIPTION                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                  
|3.1     | Certificate of Incorporation of U.S. Cobalt Inc. (now
      known as U.S. Geothermal Inc.) (Incorporated by reference to exhibit 3.1
      to the registrants Form SB-2 registration statement as filed on July 8,
      2004)                                                                                  
|        |                                                                                                                                                                                                                                                                                                                  
|3.2     | Certificate of Domestication of Non-U.S. Corporation
      (Incorporated by reference to exhibit 3.2 to the registrants Form SB-2
      registration statement as filed on July 8, 2004)                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                  
|3.3     | Certificate of Amendment of Certificate of Incorporation
      (changing name of U.S. Cobalt Inc. to U.S. Geothermal Inc.) (Incorporated
      by reference to exhibit 3.3 to the registrants Form SB-2 registration
      statement as filed on July 8, 2004)                                                  
|        |                                                                                                                                                                                                                                                                                                                  
|3.4     | Bylaws of U.S. Cobalt Inc. (now known as U.S. Geothermal
      Inc.) (Incorporated by reference to exhibit 3.4 to the registrants Form
      SB-2 registration statement as filed on July 8, 2004)                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                  
|3.5     | Plan of Merger of U.S. Geothermal, Inc. and EverGreen
      Power Inc. (Incorporated by reference to exhibit 3.5 to the registrants
      Form SB-2 registration statement as filed on July 8, 2004)                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                  
|3.6     | Amendment to Plan of Merger (Incorporated by reference to
      exhibit 3.6 to the registrants Form SB-2 registration statement as filed
      on July 8, 2004)                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                  
|4.1     | Form of Stock Certificate (Incorporated by reference to
      exhibit 4.1 to the registrants Form SB-2 registration statement as filed
      on July 8, 2004)                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                  
|4.2     | Form of Warrant Certificate (Incorporated by reference to
      exhibit 4.2 to the registrants Form SB-2 registration statement as filed
      on July 8, 2004)                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                  
|4.3     | Provisions Regarding Rights of Stockholders (Incorporated
      by reference to exhibit 4.3 to the registrants Form SB-2 registration
      statement as filed on July 8, 2004)                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                  
|10.1    | Agreement between U.S. Geothermal Inc. and Vulcan Power
      Company dated December 3, 2002 regarding the acquisition of the Vulcan
      interest (Incorporated by reference to exhibit 10.1 to the registrants
      Form SB-2 registration statement as filed on July 8, 2004)                              
|        |                                                                                                                                                                                                                                                                                                                  
|10.2    | Amendment No. 1 dated November 15, 2003 to Agreement
      between U.S. Geothermal Inc. and Vulcan Power Company (Incorporated by
      reference to exhibit 10.2 to the registrants Form SB-2 registration
      statement as filed on July 8, 2004)                                                           
|        |                                                                                                                                                                                                                                                                                                                  
|10.3    | Amendment No. 2 to Agreement by and between U.S.
      Geothermal Inc. and Vulcan Power Company dated December 30, 2003
      (Incorporated by reference to exhibit 10.3 to the registrants Form SB-2
      registration statement as filed on July 8, 2004)                                                  
|        |                                                                                                                                                                                                                                                                                                                  
|10.4    | Geothermal Lease and Agreement dated July 11, 2002,
      between Sergene Jensen, Personal Representative of the Estate of Harlan B.
      Jensen, and U.S. Geothermal Inc. (Incorporated by reference to exhibit
      10.5 to the registrants Form SB-2 registration statement as filed on July
      8, 2004)

-54-

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|10.5  | Geothermal Lease and Agreement dated June 14, 2002,
      between Jensen Investments Inc. and U.S. Geothermal Inc. (Incorporated by
      reference to exhibit 10.6 to the registrants Form SB-2 registration
      statement as filed on July 8, 2004)                                                                                                                                                            
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.6  | Geothermal Lease and Agreement dated March 1, 2004,
      between Jay Newbold and U.S. Geothermal Inc. (Incorporated by reference to
      exhibit 10.7 to the registrants Form SB-2 registration statement as filed
      on July 8, 2004)                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.7  | Geothermal Lease and Agreement dated June 28, 2003,
      between Janice Crank and the children of Paul Crank and U.S. Geothermal
      Inc. (Incorporated by reference to exhibit 10.8 to the registrants Form
      SB-2 registration statement as filed on July 8, 2004)                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.8  | Geothermal Lease and Agreement dated December 1, 2004,
      between Reid S. Stewart and Ruth O. Stewart and US Geothermal Inc.
      (Incorporated by reference to exhibit 10.9 to the registrants Amendment
      No. 2 to Form SB-2 registration statement as filed on January 10, 2005)                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.9  | Geothermal Lease and Agreement, dated July 5, 2005,
      between Bighorn Mortgage Corporation and US Geothermal Inc. (Incorporated
      by reference to exhibit 10.11 to the registrants Form 10-QSB quarterly
      report as filed on February 17, 2006)                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.10 | Geothermal Lease and Agreement, dated June 23, 2005,
      among Dale and Ronda Doman, and US Geothermal Inc. (Incorporated by
      reference to exhibit 10.13 to the registrants Form 10-QSB quarterly
      report as filed on February 17, 2006)                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.11 | Geothermal Lease and Agreement, dated June 23, 2005,
      among Michael and Cleo Griffin, Harlow and Pauline Griffin, Douglas and
      Margaret Griffin, Terry and Sue Griffin, Vincent and Phyllis Jorgensen,
      and Alice Mae Griffin Shorts, and US Geothermal Inc. (Incorporated by
      reference to exhibit 10.14 to the registrants Form 10- QSB quarterly
      report as filed on February 17, 2006)
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.12 | Geothermal Lease and Agreement dated January 25, 2006,
      between Philip Glover and US Geothermal Inc. (Incorporated by reference to
      exhibit 10.9 to the registrants Form 10-QSB quarterly report as filed on
      February 17, 2006)                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.13 | Geothermal Lease and Agreement, dated May 24, 2006,
      between JR Land and Livestock Inc. and US Geothermal Inc. (Incorporated by
      reference to exhibit 10.30 to the registrants Form 10-KSB annual report
      as filed on June 29, 2006)                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.14 | Administrative Services Contract, dated January 1, 2004,
      between U.S. Geothermal Inc. and New Dawn Holdings Ltd. (Incorporated by
      reference to exhibit 10.10 to the registrants Form SB-2 registration
      statement as filed on July 8, 2004)                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.15 | Employment Agreement dated April 1, 2006, with Daniel J.
      Kunz (Incorporated by reference to exhibit 10.12 to the registrants Form
      10-KSB annual report as filed on June 29, 2006)                                                                                                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.16 | Employment Agreement dated April 1, 2006, with Kerry D.
      Hawkley (Incorporated by reference to exhibit 10.22 to the registrants
      Form 10-KSB annual report as filed on June 29, 2006)                                                                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.17 | Employment Agreement dated April 1, 2006, with Douglas J.
      Glaspey (Incorporated by reference to exhibit 10.23 to the registrants
      Form 10-KSB annual report as filed on June 29, 2006)                                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.18 | Escrow Agreement made December 19, 2003, among U.S.
      Geothermal Inc., Pacific Corporate Trust Company, as escrow agent, and
      certain security holders (Incorporated by reference to exhibit 10.15 to
      the registrants Form SB-2 registration statement as filed on July 8,
      2004)                                                                                                              

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|10.19 | Escrow Agreement made December 19, 2003, among U. S.
      Geothermal Inc., Pacific Corporate Trust Company, as escrow agent, and
      certain security holders (Incorporated by reference to exhibit 10.16 to
      the registrants Form SB-2 registration statement as filed on July 8,
      2004)                                 
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                         
|10.21 | First Amended and Restated Merger Agreement dated
      November 30, 2003 among U.S. Cobalt Inc., EverGreen Power Inc., U.S.
      Geothermal Inc., and the stockholders of U.S. Geothermal Inc.
      (Incorporated by reference to exhibit 10.17 to the registrants Form SB- 2
      registration statement as filed on July 8, 2004)
|      |                                                                                                                                                                                                                                                                                                                                         
|10.22 | Agreement with Dundee Securities Corporation dated June
      28, 2004 (Incorporated by reference to exhibit 10.18 to the registrants
      Form SB-2 registration statement as filed on July 8, 2004)                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                         
|10.23 | Amended and Restated Stock Option Plan of U.S. Geothermal
      Inc. dated September 29, 2006.(Incorporated by reference to
      exhibit 10.23 to the registrants Form SB-2 registration statement as
      filed on October 2, 2006.)                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                         
|10.24 | Power Purchase Agreement dated December 29, 2004 between
      U.S. Geothermal Inc. and Idaho Power Company (Incorporated by reference to
      exhibit 10.19 to the registrants Amendment No. 2 to Form SB-2
      registration statement as filed on January 10, 2005)                                                               
|      |                                                                                                                                                                                                                                                                                                                                         
|10.25 | Engineering, Procurement and Construction Agreement dated
      December 5, 2005 between U.S. Geothermal Inc. and Ormat Nevada Inc.
      (Incorporated by reference to exhibit 10.28 to the registrants Form
      10-QSB quarterly report as filed on February 17, 2006) *                                                           
|      |                                                                                                                                                                                                                                                                                                                                         
|10.26 | Amendment to the Engineering, Procurement and
      Construction Agreement dated April 26, 2006 between U.S. Geothermal Inc.
      and Ormat Nevada Inc. (Incorporated by reference to exhibit 99.1 to the
      registrants Form 8-K as filed on May 2, 2006)                                                                         
|      |                                                                                                                                                                                                                                                                                                                                         
|10.27 | Letter of Intent from Eugene Water and Electric Board to
      U.S. Geothermal Inc. dated February 22, 2006 (Incorporated by reference to
      exhibit 10.27 to the registrants Form SB-2 as filed on September 29,
      2006).                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                         
|10.28 | Renewable Energy Credits Purchase and Sales Agreement
      dated July 29, 2006 between Holy Cross Energy and U.S. Geothermal Inc.
      (Incorporated by reference to exhibit 10.28 to the registrants Form SB-2
      as filed on September 29, 2006).                                                                               
|      |                                                                                                                                                                                                                                                                                                                                         
|10.29 | Transmission Agreement dated June 24, 2005 between
      Department of Energys Bonneville Power Administration - Transmission
      Business Line and U.S. Geothermal Inc. (Incorporated by reference to
      exhibit 10.27 to the registrants Form 10-QSB quarterly report as filed on
      August 12, 2005)                       
|      |                                                                                                                                                                                                                                                                                                                                         
|10.30 | Interconnection and Wheeling Agreement dated March 9,
      2006 between Raft River Rural Electric Co-op and U.S. Geothermal Inc.
      (Incorporated by reference to exhibit 10.28 to the registrants Form
      10-KSB annual report as filed on June 29, 2006)                                                                      
|      |                                                                                                                                                                                                                                                                                                                                         
|10.31 | Construction Contract dated May 16, 2006 between Raft
      River Rural Electric Co-op and U.S. Geothermal Inc. (Incorporated by
      reference to exhibit 10.31 to the registrants Form SB-2 as filed on
      September 29, 2006).                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                         
|10.32 | Membership Admission Agreement, dated August 9, 2006,
      among Raft River Energy I LLC, U.S. Geothermal Inc., and Raft River I
      Holdings, LLC (Incorporated by reference to exhibit 10.1 to the
      registrants Form 8-K as filed on August 23, 2006) *                                                                      

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|10.33 | Amended and Restated
        Operating Agreement of Raft River Energy I LLC, dated as of August 9,
        2006, among Raft River Energy I LLC, Raft River I Holdings, LLC and U.S.
        Geothermal Inc (Incorporated by reference to exhibit 10.2 to the registrants
        Form 8-K as filed on August 23, 2006).*                                         
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                   
|10.34 | Management Services
        Agreement, dated as of August 9, 2006, between Raft River Energy I LLC
        and U.S. Geothermal Services, LLC (Incorporated by reference to exhibit
        10.3 to the registrants Form 8-K as filed on August 23, 2006) *                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                   
|10.35 | Construction
        contract dated May 22, 2006 between Industrial Builders and U.S. Geothermal
        Inc. (Incorporated by reference to exhibit 10.31 to the registrants
        Form 10- KSB annual report as filed on June 29, 2006)                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                   
|10.36 | First Amendment
        to the Amended and Restated Operating Agreement of Raft River Energy I
        LLC, dated as of November 7, 2006, among Raft River Energy I LLC, Raft
        River I Holdings, LLC and U.S. Geothermal Inc. (Incorporated by reference
        to exhibit 10.36 to the registrants Form 10-QSB as filed on February
        20, 2007). *
|      |                                                                                                                                                                                                                                                                                                                                                                   
|10.37 | Consolidated
        Financial Statements of U.S. Geothermal Inc. as of March 31, 2007.                                                                                                                                                                                                                                                                           
|      |                                                                                                                                                                                                                                                                                                                                                                   
|23.1  | Consent
        of Williams & Webster, P.S.                                                                                                                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                   
|31.1  | Certification
        of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002                                                                                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                   
|31.2  | Certification
        of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002                                                                                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                   
|32.1  | Certification
        of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002                                                                                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                   
|32.2  | Certification
        of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002                                                                                                                                                                                                                                                

* - Agreements are the subject of a confidential treatment
request filed with the Commission on August 23, 2006.

-57-

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**SIGNATURES**

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

|              | **U.S. Geothermal Inc.**                                                                       
|------------- | -----------------------------------------------------------------------------------------------
|              | (Registrant)                                                                                   
|              |                                                                                                
|              |                                                                                                
|June 27, 2007 | /s/ Daniel
      J. Kunz                                                                       
|Date          | Daniel J. Kunz
      Chief Executive Officer and President 
      (Principal Executive Officer)

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

|Name                   | Title                                                                               | Date         
|---------------------- | ----------------------------------------------------------------------------------- | -------------
|                       |                                                                                     |              
|/s/ Daniel J. Kunz     | Chief Executive Officer, President and Director
      (Principal Executive Officer) | June 27, 2007
|Daniel J. Kunz         |                                                                                     |              
|                       | Chief Financial Officer (Principal Financial
      and Accounting
      Officer)    | June 27, 2007
|/s/ Kerry Hawkley      |                                                                                     |              
|Kerry Hawkley          |                                                                                     |              
|                       |                                                                                     |              
|/s/ Douglas J. Glaspey | Chief Operating Officer and Director                                                | June 27, 2007
|Douglas J. Glaspey     |                                                                                     |              
|                       |                                                                                     |              
|/s/ John H. Walker     | Chairman and Director                                                               | June 27, 2007
|John H. Walker         |                                                                                     |              
|                       |                                                                                     |              
|/s/ Paul A. Larkin     | Director                                                                            | June 27, 2007
|Paul A. Larkin         |                                                                                     |              
|                       |                                                                                     |              
|/s/ Leland R. Mink     | Director                                                                            | June 27, 2007
|Leland R. Mink         |                                                                                     |              

---