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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION** Washington, D.C. 20549

FORM 10-KSB

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

For the fiscal year ended **March 31, 2005**

Commission File Number **333-117287**

US 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)         

**208-424-1027**
  (Registrant’s Telephone Number, Including Area Code)

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

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

Check whether the issuer (1) has filed all reports required
  to be filed by Section 13 or 15(d) of
  the Securities Exchange Act of 1934 during the preceding 12 months (or for such
  shorter period
  that the registrant was required to file such reports), and (2) has been subject
  to such filing 
  requirements for at least the past 90 days.

Yes x  No
   ̈

Check if there is no disclosure of delinquent filers in response
  to Item 405 of Regulation S-B is 
  not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. x

Issuer’s revenues for its most recent year: $NIL

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 July 11, 2005: $7,999,837.50

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 May 31, 2005
|----------------------- | -------------------------------------
|Common stock, par value | 17,331,429                           
|$0.001 per share        |                                      

Transitional Small Business Disclosure Format (check one) 
  Yes  ̈ No x

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USGeothermal

U.S. Geothermal Inc. and Subsidiaries

Form 10-KSB

For the Year ended March 31, 2005

INDEX

|            |                                                                                                                   | Page
|----------- | ----------------------------------------------------------------------------------------------------------------- | ----
|            |                                                                                                                   |     
|PART I. –   |                                                                                                                   |     
|            |                                                                                                                   |     
|Item 1.     | Description of Business                                                                                           | 3   
|            |                                                                                                                   |     
|Item 2.     | Description of Property                                                                                           | 13  
|            |                                                                                                                   |     
|Item 3.     | Legal Proceedings                                                                                                 | 18  
|            |                                                                                                                   |     
|Item 4.     | Submission of Matters to a Vote of Security
      Holders                                                         | 18  
|            |                                                                                                                   |     
|PART II. –  |                                                                                                                   |     
|            |                                                                                                                   |     
|Item 5.     | Market for Common Equity and Related Stockholder
      Matters                                                    | 18  
|            |                                                                                                                   |     
|Item 6.     | Management’s Discussion and Analysis
      or Plan of Operations                                                  | 23  
|            |                                                                                                                   |     
|Item 7.     | Financial Statements                                                                                              | 26  
|            |                                                                                                                   |     
|Item 8.     | Changes in and Disagreements with Accountants
      on Accounting and Financial Disclosure                        | 27  
|            |                                                                                                                   |     
|Item 8A.    | Controls and Procedures                                                                                           | 27  
|            |                                                                                                                   |     
|Item 8B.    | Other Information                                                                                                 | 27  
|            |                                                                                                                   |     
|PART III. – |                                                                                                                   |     
|            |                                                                                                                   |     
|Item 9.     | Directors, Executive Officers, Promoters
      and Control Persons; Compliance with Section 16(a) of the Exchange | 27  
|            |                                                                                                                   |     
|Item 10.    | Executive Compensation                                                                                            | 30  
|            |                                                                                                                   |     
|Item 11.    | Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters              | 31  
|            |                                                                                                                   |     
|Item 12.    | Certain Relationships and Related Transactions                                                                    | 32  
|            |                                                                                                                   |     
|Item 13.    | Exhibits                                                                                                          | 34  
|            |                                                                                                                   |     
|Item 14.    | Principal Accountant Fees and Services                                                                            | 34  

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This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, 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.

Part I

ITEM 1. DESCRIPTION OF BUSINESS

The Company’s Business

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 developing geothermal energy power plants in the Raft River area of Idaho. As more thoroughly discussed in
the section below on Management’s Plan of Operations, the company has entered into three power purchase agreements, at 10 megawatts (MW) each, with Idaho Power Company, and is in the process of developing the power plant for the first phase of
production.

Business Development

U.S. Geothermal Inc. is a Delaware corporation. GTH was originally incorporated in the province of British Columbia, Canada, under the name “Mango Resources Ltd.” on September 14, 1987. It immediately began trading on the Vancouver Stock
Exchange under the symbol “MRH.” On October 7, 1999, the company changed its name from “Mango Resources Ltd.” to “Consolidated Mango Resources Ltd.” and its share capital was consolidated on the basis of ten
pre-consolidation common shares for one post-consolidation common share.

On March 13, 2000, the company moved to and began trading on the TSX Venture
  Exchange (which is the successor to the Vancouver Stock Exchange as well as
  some other provincial exchanges) under the name “US Cobalt Inc.”
  and under the symbol “USC” and continued to trade under that symbol
  until trading was halted on April 3, 2002, in accordance with TSX Venture Exchange
  policy, in anticipation of and pending completion of the company’s merger

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with Geo-Idaho. Upon completion of the merger, the company again began trading on the TSX Venture Exchange, under its current symbol, “GTH.”

Historically, GTH, first as Mango Resources and Consolidated Mango Resources and then as U.S. Cobalt, operated in the resources sector and held interests in various mining properties. Its mining activities were unproductive and by June, 1999, Mango
had no significant assets and became inactive.

U.S. Cobalt Inc., a Colorado corporation (“USC Colorado”) was incorporated on April 27, 1998, to conduct cobalt exploration. In March 2000, the company completed a plan of arrangement with USC Colorado, continuing its incorporation from
British Columbia to Delaware, under Delaware corporate law, as U.S. Cobalt Inc. A “plan of arrangement” and “continuation” are Canadian law concepts, whereby a Canadian provincial corporation may, practically speaking, become
a Delaware (or other U.S. jurisdiction) corporation, similar to a state-to-state reincorporation under U.S. law. As part of the plan of arrangement, our authorized capital was changed from 100,000,000 common shares without par value to 100,000,000
shares of common stock with a par value of US $0.001 per share. USC Colorado became a subsidiary of the company, and conducted the cobalt exploration activities. By March of 2002, the company concluded that its then current cobalt exploration
project was no longer promising, and determined it would refocus its business efforts on renewable, “green” energy projects. USC Colorado was voluntarily dissolved in March, 2005.

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 Vulcan Power Company, pursuant to which Geo-Idaho agreed to acquire from Vulcan
all of the real property, personal property and permits that comprised Vulcan’s interest in the Raft River project. We generally refer to Vulcan’s real and personal property interests as the “Vulcan Property”. On December 3,
2002 the letter agreement was replaced by a formal agreement with Vulcan (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 Vulcan 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 March 31, 2004, Geo-Idaho had paid Vulcan $492,000 in securities and cash payments, to bring its percentage ownership in the Vulcan Property to
75%. GTH may acquire the remaining 25% interest for a payment of $125,000 at any time on or before receipt of project financing for construction of the initial power plant.

The opportunity to be involved in the geothermal business as presented by
  Geo-Idaho was attractive to GTH’s board of directors and subsequently
  approved by its shareholders. 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. For
  a more detailed discussion of the development of the company, please see the
  section titled “The Company and Its Business” of the company’s
  SB-2, filed with the SEC on April 7, 2005.

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Competition

Although the market for different forms of energy is large and dominated by
  very powerful players, we perceive our industrial competition to be independent
  power producers and in particular those producers who provide “green“
  renewable power. Our definition of green power is electricity derived from a
  source that does not pollute the air, water or earth. Sources of green power,
  in addition to geothermal, include wind, solar, biomass and run-of-the river
  hydroelectric. A number of states have instituted renewable portfolio standards
  (“RPS”) that require utilities to purchase a minimum percentage
  of their power from renewable sources. For example, RPS statutes in California
  and Nevada require 20% renewable, 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 or are becoming committed
  to increasing 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, GTH 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.

Governmental Approvals and Regulation

GTH is subject to both federal and state regulation in respect of the production, sale and distribution of electricity. Federal legislation includes The Public Utilities Act of 1935 (which has two titles: The Public Utility Holding Company Act
("PUHCA") and the Federal Power Act), as well as the Public Utility Regulatory Policies Act of 1978 ("PURPA") and the Energy Policy Act of 1992 ("EPACT "). 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. Additionally, under EPACT, the company is currently exempt from PUHCA legislation regulating rates for electricity on the wholesale level.

The State of Idaho also regulates electricity. The Public Utility law of the State of Idaho (Title 61 of the Idaho Code) grants authority for rules and regulation to 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 Megawatts (MW) per month and a contract term of 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;
  under EPACT, it can transmit and sell its electricity in another state. Nonetheless,
  GTH has signed three 10 MW power purchase agreements with the Idaho Power Company.

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GTH will require the approval of various federal, state and local authorities for construction of a geothermal facility 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 permitting.

Environmental Compliance

As GTH’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.
Please see discussion below under Permittingin Item 6- Management’s Plan of Operations. 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. The environmental assessment that the company is
conducting will identify any additional steps that are needed to comply with these acts.

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.

Employees

GTH currently has seven employees including three full-time employees. Once construction financing is obtained, we intend to engage consultants and service providers, including a construction contractor. Once the power plant is completed, we intend
to hire approximately 12 to 14 operating staff, at an estimated annual cost of $635,000. If the Company is successful in making acquisitions, additional management and administrative staff may be added.

Risk Factors

An investment in shares of our common stock involves a high degree of risk. Potential investors should consider the following factors, in addition to the other information provided by the company in its filings with the SEC in evaluating our
business and proposed activities before they purchase any shares of our common stock.

Risks Relating To Our Business

Our ability to continue as a going concern is uncertain.
  Our financial statements have been prepared on a going concern basis, which
  contemplates continuity of operations, realization of assets and liquidation
  of liabilities in the ordinary course of business. We have a need for substantial
  funds to develop our geothermal properties. We have financed our activities
  to date using private debt and equity financings, and we have no line of

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credit or other financing agreement providing borrowing availability with a commercial lender. Our ability to continue as a going concern is dependent upon adequate sources of capital and the ability to sustain positive results of operations and
cash flows sufficient to continue to explore for and develop our geothermal assets. All of the foregoing leads to questions concerning our ability to meet our obligations as they come due. There is no assurance that the carrying amounts of our
assets will be realized or that liabilities will be liquidated or settled for the amounts recorded. GTH is in a development stage and there is no assurance at this time that we will procure the equity and/or debt financing required to build and
commission a geothermal electrical power generation facility. The auditors’ report on the March 31, 2005 financial statements includes an explanatory paragraph that states that as the company has suffered recurring losses from operations,
substantial doubt exists about its ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should
the company be unable to continue as a going concern.

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 and 2005, we incurred net losses of ($164,909), ($676,398), and
  ($1,830,421) respectively. At March 31, 2004, and March 31, 2005, we had
  accumulated deficits of ($1,878,729) and ($3,709,150), respectively.
  We expect to incur losses for at least the next 18 months. We cannot give you
  any assurance that we will soon make a profit or that we will ever make a profit.
  To achieve profitability, we must, among other things, obtain financing to build
  and commission a geothermal electrical power generation facility for our initial
  power purchase agreements.

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.

We have a need for substantial additional financing and will have to significantly
  curtail or cease operations if we are unable to secure such financing.At March 31, 2005, we had a cash position of approximately $1,957,075.
  We require substantial additional financing to fund the cost of continued development
  of the Raft River project and other operating activities, to acquire the remaining
  ownership of property making up the project, and to finance the growth of our
  business, including the construction and commissioning of a power generation
  facility. If further funding is not obtained by December 31, 2005, we may be
  required to significantly curtail or cease operations. 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.

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It is very costly to place geothermal resources into commercial production.
  Before the sale of any power can occur, it will be necessary to construct a
  gathering and disposal system, a power plant, and a transmission line, and considerable
  administrative costs would be incurred, together with the drilling of additional
  wells. We have estimated these costs to be around US $35,000,000. 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 GTH 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 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.

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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 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 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 would 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 fires, 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 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;

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•                  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. Even if liability is imposed on operators in the
  Anderson Springs area, we do not believe the area of the Raft River project
  or our intended operation of a power plant present the same geological or seismic
  risks.

Actual costs of construction or operation of a power plant may exceed estimates
  used in negotiation of power purchase agreements.The company’s three initial power purchase contracts are 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.

Payments under our initial power purchase agreement may be reduced if we
  are unable to forecast our production adequately.

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Under the terms of our three initial power purchase agreements, 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.
  Because some of our executive officers currently serve in only part-time capacities,
  the extent that such other companies require their services may conflict with
  the available time or scheduling of services performed for GTH. 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.

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 sale
  in the United States, which could have an adverse effect on the market price
  for our common stock and could adversely affect our ability to raise needed
  capital.Currently, the number of shares in the public float on the TSX Venture Exchange
  and over-the-counter market in the U.S. is approximately 17,331,429. The market
  price for our common stock could decrease significantly and our ability to raise
  capital could be adversely affected by the availability of such a large number
  of shares.

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 33% of the
  company’s securities, on a fully diluted basis. If the officers and directors
  were to act collectively, assuming they

11

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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 17,331,429 shares of our common stock outstanding and 10,393,858 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 twelve months from a low of CDN$0.70 to a high of CDN$1.10 on the
  TSX Venture Exchange and from a low of US$0.50 to a high of US$0.66
  on the Over-the-Counter Bulletin Board. The trading price of our common stock
  on the TSX Venture Exchange and on the OTC 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:

12

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•                  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 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.

13

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The Raft River project currently consists of seven parcels (generally referred
  to as the Vulcan Property, the Crank Lease, the Newbold Lease, the Jensen Lease,
  the Jensen Investments Lease, the Stewart Lease and the Elena Property) comprising
  660 acres of fee land and 3,496.79 acres of contiguous leased geothermal rights
  located on private property in Sections 23, 24, 25, 26, 27, 28, 33, 34 and 35,
  Township 15 South, Range 26 East Boise Meridian, and Sections 17, 18, 19, 29,
  and 30, Township 15 South, Range 27 East Boise Meridian, Cassia County, Idaho.
  All parcels are defined by legal subdivision or by metes and bounds survey description.
  The seven parcels are as follows:

The Vulcan Property.The Vulcan Property includes both surface and geothermal rights and consists of two units. The first unit has a total area of 240 acres and is comprised of the East half of the South-East quarter of Section 22, plus the
South-West quarter of Section 23, Township 15 South, Range 26 East Boise Meridian. Three geothermal wells (RRGE-1, RRGP-4 and RRGP-5) are located on this parcel. The second unit has a total area of 320 acres, and is comprised of the South half of
the North-West quarter, the South half of the North-East quarter, and the entire South-East quarter of Section 25, Township 15, South, Range 26 East Boise Meridian. 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 Crank Lease.The Crank lease covers 160 acres of mineral and geothermal rights, with right of ingress and egress. The lease is comprised of the NE quarter of Section 23, Township 15 South, Range 26 East Boise Meridian.

The Newbold Lease.The Newbold lease covers 20 acres of both surface
  and geothermal rights. The lease is comprised of the NE quarter of Section 23,
  Township 15 South, Range 26 East Boise Meridian.

The Jensen Lease.The Jensen lease covers 2,954.75 acres of geothermal
  rights only. It is contiguous with the Vulcan property and the Crank lease with
  land parcels located in Sections

14

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24, 25, 26, 27, 33, and 34, Township 15 South, Range 26 East Boise Meridian, and in Sections 18, 19, 20, 29, and 30, Township 15 South, Range 27 East Boise Meridian.

The Jensen Investments Lease.The Jensen Investments lease covers 44.5 acres of surface and geothermal rights in Section 35, Township 15 South, Range 26 East Boise Meridian, and is contiguous with the Jensen lease.

The Stewart Lease.The Stewart Lease covers 317.54 acres in two adjoining parcels; Parcel 1 includes the N half of the SE quarter of the SE quarter, the SE quarter of the SE quarter of the SE quarter, and the SW quarter of the SE quarter of
the SE quarter of Section 23, and the W half of the SW quarter, the SE quarter of the SW quarter and part of the SE quarter of the SW quarter of Section 24, Township 15 South, Range 26 East Boise Meridian, contains 159.04 acres and includes surface
and geothermal rights, Parcel 2 contains 158.50 acres in the NE quarter of Section 26, Township 15 South, Range 26 East Boise Meridian and only covers surface rights. The underlying geothermal rights for Parcel 2 are subject to the Jensen Lease.

The Elena Property. The Elena Property is approximately 100 acres of surface and geothermal rights, excluding the oil and gas rights to the property. The property is in the W half of the SE quarter, and the W half of the NE quarter of the SE
quarter of Section 23, Township 15 South, Range 26 East Boise Meridian, and is contiguous to other properties owned and leased by the company.




Lease/Royalty Terms

The Crank lease, the Newbold lease, the Jensen lease and the Jensen Investments
  lease have royalties payable under the following terms:

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|(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 (RRGE2) 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, 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): US $5,000

•                  Year
  2 (Paid June 2003 under original lease): US $10,000

•                  Year
  3 (Paid June 2004 under renegotiated lease): US $10,000

•                  Year
  4: Due June 2005: US $10,000

•                  Year
  5: Due June 2006: US $10,000

Payments for years 2002 through 2006 are advances against future production royalties. For later years, during commercial production, there is a minimum annual production royalty of US $18,000. The minimum amount that will be payable over the
course of the leases is $45,000. Maximum amounts payable will depend on production from the property.

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

•                  Years
  1-5: $10.00 per acre or $200 per year (Year 1 paid on signing)

16

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•                  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 production from the property.

The Jensen Lease.The Jensen lease, with Sergene Jensen, lessor, is
  dated July 11, 2002, has a primary term of 10 years. Lease payments (on a July
  to July basis) are as follows:

•                  Years
  1-5: US $2.50 per acre or $7,386.88 per year (Years 1-3 paid for a total
  of $22,160.64)

•                  Years
  6-10: US $3.00 per acre or $8,864.25 per year

The minimum amount that will be payable over the course of the lease is $81,255.65. Maximum amounts payable will depend on production from the property.

The Jensen Investments Lease.The Jensen Investments lease, with Jensen
  Investments, Inc., is dated July 12, 2002, and has a primary term of 10 years.
  Lease payments (on a July to July basis) are as follows:

•                  Years
  1-5: US $2.50 per acre or $111.25 per year (Years 1-3 paid for a total
  of $333.75)

•                  Years
  6-10: US $3.00 per acre or $133.50 per year

The minimum amount that will be payable over the course of the lease is $1,223.75. Maximum amounts payable will depend on production from the property.

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

•                  Year
  1: US $8,000 (paid on signing).

•                  Year
  2: US $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 $319,614.00. Maximum amounts payable will depend upon production from the property.

The total minimum amount payable under all of the leases during their primary terms is $449,593.43. All of the above listed lease payments are payable annually in advance, and are current through lease years beginning in 2004.

We sub-lease general office space “at cost” for our executive office in Boise from an affiliate of Daniel Kunz, the company's Chief Executive Officer, at an annual cost of $13,399. The underlying lease is a year-to-year lease that
expires on January 31, 2006.

Until the construction of the power plant included in phase one of the Raft
  River project is initiated, management believes that only general liability
  and umbrella liability insurance is necessary. Additional insurance will be
  obtained prior to construction of the power plant.

17

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ITEM 3. LEGAL PROCEEDINGS

As of March 31, 2005, 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.

Part II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERMATTERS

Effective June 3, 2005, the common stock of US Geothermal Inc. has been listed for trading on the Over-The-Counter Bulletin Board (the “Bulletin Board”) under the trading symbol “UGTH”. J Giordano Securities Group
(“Giordano”), of New York City, is the market maker for the company’s securities. The first trades of our shares on the Bulletin Board started June 8, 2005, but there can be no assurance that a viable and active trading market will
develop. In limited trading on the Bulletin Board, the common stock of the company has traded from a low of US$0.50 to a high of US$0.66. 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.

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. The trading prices reflect the reverse stock-split on a 5 to 1
basis, which was effected December 19, 2003. In accordance with TSX Venture Exchange policy, the trading of GTH shares was halted on April 3, 2002, prior to the announcement of the acquisition of Geo-Idaho, pending the completion of that
acquisition. The last trade of shares of GTH prior to the halt was at CDN $0.80 per share ($0.16 pre-consolidation). Trading resumed on December 22, 2003 with the initial trade not occurring until January 5, 2004.

|BID PRICES    
|--------------
|              
|2002          
|              
|              
|First Quarter 
|Second Quarter
|Third Quarter 
|Fourth Quarter
|              
|2003          
|              
|              
|First Quarter 
|Second Quarter
|Third Quarter 
|Fourth Quarter

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|2004           |       |      
|-------------- | ----- | -----
|               | (CDN) | (CDN)
|First Quarter  | $0.90 | $0.54
|Second Quarter | $1.05 | $0.70
|Third Quarter  | $1.10 | $0.76
|Fourth Quarter | $1.05 | $0.80
|               |       |      
|2005           |       |      
|               | (CDN) | (CDN)
|First Quarter  | $1.10 | $0.80
|Second Quarter | $0.90 | $0.61

As of June 30, 2005, we had approximately 300 stockholders of record.

The Company has never paid and does not intend to pay dividends on our common stock in the foreseeable future. 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:

|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 issuance
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------------------------------------------------------------
|Equity compensation plans   approved
      by security   holders     | 1,756,265                                                                                                     | $ 0.530                                                                                 | 828,235                                                               
|Equity compensation plans   not approved
      by security   holders | Nil                                                                                                           | Nil                                                                                     | Nil                                                                   
|Total                                                                | 1,756,265                                                                                                     | $0.518                                                                                  | 828,235                                                               

Recent Sales of Unregistered Securities

During the past three years, GTH has issued the following unregistered securities:

1.                On
  February 2, 2002, the following persons, as founders, purchased an aggregate
  of 2,600,000 shares of Geo-Idaho common stock for a total purchase price of
  $40,000:

|Daniel J. Kunz      | 650,000
|------------------- | -------
|Douglas J. Glaspey  | 650,000
|Paul A. Larkin      | 650,000
|Ronald P. Bourgeois | 650,000

The shares were issued in a transaction exempt from the registration requirements
  of the Securities Act by virtue of the exemption afforded by Section 4(2). Each
  of such persons purchased the shares for his own account, for investment and
  not with a view to the distribution of the shares. The certificates for the
  shares bear a restrictive legend and stop transfer

19

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instructions have been placed against the transfer of the shares. No commissions were paid with respect to the issuance.

2.                On
  March 5, 2002, 1,895,000 shares of Geo-Idaho common stock and 1,612,000 warrants
  to purchase shares of Geo-Idaho common stock were issued by Geo-Idaho to Vulcan
  Power Company in exchange for interests in the Raft River project. The value
  of the issued shares and warrants for financial statement purposes was approximately
  $17,000. The securities were issued in a transaction exempt from the registration
  requirements of the Securities Act in reliance on Section 4(2). Vulcan Power
  Company represented to Geo-Idaho 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 securities. No commissions
  were paid with respect to the issuance.

3.                On
  May 28, 2002, an aggregate of 400,000 shares of Geo-Idaho common stock were
  purchased by 13 persons for a subscription price of $0.25 per share, and
  gross proceeds of $98,750 in cash and $1,250 in consulting services.
  The purchasers either represented that they were "accredited investors" as defined
  in Regulation D, or the sales were to non-US persons and took place outside
  of the United States, as defined in Regulation S. None of the purchasers were
  officers or directors. The shares were issued in transactions exempt from the
  registration requirements of the Securities Act in reliance on and compliance
  with Regulations D and S. Each of such persons represented to Geo-Idaho that
  he purchased the shares for his own account, for investment and not with a view
  to the distribution of the shares. No commissions were paid with respect to
  the issuance.

4.                On
  November 1, 2002, an aggregate of 1,033,667 shares of Geo-Idaho common stock
  were purchased by 18 persons, including Daniel Kunz and John Walker, who are
  officers and/or directors of Geo-Idaho and GTH, for a subscription price of
  $0.30 per share, and gross proceeds of $307,100 in cash, and consulting
  services valued at $3,000. The purchasers were either "accredited investors"
  as defined in Regulation D, or the sales were to non-US persons and took place
  outside of the United States, as defined in Regulation S. The shares were issued
  in transactions exempt from the registration requirements of the Securities
  Act in reliance on and compliance with Regulations D and S. Each of such persons
  represented to Geo-Idaho that he purchased the shares for his own account, for
  investment and not with a view to the distribution of the shares. No commissions
  were paid with respect to the issuance.

5.                On
  February 14, 2003, GTH (then U.S. Cobalt Inc.) issued 151,170 shares to the
  following persons for past services rendered, at a deemed aggregate consideration
  of $45,350 or $0.30 per share:

|Name               | No. of Shares
|------------------ | -------------
|Daniel J. Kunz     | 30,479       
|Douglas J. Glaspey | 78,929       
|Paul A. Larkin     | 41,762       
|Total              | 151,170      

6.                Pursuant
  to agreements executed April 25, 2003, GTH issued convertible promissory notes
  in the aggregate principal amount of $269,000 for bridge financing pending
  completion of the merger acquisition of Geo-Idaho, to a group of six investors,
  including Daniel Kunz and Kevin Kitz, officers of the company. The investors
  were either "accredited investors" as defined

20

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in Regulation D, or the transactions were with non-US persons and took place outside of the United States, as defined in Regulation S. The notes were issued in transactions exempt from the registration requirements of the Securities Act in reliance
on and compliance with Regulations D and S. Each of such persons represented to the company that he purchased the notes for his own account, for investment and not with a view to the distribution of the notes. The notes were issued with a
restrictive legend and stop transfer instructions were placed against the transfer of the notes. No commissions were paid with respect to the issuance.

7.                On
  December 19, 2003, GTH issued 6,939,992 shares of its common stock and 2,420,217
  warrants to purchase its common stock in exchange for 100% of Geo-Idaho's outstanding
  shares and warrants. The shares were issued to the following persons, each of
  whom was a security holder of Geo-Idaho, in reliance on Section 4(2):

|NAME                  | NO. OF SHARES
|--------------------- | -------------
|Vulcan Power Company  | 1,755,156    
|Daniel J. Kunz        | 1,254,769    
|Douglas J. Glaspey    | 1,014,649    
|Paul A. Larkin        | 863,187      
|Ronald Bourgeois      | 821,425      
|Tom Menning           | 183,332      
|Grim Estate Ltd.      | 180,000      
|Donald Nelson         | 108,000      
|Ronald C. Yanke       | 108,000      
|Ross Beaty            | 85,000       
|Gerald Sneddon        | 80,000       
|John H. Walker        | 73,807       
|Sneddon Family Trust  | 50,000       
|Steve R. Smith        | 45,000       
|Burton Egger          | 40,000       
|Steven Chi            | 36,667       
|Dr. John Swartley     | 36,667       
|John W. Leonard       | 35,000       
|William Brock         | 33,333       
|Robert Falls          | 24,000       
|Steven Jensen         | 21,000       
|John Beaulieu         | 20,000       
|William Batiuk        | 17,000       
|Barry Marcus          | 15,000       
|Roscoe Ward           | 5,000        
|H. Cobbs              | 4,000        
|Veritable Quandry LLC | 10,000       
|Ed Cryer              | 10,000       
|Mary Mink             | 10,000       

The warrants were issued solely to Vulcan Power Company, the sole warrant
  holder of Geo-Idaho, in reliance on Section 4(2), and are exercisable at a price
  of $0.75 per share, until December 15, 2005. Pursuant to the negotiated
  agreement of the parties, and as approved by the TSX Venture Exchange, the shares
  were exchanged on a one-for-one basis with all shareholders other than Vulcan
  Power Company, which received shares and warrants so that Vulcan Power would
  own 14% on a non-diluted and 25% on a fully-diluted basis after closing (and
  taking into account the private placement discussed in paragraph 8, below).
  The warrants were valued using

21

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the Black Scholes model at $0.26 each, or $629,256 in the aggregate, and recorded on our financial statements as an addition to deficit. Each of such persons represented to Geo-Idaho that he purchased the securities for his, her or 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.

8.                Also
  on December 19, 2003, GTH sold 3,322,221 shares of common stock and 1,661,110
  warrants to purchase shares of its common stock in a private offering under
  Regulations D and S, at a price of $0.45 per unit (a unit being one share
  and one-half share purchase warrant), for gross proceeds of $1,494,999.
  The warrants are exercisable at an exercise price of $0.75 until December
  15, 2005, subject to acceleration upon 30 days notice once the company obtains
  a license from permitting authorities for a 10 megawatt power plant and corresponding
  power purchase and power transmission agreements. The warrants were valued using
  the Black Scholes model at $0.26 each, or $431,889 in the aggregate.
  Of the 13 purchasers, two were residents of the United States who represented
  that they were "accredited investors" under Regulation D, and the remaining
  11 sales were to non-US persons and took place outside of the United States,
  as defined in Regulation S. Daniel J. Kunz, an officer and director of GTH,
  subscribed for 1,111,111 units. Toll Cross Securities of Toronto, Canada, was
  paid a cash fee of $52,500 and issued warrants exercisable until December
  15, 2005, to purchase 83,333 shares of GTH at an exercise price of $0.45,
  as compensation for its services in connection with the private offering. An
  additional $22,622 was incurred in legal expenses relating to the offering
  and together with the $52,500 cash and $25,437 fair value of the Agent’s
  warrants ($0.26 per warrant, calculated using the Black Scholes model) made
  up the $100,559 which was charged to share issue costs. The securities were
  issued in transactions exempt from the registration requirements of the Securities
  Act in reliance on and compliance with Regulations D and S. Each of such persons
  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.

9.                On
  February 20, 2004, GTH issued 385,864 shares and 192,932 share purchase warrants
  in connection with the conversion of $147,000 of principal and $26,639
  in interest of the promissory notes referred to in paragraph 5, above. Mr. Kunz
  did not participate in the conversion, and was repaid his principal and interest.
  The warrants are exercisable until February 17, 2006, at an exercise price of
  $0.75 per share, and are subject to acceleration upon 30 days notice once
  the company obtains a license from permitting authorities for a 10 megawatt
  power plant and corresponding power purchase and transmission agreements. The
  securities were issued in transactions exempt from the registration requirements
  of the Securities Act in reliance on and compliance with Regulations D and S.
  Each of such persons 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 with respect to the issuance.

10.               On
  September 17, 2004, GTH sold 4,000,001 shares of common stock and 4,000,001
  warrants to purchase shares of its common stock in a private offering under
  Regulation S, at a price of CDN $0.85 per unit (a unit being one share and
  one warrant), for gross proceeds of CDN $3,400,000. The units consist of
  one share and a warrant which entitles the holder to purchase one share at an
  exercise price of CDN $1.25 until September 17, 2006. GTH may accelerate
  the exercise period of the warrants on twenty days notice if the closing price
  of the company’s common shares on a public market exceeds CDN $1.65
  for twenty consecutive business days.

22

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The value of each warrant (using the Black-Scholes model) was $0.30, and the aggregate value of the 4,000,001 warrants was $1,190,697. The securities were issued in transactions exempt from the registration requirements of the Securities Act
in reliance on and compliance with Regulation S. Each of such persons 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. Dundee Securities Corporation of Toronto, Canada, was paid a cash fee of CDN $238,000, and issued a “compensation
option” to acquire 280,000 units at an exercise price per unit of CDN $0.85, until September 17, 2006, and valued at $133,341 ($0.30 per warrant, using the Black-Scholes model). The warrants included in Dundee’s units are
also subject to acceleration, whether or not the compensation option has been exercised. An additional CDN $31,977.45 was incurred in legal expenses relating to the offering, as well as CDN $18,190 in fees to the TSX Venture Exchange which
together with the CDN $238,000 cash paid to Dundee made up the $225,131 cash component of issuance costs. With the $131,341 which was the fair value of the Dundee compensation option, the total charged to share issue costs was
$358,472.

11.               On
  October 19, 2004, GTH issued a total of 278,735 shares on the exercise of stock
  options issued under the company’s stock option plan to officers and directors
  of the company as follows:

|Optionee        | Number of Shares Purchased
|--------------- | --------------------------
|Daniel Kunz     | 86,506                    
|Douglas Glaspey | 77,866                    
|Ron Bourgeois   | 27,733                    
|Paul Larkin     | 86,630                    
|                |                           
|Total           | 278,735                   

12.               During
  February 2005, GTH issued 100,000 shares to Elena Corporation as partial consideration
  for purchase of 100 acres known as the Elena Property. No commissions were paid
  with respect to the issuance.

13.               On
  February 18, 2005, GTH issued 30,000 shares on the exercise of stock options
  issued under the company’s stock option plan to Ron Bourgeois. No commissions
  were paid with respect to the issuance.

ITEM 6. MANAGEMENT’S PLAN OF OPERATIONS

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, 2005, GTH was focused on (1) utilizing
  the results of the extended well testing program at the Raft River, Idaho geothermal
  project (“Raft River”), (2) the procurement of power purchase agreements,
  and (3) the evaluation of acquisitions of new geothermal projects. The data
  collected in the well testing program was utilized by GeothermEx

23

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Inc. (“GeothermEx”) to complete an independent productivity assessment that concluded that four production wells have an initial electrical power capacity of 13.8 megawatts utilizing binary cycle power process technology. On January 24,
2005, the Idaho Public Utilities Commission approved a long-term power purchase agreement with Idaho Power Company for the sale of power output from the proposed GTH Phase One power plant. On May 5, 2005, the company signed two additional power
purchase agreements with Idaho Power Company for the sale of the power output from the proposed GTH Phase Two and Three power plants.

On February 11, 2005 the Company’s initial SB-2 registration statement was declared effective by the SEC. A subsequent SB-2 registration statement was declared effective April 25, 2005. Both statements registered shares held by selling
shareholders, and shares issuable under warrants and options held by those shareholders.

On June 24, 2005, GTH signed a transmission agreement with the U.S. Department of Energy’s Bonneville Power Administration- Transmission Business Line for the transmission of electrical power from the project site to Idaho Power’s
receiving point at Minidoka, Idaho.

PLAN OF OPERATIONS

The Company’s plan of operations for the next 12 months includes the following elements:

| | (1) | Obtain final bids for construction of the initial 10 MW power plant contemplated
      by the first power purchase agreement with Idaho Power Company executed
      December 29, 2004, and enter into final negotiations for the supply of the
      plant and equipment with the vendor.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) | Finalize negotiations with Marathon Capital LLC for financing to construct
      the power plant and close the transaction to allow financing drawdown.                                                                                                                                   
|
| | (3) | Negotiate and execute a final engineering, procurement and construction
      agreement with CH2M Hill’s subsidiary Lockwood Greene E&C, Inc.,
      who is experienced in the design, construction and commissioning of thermal
      based power generation facilities.                 
|
| | (4) | Initiate project construction for first power plant.                                                                                                                                                                                                                                      
|
| | (5) | Continue to seek and acquire additional geothermal resource properties
      and/or operations.                                                                                                                                                                                           

Power Purchase Agreement.The company signed a power purchase agreement (“PPA”) as a Qualifying Facility on December 29, 2004 with the Idaho Power Company. The PPA forms the basis for the economic development of the first phase of
the Raft River project and allows for the arrangement of a financing package to construct the facilities, including the power plant. The PPA has a 20-year term and includes annually adjusted electric power prices based on the avoided cost method,
which the company believes will be adequate for the successful development of a 10 MW power plant.

The company has signed two additional power purchase agreements with Idaho
  Power for future phases, which will involve drilling new wells and determining
  the production capacity of those wells for additional plant construction. These
  new PPAs are on essentially identical terms as the initial PPA other than location,
  wells, scheduling and similar particularities of the individual projects. Each
  PPA has a 20-year term from the scheduled operations commencement date of December
  15, 2008, and the new plants for these projects will be constructed concurrently.

24

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Resource Utilization.For the first phase of development at Raft River, the company will commercialize the existing production wells and energy field by construction of a 10 MW geothermal power plant that will provide the energy to be
delivered under the PPA with Idaho Power Company. The company has received four EPC and other construction-related bids (see Engineering/EPC Contract and Project Design, below) from which it will be able to select a technology application for
the power block and develop a final construction plan for financing of a power plant. These bids are currently under review. GTH has begun exclusive negotiations with Marathon Capital LLC for financing of the Phase One geothermal power plant.
Marathon has developed a term sheet to evaluate potential financing sources and initiate discussions regarding financing structure, and the company anticipates that financing will be completed and initial construction activities can begin by the
third quarter, 2005. Construction is anticipated to take approximately 14 to 16 months (assuming no significant or unusual delays from weather, supply issues or similar events), and the initial power plant is anticipated to begin production by the
winter of 2006.

Engineering / EPC Contract and Project Design.The first phase plant design will be finalized to meet the requirements of the PPA and the basis for a request for proposal from engineering and/or engineering-procurement-construction
(“EPC”) contractors. GTH is finalizing project design plans for a conventional 10 MW facility. In addition, GTH is exploring the feasibility of using an advanced power generation process, the ammonia absorption power cycle (AAPC), which
is a new application of refrigeration technology.

This AAPC technology may be more efficient in producing energy from the existing wells, which would provide the ability to obtain energy from the existing wells for a longer period of time, and possibly reduce the number of additional wells that
would be necessary for the first phase project and future phases. The U.S. Department of Energy awarded the Company a $2.2 million grant in February 2005 which can be used to construct a power plant that uses the AAPC process. While very
promising and proven in other applications, the technology is unproven in this application. In order to obtain financing, adequate performance guarantees would be needed from qualified engineering and/or construction companies. The grant would be
used to help mitigate the cost of these guarantees. Because the plant and equipment incorporating the advanced power generation process and the conventional technology are approximately 90% the same, the company is able to pursue both paths
concurrently. The company has received final bids based on its request for proposal, will decide whether to pursue the AAPC technology or the conventional technology, and finalize its plans accordingly, by the end of June 2005.

Transmission / Interconnect Agreement.An Interconnect Feasibility Evaluation has been completed by Bonneville Power Administration- Transmission Business Line (TBL) and no problems have been identified for up to 30 MW of transmission
capacity to the delivery point. TBL has estimated the cost of the interconnect, and has issued a National Environmental Policy Act (“NEPA”) categorical exclusion for the substation requirements. A detailed Interconnection Facility Study
is underway by TBL.

On June 24, 2005, GTH signed a service agreement for firm, point-to-point
  power transmission with the TBL for up to 12 megawatts (MW) of electrical transmission
  capacity for an initial term of 30 years, beginning June 1, 2006. The service
  agreement is intended to provide transmission capability in support of the company’s
  Power Purchase Agreement with Idaho Power Company for the first phase of development
  at the company’s Raft River project. Charges under the transmission agreement
  are based on federal tariff; the non-refundable annual reservation fee for the
  first year is $12,336, which represents an estimation of likely annual charges
  under the agreement, without taking into account potential “short distance”
  discounts.

25

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In addition to the transmission agreement for the first phase of the Raft
  River project, the company has reserved capacity through December 1, 2010, for
  two plants of up to 12 MW each, for an additional 24 MW of transmission capacity
  with TBL to support the company’s other two Power Purchase Agreements
  with Idaho Power Company, and has paid fees of $24,672 for the first year.
  The term of service will be increased once the projects are further along in
  the development process. In addition, if the TBL receives a firm request from
  a third party for transmission capacity for the period after December 1, 2010
  (assuming the company has not already extended the term), the company will have
  the first right to match the term proposed by the third party.

Permitting.The company has begun permitting activities, which will be ongoing throughout the execution of the project. Most of the project is on private ground and GTH believes the project does not require a federal NEPA action unless the
DOE grant is accepted. If the DOE grant is used for the project, an Environmental Assessment will be required. The Environmental Assessment would require additional permitting activities by the Company and would add to the overall time required for
initiation of construction. 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 survey was undertaken. The DOE
published an extensive report in 1982. GTH 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.

An application for a Conditional Use Permit was submitted to the Cassia County Planning and Zoning Commission on February 17, 2005. A hearing before the Commission on the permit was held on April 7, 2005, during which the Commission unanimously
approved the permit. Various state permits may or may not be required for the project, depending upon the technology used for the power plant.

Project Financing.Our cash position as at March 31, 2005, is adequate to fund our activities to December 31, 2005. On or before December 31, 2005, we will have to raise additional capital to construct the initial Raft River power plant, and
for future working capital.

Total capital expenditures for the phase one project are currently estimated to be between $30 and $35 million. We expect we will finance the project through either a lease or a combination of debt and equity, with the equity portion being
up to 50% of the total. We anticipate that some or all of the equity portion may be raised through the issuance of shares, exercise of existing outstanding warrants, or through the sale of tax credits and benefits. Discussions for both construction
and long-term financing for the initial facility are currently taking place with Marathon Capital LLC, who specializes in power plant project debt financing and raising the tax oriented equity portion of the capital cost for the project, and with
potential participants who may be interested in utilizing tax credits and benefits that may be available to the project.

Potential Acquisitions.GTH intends to continue its growth through
  the acquisition of ownership or leasehold interests in properties 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 advanced
  geothermal or other renewable energy properties.

ITEM 7. FINANCIAL STATEMENTS

26

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USGeothermal

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

CONSOLIDATED FINANCIAL STATEMENTS(Stated in U.S. Dollars)

MARCH 31, 2005 and 2004



F-1

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
  FIRM

To the Stockholders of
  U.S. Geothermal Inc. 
  (A development stage company)

We have audited the accompanying consolidated balance sheets
  of U.S. Geothermal Inc. (a development stage company) and its subsidiaries as
  of March 31, 2005 and 2004, and the related consolidated statements of operations
  and comprehensive loss, cash flows, and stockholders’ equity for each
  of the two years then ended and for the cumulative period from February 26,
  2002 (date of inception) to March 31, 2005. These consolidated financial statements
  are the responsibility of the Company's management. Our responsibility is to
  express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the financial statements referred to above
  present fairly, in all material respects, the consolidated financial position
  of the Company as at March 31, 2005 and 2004, and the consolidated results of
  its operations and its cash flows for the periods indicated in conformity with
  accounting principles generally accepted in the United States.

The Company is not required to have, nor were we engaged to
  perform, an audit of its internal control over financial reporting. Our audits
  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, we express no such opinion.

The accompanying financial statements have been prepared assuming
  the Company will continue as a going concern. As discussed in Note 1 to the
  financial statements, the Company has suffered losses since inception, has not
  attained profitable operations and is dependent upon obtaining adequate financing
  to fulfill its development activities. These factors raise substantial doubt
  that the Company will be able to continue as a going concern. Management’s
  plans in regard to these matters are also discussed in Note 1. The financial
  statements do not include any adjustments that might result from the outcome
  of this uncertainty.

|Vancouver, Canada | “Morgan & Company”   
|----------------- | ---------------------
|June 16, 2005     | Chartered Accountants

|Tel: (604) 687-5841 |                                     | P.O. Box 10007 Pacific Centre
|------------------- | ----------------------------------- | -----------------------------
|Fax: (604) 687-0075 | Sute 1488 - 700 West Georgia Street
|www.morgan-cas.com  | Vancouver, B.C. V7Y 1A1            

F-2

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

CONSOLIDATED BALANCE SHEETS

(Stated in U.S. Dollars)

|                                               |   | March 31   |  
|---------------------------------------------- | - | ---------- | -
|                                               |   | 2005       |  
|                                               |   |            |  
|                                               |   |            |  
|                                               |   |            |  
|ASSETS                                         |   |            |  
|                                               |   |            |  
|Current                                        |   |            |  
|Cash and cash equivalents                      | $ | 1,957,075  |  
|Refundable tax credit                          |   | 3,095      |  
|Prepaid expenses                               |   | 29,099     |  
|                                               |   | 1,989,269  |  
|                                               |   |            |  
|Property, Plant and Equipment(Note 4)          |   | 595,701    |  
|                                               | $ | 2,584,970  |  
|                                               |   |            |  
|LIABILITIES                                    |   |            |  
|                                               |   |            |  
|Current                                        |   |            |  
|Accounts payable
      and accrued liabilities | $ | 165,102    |  
|                                               |   |            |  
|STOCKHOLDERS’ EQUITY                           |   |            |  
|                                               |   |            |  
|Capital Stock(Note 5)                          |   |            |  
|Authorized:                                    |   |            |  
|100,000,000 common shares with a $0.001 par    |   |            |  
|value                                          |   |            |  
|Issued:                                        |   |            |  
|17,331,429 shares at March 31, 2005 and        |   | 17,332     |  
|12,922,693 shares at March 31, 2004            |   |            |  
|                                               |   |            |  
|                                               |   |            |  
|Additional Paid-In Capital                     |   | 3,485,642  |  
|Stock Purchase Warrants                        |   | 2,460,782  |  
|Accumulated Other Comprehensive Income         |   | 165,262    |  
|Accumulated Deficit During Development Stage   |   | (3,709,150 | )
|                                               |   | 2,419,868  |  
|                                               | $ | 2,584,970  |  

Approved on behalf of the Board:

|“Doug Glaspey” |  | “Paul Larkin”
|-------------- |  | -------------
|Director       |  | Director     

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

F-3

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

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
  LOSS(Stated in U.S. Dollars)

|                                                    |   |             |   |   |                   |   |   | CUMULATIVE        |  
|--------------------------------------------------- | - | ----------- | - | - | ----------------- | - | - | ----------------- | -
|                                                    |   |             |   |   |                   |   |   | PERIOD FROM       |  
|                                                    |   | YEARS ENDED |   |   | INCORPORATION     |  
|                                                    |   | MARCH 31    |   |   | FEBRUARY 26, 2002 |  
|                                                    |   | 2005        |   |   | 2004              |   |   | TO MARCH 31, 2005 |  
|                                                    |   |             |   |   | (Restated,        |   |   |                   |  
|                                                    |   |             |   |   | Note 2(f))        |   |   |                   |  
|                                                    |   |             |   |   |                   |   |   |                   |  
|Revenue                                             | $ | -           |   | $ | -                 |   | $ | -                 |  
|                                                    |   |             |   |   |                   |   |   |                   |  
|Expenses                                            |   |             |   |   |                   |   |   |                   |  
|Consulting fees                                     |   | 489,747     |   |   | 364,205           |   |   | 853,952           |  
|Corporate administration and development            |   | 118,098     |   |   | 46,879            |   |   | 173,447           |  
|Exploration expenditures                            |   | 438,885     |   |   | 18,141            |   |   | 474,325           |  
|Interest and foreign exchange loss                  |   | 95,885      |   |   | 9,254             |   |   | 105,139           |  
|Professional fees                                   |   | 321,081     |   |   | 117,169           |   |   | 511,440           |  
|Management fees                                     |   | 86,463      |   |   | 111,855           |   |   | 252,318           |  
|Salaries and wages                                  |   | 207,759     |   |   | -                 |   |   | 207,759           |  
|Travel and promotion                                |   | 89,497      |   |   | 12,318            |   |   | 113,765           |  
|                                                    |   |             |   |   |                   |   |   |                   |  
|Loss Before The Following                           |   | (1,847,415  | ) |   | (679,821          | ) |   | (2,692,145        | )
|                                                    |   |             |   |   |                   |   |   |                   |  
|Interest Income                                     |   | 16,994      |   |   | 3,423             |   |   | 20,417            |  
|                                                    |   |             |   |   |                   |   |   |                   |  
|Net Loss For The Period                             | $ | (1,830,421  | ) | $ | (676,398          | ) | $ | (2,671,728        | )
|                                                    |   |             |   |   |                   |   |   |                   |  
|Basic And Diluted Loss Per Share                    | $ | (0.12       | ) | $ | (0.11             | ) |   |                   |  
|                                                    |   |             |   |   |                   |   |   |                   |  
|Weighted Average Number Of Shares
      Outstanding |   | 14,209,468  |   |   | 6,337,901         |   |   |                   |  
|                                                    |   |             |   |   |                   |   |   |                   |  
|Other Comprehensive Income                          |   |             |   |   |                   |   |   |                   |  
|Net loss for the
      period                       | $ | (1,830,421  | ) | $ | (676,398          | ) |   |                   |  
|Foreign currency translation adjustment             |   | 165,262     |   |   | 35,792            |   |   |                   |  
|                                                    |   |             |   |   |                   |   |   |                   |  
|Total Comprehensive Loss                            | $ | (1,665,159  | ) | $ | (640,606          | ) |   |                   |  

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

F-4

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

CONSOLIDATED STATEMENTS OF CASH FLOWS(Stated in U.S. Dollars)

|                                                         |   |             |   |   |                             |   |   | CUMULATIVE        |  
|-------------------------------------------------------- | - | ----------- | - | - | --------------------------- | - | - | ----------------- | -
|                                                         |   |             |   |   |                             |   |   | PERIOD FROM       |  
|                                                         |   | YEARS ENDED |   |   | INCORPORATION               |  
|                                                         |   | MARCH 31    |   |   | FEBRUARY 26, 2002           |  
|                                                         |   | 2005        |   |   | 2004                        |   |   | TO MARCH 31, 2005 |  
|                                                         |   |             |   |   | (Restated 
      Note 2(f)) |   |   |                   |  
|Operating Activities                                     |   |             |   |   |                             |   |   |                   |  
|Net loss for the period                                  | $ | (1,830,421  | ) | $ | (676,398                    | ) | $ | (2,671,728        | )
|Add: Non-cash items:                                     |   |             |   |   |                             |   |   |                   |  
|Depreciation                                             |   | 1,399       |   |   | 323                         |   |   | 1,975             |  
|Shares issued for other than cash                        |   | -           |   |   | -                           |   |   | 49,600            |  
|Stock based compensation                                 |   | 295,540     |   |   | 296,081                     |   |   | 591,621           |  
|                                                         |   |             |   |   |                             |   |   |                   |  
|Change in non-cash working capital items:                |   |             |   |   |                             |   |   |                   |  
|Accounts payable and accrued liabilities                 |   | (20,363     | ) |   | (97,802                     | ) |   | (81,042           | )
|Prepaid expenses                                         |   | (29,099     | ) |   | -                           |   |   | (29,099           | )
|Refundable tax credit                                    |   | 4,805       |   |   | (2,082                      | ) |   | 2,723             |  
|                                                         |   | (1,578,139  | ) |   | (479,878                    | ) |   | (2,135,950        | )
|Investing Activities                                     |   |             |   |   |                             |   |   |                   |  
|Purchases of property, plant and equipment               |   | (41,331     | ) |   | (227,306                    | ) |   | (520,325          | )
|Cash acquired on business combination                    |   | -           |   |   | 5,798                       |   |   | 5,798             |  
|                                                         |   | (41,331     | ) |   | (221,508                    | ) |   | (514,527          | )
|                                                         |   |             |   |   |                             |   |   |                   |  
|Financing Activities                                     |   |             |   |   |                             |   |   |                   |  
|Issuance of
      share capital, net of share issue cost |   | 2,576,562   |   |   | 1,419,878                   |   |   | 4,442,290         |  
|Advances to affiliated companies                         |   | -           |   |   | 86,500                      |   |   | -                 |  
|                                                         |   | 2,576,562   |   |   | 1,506,378                   |   |   | 4,442,290         |  
|                                                         |   |             |   |   |                             |   |   |                   |  
|Foreign Exchange Effect On Cash And Cash                 |   |             |   |   |                             |   |   |                   |  
|Equivalents                                              |   | 129,470     |   |   | 35,792                      |   |   | 165,262           |  
|                                                         |   |             |   |   |                             |   |   |                   |  
|Increase In Cash And Cash Equivalents                    |   | 1,086,562   |   |   | 840,784                     |   |   | 1,957,075         |  
|                                                         |   |             |   |   |                             |   |   |                   |  
|Cash And Cash Equivalents, Beginning Of Period           |   | 870,513     |   |   | 29,729                      |   |   | -                 |  
|                                                         |   |             |   |   |                             |   |   |                   |  
|Cash And Cash Equivalents, End
      Of Period           | $ | 1,957,075   |   | $ | 870,513                     |   | $ | 1,957,075         |  
|                                                         |   |             |   |   |                             |   |   |                   |  
|Supplemental Disclosure                                  |   |             |   |   |                             |   |   |                   |  
|Taxes paid                                               |   | -           |   |   | -                           |   |   | -                 |  
|Interest paid                                            |   | -           |   |   | -                           |   |   | -                 |  
|Non-cash investing
      and financing activities        |   |             |   |   |                             |   |   |                   |  
|Shares issued for settlement of debt                     |   | -           |   |   | 173,639                     |   |   | 173,639           |  
|Shares issued for professional services                  |   | -           |   |   | -                           |   |   | 49,600            |  
|Shares issued for geothermal property                    |   | 60,351      |   |   | -                           |   |   | 77,350            |  
|Warrants issued for share
      issue cost               |   | 133,341     |   |   | 25,437                      |   |   | 158,778           |  

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

F-5

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

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERS’EQUITY

FOR THEPERIODFROMINCEPTION,FEBRUARY26, 2002 TOMARCH31, 2005(Stated in U.S. Dollars)

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

F-6

---

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

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERS’EQUITY(Continued)

FOR THEPERIODFROMINCEPTION,FEBRUARY26, 2002 TOMARCH31, 2005(Stated in U.S. Dollars)

|                                                       |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   | ACCUMULATED |   |   |           |  
|------------------------------------------------------ | ---------- | - | - | ------ | - | - | ---------- | - | - | --------- |  | - | ------------- |  | - | ----------- | - | - | --------- | -
|                                                       |            |   |   |        |   |   |            |   |   |           |  |   | ACCUMULATED   |  |   | DEFICIT     |   |   |           |  
|                                                       | NUMBER     |   |   |        |   |   | ADDITIONAL |   |   | STOCK     |  |   | OTHER         |  |   | DURING      |   |   |           |  
|                                                       | OF         |   |   |        |   |   | PAID-IN    |   |   | PURCHASE  |  |   | COMPREHENSIVE |  |   | DEVELOPMENT |   |   |           |  
|                                                       | SHARES     |   |   | AMOUNT |   |   | CAPITAL    |   |   | WARRANTS  |  |   | INCOME        |  |   | STAGE       |   |   | TOTAL     |  
|                                                       |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|Balance brought forward, March 31, 2003 – U.S.         |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|Geothermal Inc. - Idaho                                | 6,079,837  |   | $ | 6,080  |   | $ | 506,370    |   | $ | -         |  | $ | -             |  | $ | (164,909    | ) | $ | 347,541   |  
|                                                       |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|Consolidation adjustment to the number of shares       |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|issued and outstanding as a result of the reverse      |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|take-over transaction – U.S. Geothermal
      Inc. –   |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|Idaho – December 19, 2003 (Note 3)                     | (6,079,837 | ) |   | (6,080 | ) |   | 6,080      |   |   | -         |  |   | -             |  |   | -           |   |   | -         |  
|Legal parent company shares issued and                 |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|outstanding at time of reverse take-over –
      U.S.  |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|Cobalt Inc. – December 19, 2003 (Note 3)               | 2,274,616  |   |   | 2,275  |   |   | (2,275     | ) |   | -         |  |   | -             |  |   | -           |   |   | -         |  
|                                                       | 2,274,616  |   |   | 2,275  |   |   | 510,175    |   |   | -         |  |   | -             |  |   | (164,909    | ) |   | 347,541   |  
|Shares issued for acquisition of U.S. Geothermal       |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|Inc. – Idaho (Note 3)                                  | 6,939,992  |   |   | 6,940  |   |   | (6,940     | ) |   | -         |  |   | -             |  |   | (408,166    | ) |   | (408,166  | )
|Warrants issued for acquisition of U.S. Geothermal     |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|Inc. – Idaho (Note 3)                                  | -          |   |   | -      |   |   | -          |   |   | 629,256   |  |   | -             |  |   | (629,256    | ) |   | -         |  
|Shares and warrants issued for cash at a price of      |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|$0.45 per share in a private placement, net
      of   |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|share issue costs of $100,559, which consists
      of |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|$75,122 paid in cash and $25,437 paid
      by the     |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|issuance of 83,333 agent’s warrants –
      December   |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|19, 2003 (Note 5(a)(v)                                 | 3,322,221  |   |   | 3,322  |   |   | 959,230    |   |   | 457,326   |  |   | -             |  |   | -           |   |   | 1,419,878 |  
|Shares and warrants issued for conversion of notes     |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|at $0.45 – February 20, 2004 (Note
      5(a)(vi))     | 385,864    |   |   | 386    |   |   | 123,090    |   |   | 50,162    |  |   | -             |  |   | -           |   |   | 173,638   |  
|Stock options granted (Note 6)                         | -          |   |   | -      |   |   | 296,081    |   |   | -         |  |   | -             |  |   | -           |   |   | 296,081   |  
|Foreign currency translation                           | -          |   |   | -      |   |   | -          |   |   | -         |  |   | 35,792        |  |   |             |   |   | 35,792    |  
|Net loss for the period                                | -          |   |   | -      |   |   | -          |   |   | -         |  |   | -             |  |   | (676,398    | ) |   | (676,398  | )
|                                                       |            |   |   |        |   |   |            |   |   |           |  |   |               |  |   |             |   |   |           |  
|Balance, March 31, 2004                                | 12,922,693 |   |   | 12,923 |   |   | 1,881,636  |   |   | 1,136,744 |  |   | 35,792        |  |   | (1,878,729  | ) |   | 1,188,366 |  

F-7

---

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

CONSOLIDATEDSTATEMENTOFSTOCKHOLDERS’EQUITY(Continued)

FOR THEPERIODFROMINCEPTION,FEBRUARY26, 2002 TOMARCH31, 2005(Stated in U.S. Dollars)

|                                                                |            |  |   |        |  |   |            |  |   |           |  |   |               |  |   | ACCUMULATED |   |   |            |  
|--------------------------------------------------------------- | ---------- |  | - | ------ |  | - | ---------- |  | - | --------- |  | - | ------------- |  | - | ----------- | - | - | ---------- | -
|                                                                |            |  |   |        |  |   |            |  |   |           |  |   | ACCUMULATED   |  |   | DEFICIT     |   |   |            |  
|                                                                | NUMBER     |  |   |        |  |   | ADDITIONAL |  |   | STOCK     |  |   | OTHER         |  |   | DURING      |   |   |            |  
|                                                                | OF         |  |   |        |  |   | PAID-IN    |  |   | PURCHASE  |  |   | COMPREHENSIVE |  |   | DEVELOPMENT |   |   |            |  
|                                                                | SHARES     |  |   | AMOUNT |  |   | CAPITAL    |  |   | WARRANTS  |  |   | INCOME        |  |   | STAGE       |   |   | TOTAL      |  
|                                                                |            |  |   |        |  |   |            |  |   |           |  |   |               |  |   |             |   |   |            |  
|Balance, March 31, 2004                                         | 12,922,693 |  | $ | 12,923 |  | $ | 1,881,636  |  | $ | 1,136,744 |  | $ | 35,792        |  | $ | (1,878,729  | ) | $ | 1,188,366  |  
|                                                                |            |  |   |        |  |   |            |  |   |           |  |   |               |  |   |             |   |   |            |  
|Shares and warrants issued for cash at a price of $0.66         |            |  |   |        |  |   |            |  |   |           |  |   |               |  |   |             |   |   |            |  
|in a private placement, net of share issue
      costs of       |            |  |   |        |  |   |            |  |   |           |  |   |               |  |   |             |   |   |            |  
|$358,472, which consists of $225,131
      paid in cash and     |            |  |   |        |  |   |            |  |   |           |  |   |               |  |   |             |   |   |            |  
|$133,341 paid by the issuance of 280,000
      agent’s          |            |  |   |        |  |   |            |  |   |           |  |   |               |  |   |             |   |   |            |  
|warrants – September 17, 2004 (Note
      5(a)(vii))            | 4,000,001  |  |   | 4,000  |  |   | 1,103,082  |  |   | 1,324,038 |  |   | -             |  |   | -           |   |   | 2,431,120  |  
|Shares issued for property at a price of $0.60 –
      February |            |  |   |        |  |   |            |  |   |           |  |   |               |  |   |             |   |   |            |  
|22, 2005 (Note 5(a)(x))                                         | 100,000    |  |   | 100    |  |   | 60,251     |  |   | -         |  |   | -             |  |   | -           |   |   | 60,351     |  
|Shares issued for stock options exercised (Note                 |            |  |   |        |  |   |            |  |   |           |  |   |               |  |   |             |   |   |            |  
|5(viii)(ix))                                                    | 308,735    |  |   | 309    |  |   | 145,133    |  |   | -         |  |   | -             |  |   | -           |   |   | 145,442    |  
|Stock options granted (Note 6)                                  | -          |  |   | -      |  |   | 295,540    |  |   | -         |  |   | -             |  |   | -           |   |   | 295,540    |  
|Foreign currency translation                                    | -          |  |   | -      |  |   | -          |  |   | -         |  |   | 129,470       |  |   | -           |   |   | 129,470    |  
|Net loss for the year                                           | -          |  |   | -      |  |   | -          |  |   | -         |  |   | -             |  |   | (1,830,421  | ) |   | (1,830,421 | )
|                                                                |            |  |   |        |  |   |            |  |   |           |  |   |               |  |   |             |   |   |            |  
|Balance, March 31, 2005                                         | 17,331,429 |  | $ | 17,332 |  | $ | 3,485,642  |  | $ | 2,460,782 |  | $ | 165,262       |  | $ | (3,709,150  | ) | $ | 2,419,868  |  

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

F-8

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|1. | NATURE OF OPERATIONS AND GOING CONCERN
|-- | --------------------------------------
|  
|   | a)                                    
|  
|   |                                       
|  
|   | b)                                    
|  
|   |                                       
|  
|   | c)                                    
|  
|   |                                       

F-9

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|1. | NATURE OF OPERATIONS AND GOING CONCERN(Continued)
|-- | -------------------------------------------------
|  
|   | c)                                               
|  
|   |                                                  
|  
|2. | ACCOUNTING POLICIES                              
|  
|   | a)                                               
|  
|   |                                                  
|  
|   |                                                  
|   |                                                  
|   |                                                  
|  
|   |                                                  
|  
|   | b)                                               
|  
|   |                                                  

F-10

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|2. | ACCOUNTING POLICIES(Continued)
|-- | ------------------------------
|  
|   | c)                            
|  
|   |                               
|  
|   |                               
|  
|   |                               
|  
|   | d)                            
|  
|   |                               
|  
|   | e)                            
|  
|   |                               

F-11

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|2. | ACCOUNTING POLICIES(Continued)
|-- | ------------------------------
|  
|   | f)                            
|  
|   |                               
|  
|   |                               

| |  | Changes to consolidated
      balance sheet                    |   |          |  
| |  | -------------------------------------------------------------- | - | -------- | -
| |  |                                                                |   |          |  
| |  | Increase to additional paid-in capital                         | $ | 73,095   |  
| |  | Increase to accumulated deficit during
      development stage | $ | (73,095  | )
| |  |                                                                |   |          |  
| |  | Changes to consolidated statement of
      operations          |   |          |  
| |  |                                                                |   |          |  
| |  | Net loss for the year before change in accounting policy       | $ | (603,303 | )
| |  |                                                                |   |          |  
| |  | Increase in net loss:                                          |   |          |  
| |  | Stock
      based compensation                                 |   | (73,095  | )
| |  |                                                                |   |          |  
| |  | Net loss for the
      year after change in accounting policy  | $ | (676,398 | )

| | g) | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    | The Company’s financial instruments consist
        of cash and equivalents, refundable tax credits, and accounts payable
        and accrued liabilities. Unless otherwise noted, it is management’s
        opinion that the Company is not exposed to significant interest, currency
        or credit risks arising from these financial instruments. The fair values
        of these financial instruments approximate their carrying values, unless
        otherwise noted.
|
| |    | Refundable tax credit is comprised of Goods and
        Services Tax (“GST”) which is refundable from the Government
        of Canada.                                                                                                                                                                                                                                                                                                                                            

F-12

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|2. | ACCOUNTING POLICIES(Continued)
|-- | ------------------------------
|  
|   | h)                            
|  
|   |                               
|  
|   | i)                            
|  
|   |                               
|  
|   |                               
|  
|   |                               
|  
|   | j)                            
|  
|   |                               
|  
|   | k)                            
|  
|   |                               

F-13

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|2. | ACCOUNTING POLICIES(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | l)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|3. | REVERSE TAKE-OVER                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   | Effective December 19, 2003, GTH acquired
        100% of the issued and outstanding voting shares of GEO - Idaho by issuing
        6,939,992 common shares and 2,420,217 share purchase warrants, of which
        4,147,534 common shares and 1,452,130 share purchase warrants were held
        in escrow as at March 31, 2005 (March 31, 2004, 6,204,694 common shares
        and 2,178,195 share purchase warrants). Each share purchase warrant entitles
        the holder to purchase one additional common share at a price of $0.75
        per share until December 15, 2005. Since the transaction resulted in the
        former shareholders of GEO - Idaho owning the majority of the issued shares
        of GTH, the transaction, which is referred to as a “reverse take-
        over”, has been treated for accounting purposes as an acquisition
        by GEO - Idaho of the net assets and liabilities of GTH. Under this purchase
        method of accounting, the results of operations of GTH are included in
        these financial statements from December 19, 2003. GEO - Idaho is deemed
        to be the purchaser for accounting purposes. Accordingly, its net assets
        are included in the balance sheet at their previously recorded values.

F-14

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|3. | REVERSE TAKE-OVER(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | The Company has determined that the share purchase
        warrants issued as part of the transaction have a fair value of $629,256
        as determined by using the Black-Scholes pricing model with the assumptions
        as stated in Note 5(c). The amount is considered to be additional consideration
        given to the former GEO-Idaho shareholders and, as such, has been allocated,
        along with the net liabilities assumed of GTH, to deficit.
|  
|   | The acquisition is summarized as follows:                                                                                                                                                                                                                                                                                                                                                                                                                              

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

|   | The net liabilities amount assumed has been charged
        to accumulated deficit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|4. | PROPERTY, PLANT AND EQUIPMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | GEO-Idaho entered into an agreement, as amended
        December 3, 2002, with Vulcan Power Company (“Vulcan”), a
        company incorporated in Oregon, U.S.A., to purchase up to a 100% interest
        in the Raft River Geothermal Property (“the Property”) located
        in Cassia County, Idaho, U.S.A., in exchange for 1,895,000 shares (the
        “old shares”) and 1,612,000 warrants (the “old warrants”)
        of GEO-Idaho and up to $600,000 in cash. A condition to acquiring
        100% of the Property is the completion by GEO-Idaho of at least a $200,000
        work program on the Property. The old shares and old warrants were exchanged
        subsequent to December 31, 2002 (as part of the reverse take-over described
        in Notes 3 and 5(a)(v)) for shares and warrants of the Company.
|  
|   | As at March 31, 2005, the Company has acquired a
        75% interest in the Property by making cash payments totalling $250,000
        in fiscal 2003 and $225,000 in fiscal 2004. The Company has also completed
        the work program.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | To purchase the remaining 25% interest in the Property,
        the Company must pay Vulcan $125,000 on or before receipt of project
        financing for construction of the power plant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | During the year ended March 31, 2005, the Company
        acquired 100 acres of surface and energy rights in exchange for a cash
        payment of $40,000 and issuance of 100,000 common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-15

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|4. | PROPERTY, PLANT AND EQUIPMENT(Continued)
      Property, plant and equipment consisted of the following:
|-- | --------------------------------------------------------------------------------------------------------

| |                                          |   | 2005    |   |   | 2004    |  
| | ---------------------------------------- | - | ------- | - | - | ------- | -
| | Geothermal property (land and equipment) |   |         |   |   |         |  
| | Shares issued                            | $ | 60,351  |   | $ | -       |  
| |                                          |   |         |   |   |         |  
| | Cash payments                            |   | 40,000  |   |   | 225,000 |  
| |                                          |   | 100,351 |   |   | 225,000 |  
| | Balance, beginning of year               |   | 492,000 |   |   | 267,000 |  
| | Balance, end of year                     |   | 592,351 |   |   | 492,000 |  
| |                                          |   |         |   |   |         |  
| | Other equipment                          |   |         |   |   |         |  
| | Acquisitions                             |   | 1,331   |   |   | 2,306   |  
| | Balance, beginning of year               |   | 3,994   |   |   | 1,688   |  
| | Balance, end of year                     |   | 5,325   |   |   | 3,994   |  
| |                                          |   | 597,676 |   |   | 495,994 |  
| | Less: Accumulated depreciation           |   | (1,975  | ) |   | (576    | )
| |                                          |   |         |   |   |         |  
| |                                          | $ | 595,701 |   | $ | 495,418 |  

|5. | STOCK CAPITAL
|-- | -------------
|  
|   | a)           
|  
|   |              
|  
|   |              
|  
|   |              

F-16

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|5. | STOCK CAPITAL(Continued)
|-- | ------------------------
|  
|   | a)                      
|  
|   |                         
|  
|   |                         

F-17

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|5. | STOCK CAPITAL(Continued)
|-- | ------------------------
|  
|   | a)                      
|  
|   |                         
|  
|   |                         
|  
|   |                         
|  
|   |                         
|  
|   |                         
|  
|   |                         

F-18

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|5. | STOCK CAPITAL(Continued)
|-- | ------------------------
|  
|   | b)                      
|  
|   |                         

| |  |                         | 2005      | 2004     
| |  | ----------------------- | --------- | ---------
| |  |                         |           |          
| |  | Common shares           | 4,241,540 | 6,439,567
| |  | Share purchase warrants | 1,946,937 | 2,678,195

| |    | The escrow shares and warrants are held in escrow
        pursuant to standard requirements of the TSX Venture Exchange, which required
        the escrow conditions be placed upon the shares and share purchase warrants
        issued in conjunction with the acquisition of GEO- Idaho (Note 3) and
        the concurrently completed private placement (Note 5(a)(v)).
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | c) | Stock Purchase Warrants                                                                                                                                                                                                                                                                                                                                                       
|
| |    | As at March 31, 2005, the following share purchase
        warrants are outstanding:                                                                                                                                                                                                                                                                                          

|                              |  | EXERCISABLE |  |          |  |                    |  |           
|----------------------------- |  | ----------- |  | -------- |  | ------------------ |  | ----------
|WARRANTS                      |  | INTO NUMBER |  |          |  |                    |  |           
|ISSUED                        |  | OF COMMON   |  | EXERCISE |  | EXPIRY             |  | FAIR      
|PURSUANT TO                   |  | SHARES      |  | PRICE    |  | DATE               |  | VALUE (1) 
|                              |  |             |  |          |  |                    |  |           
|Acquisition of U.S.           |  |             |  |          |  |                    |  |           
|Geothermal
      – Idaho Inc. |  | 2,420,217   |  | $0.75    |  | December 15, 2005  |  | $629,256  
|Private placement             |  | 1,661,110   |  | $0.75    |  | December 15, 2005  |  | $431,889  
|Agent’s warrants              |  | 83,333      |  | $0.45    |  | December 15, 2005  |  | $25,437   
|Conversion of notes           |  | 192,932     |  | $0.75    |  | February 17, 2006  |  | $50,162   
|Private placement             |  | 4,000,001   |  | $1.25CDN |  | September 17, 2006 |  | $1,190,697
|Agent’s warrants              |  | 280,000     |  | $0.85CDN |  | September 17, 2006 |  | $133,341  
|                              |  |             |  |          |  |                    |  |           
|                              |  | 8,637,593   |  |          |  |                    |  | $2,460,782

F-19

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|5.  | SHARE CAPITAL(Continued)                                                                                                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | The Black-Scholes option pricing model was used
        to determine the fair value of the warrants, with the following assumptions:

| |                         | 2005      | 2004     
| | ----------------------- | --------- | ---------
| |                         |           |          
| | Dividend yield          | 0%        | 0%       
| | Expected volatility     | 150%      | 136%     
| | Risk free interest rate | 2.65%     | 4.18%    
| | Expected life           | 24 months | 24 months

|6. | STOCK BASED COMPENSATION                                                                                                                                                                                                                                                                                                                                                    
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | The Company's 2004 stock option plan provides for
        the grant of incentive stock options for up to 2,584,000 common shares
        to employees, consultants, officers and directors of the company. Options
        are granted for a term of up to five years from the date of grant. Stock
        options granted generally vest over a period of eighteen months.
|  
|   | During the year ended March 31, 2005, the Company
        granted 560,000 stock options to consultants, directors and officers exercisable
        at prices ranging from $0.72 to $0.90 CDN ($0.47 to $0.59
        USD as at March 31, 2005).                                                                                                                             
|  
|   | During the year ended March 31, 2004, the Company
        granted 1,745,000 stock options to consultants, directors and officers
        exercisable at a price of $0.60 CDN ($0.50 USD as at March 31,
        2005) until January 3, 2009.                                                                                                                                
|  
|   | Compensation expense related to stock options granted
        is recorded at their fair value as calculated by the Black-Scholes option
        pricing model. Compensation expense of $264,090 was included in consulting
        fees and $31,451 was included in salaries and wages for the year ended
        March 31, 2005 (March 31, 2004 - $296,081).               

F-20

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|6. | STOCK BASED COMPENSATION(Continued)
      The changes in stock options are as follows:
|-- | --------------------------------------------------------------------------------------

| |                                     |           |   |   | WEIGHTED       
| | ----------------------------------- | --------- | - | - | ---------------
| |                                     |           |   |   | AVERAGE        
| |                                     |           |   |   | EXERCISE       
| |                                     | NUMBER    |   |   | PRICE          
| |                                     |           |   |   |                
| | Balance outstanding, March 31, 2003 | -         |   | $ | -              
| |                                     |           |   |   |                
| | Granted                             | 1,745,000 |   |   | 0.60
      CDN 
| |                                     |           |   |   |                
| | Balance outstanding, March 31, 2004 | 1,745,000 |   | $ | 0.60 CDN       
| |                                     |           |   |   |                
| | Granted                             | 560,000   |   | $ | 0.75 CDN       
| | Cancelled                           | (240,000  | ) |   | 0.60 CDN       
| | Exercised                           | (308,735  | ) |   | 0.60
      CDN 
| |                                     |           |   |   |                
| | Balance outstanding March 31, 2005  | 1,756,265 |   | $ | $0.65
      CDN

| | The following table summarizes information about
        the stock options outstanding at March 31, 2005:
| | ---------------------------------------------------------------------------------------------------------

| | OPTIONS OUTSTANDING |           | OPTIONS EXERCISABLE | 
| | ------------------- | --------- | ------------------- | 
| |                     |           | REMAINING           | 
| | EXERCISE            | NUMBER OF | CONTRACTUAL         | 
| | PRICE               | SHARES    | LIFE (YEARS)        | 
| |                     |           |                     | 
| | $ 0.60CDN           | 1,196,265 | 3.76                | 
| | $ 0.72CDN           | 470,000   | 4.67                | 
| | $ 0.90CDN           | 90,000    | 4.62                | 
| |                     |           |                     | 
| | $ 0.65CDN           | 1,756,265 | 4.05                | 

F-21

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|6. | STOCK BASED COMPENSATION(Continued)                                                                                                                                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | The fair value of the stock options granted was
        estimated using the Black-Scholes option- pricing model and is amortized
        over the vesting period of the underlying options. The weighted average
        fair value of options granted was $0.50 per share. The assumptions
        used to calculate the fair value are as follows:

| |                         | 2005    |  | 2004    | 
| | ----------------------- | ------- |  | ------- | 
| |                         |         |  |         | 
| | Dividend yield          | 0       |  | 0       | 
| | Expected volatility     | 116%    |  | 136%    | 
| | Risk free interest rate | 3.88%   |  | 4.18%   | 
| | Expected life           | 5 Years |  | 5 Years | 

|   | Changes in the subjective input assumptions can
        materially affect the fair value estimate and, therefore, the existing
        models do not necessarily provide a reliable measure of the fair value
        of the Company’s stock options.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|7. | INCOME TAX LOSSES                                                                                                                                                                                                                                    
|  
|   | The Company’s provision for income taxes differs
        from the amounts computed by applying the United States federal statutory
        income tax rates to the loss as a result of the following:                                                

| |                                                |   | 2005     |   |   | 2004     |  
| | ---------------------------------------------- | - | -------- | - | - | -------- | -
| |                                                |   |          |   |   |          |  
| | Statutory rates                                |   | 35%      |   |   | 35%      |  
| |                                                |   |          |   |   |          |  
| | Recovery of income taxes computed at statutory |   |          |   |   |          |  
| | rates                                          | $ | (641,000 | ) | $ | (237,000 | )
| | Non-deductible items                           |   | 104,000  |   |   | 104,000  |  
| | Temporary differences                          |   | 38,000   |   |   | 1,000    |  
| | Tax benefit not recognized on current losses   |   | 499,000  |   |   | 132,000  |  
| |                                                |   |          |   |   |          |  
| |                                                | $ | -        |   | $ | -        |  

F-22

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|7. | INCOME TAX LOSSES (Continued)                                                                                                                                                                                                                                                                                                           
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | The components of the deferred tax asset and valuation
        allowance are long-term items. Whereas no reduction in valuation is anticipated
        within a year, the tax effects of timing differences that give rise to
        significant components of the future tax assets and future tax liabilities
        are as follows:

| |                                  |   | 2005     |   |   | 2004     |  
| | -------------------------------- | - | -------- | - | - | -------- | -
| |                                  |   |          |   |   |          |  
| | Net operating loss carry forward | $ | 687,000  |   | $ | 188,000  |  
| | Property, plant and equipment    |   | 40,000   |   |   | 3,000    |  
| | Less: Valuation allowance        |   | (727,000 | ) |   | (191,000 | )
| |                                  |   |          |   |   |          |  
| | Deferred tax asset               | $ | -        |   | $ | -        |  

| | At March 31, 2005, the Company has net operating
        losses of approximately $1,962,000, which may be carried forward to
        apply against future years’ income for tax purposes expiring as
        follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2023 | $ | 160,000  
|---- | - | ---------
|2024 | $ | 377,000  
|2025 | $ | 1,425,000

|8. | COMMITMENTS
|-- | -----------
|   |            
|   | a)         
|   |            
|   |            

|2006 | $ | 22,700
|---- | - | ------
|2007 | $ | 22,900
|2008 | $ | 14,700
|2009 | $ | 14,900
|2010 | $ | 15,200

|   | b)                                                                                                                                         | The Company is committed to issue 120,000 common
        shares as a bonus pursuant to an employment agreement.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------
|  
|9. | RELATED PARTY TRANSACTIONS                                                                                                                
|  
|   | As at March 31, 2005, an amount of $4,842
        (March 31, 2004 - $147,616) is payable to directors and officers of
        the Company.

F-23

---

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

NOTES CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004(Stated in U.S. Dollars)

|9. | RELATED PARTY TRANSACTIONS(Continued)
|-- | -------------------------------------
|  
|   | b)                                   

| |  |                         |   | 2005    |  |   | 2004   
| |  | ----------------------- | - | ------- |  | - | -------
| |  |                         |   |         |  |   |        
| |  | Administrative services | $ | 18,142  |  | $ | 10,029 
| |  | Management fees         |   | 64,196  |  |   | 111,855
| |  | Salaries and wages      |   | 98,197  |  |   | -      
| |  | Consulting fees         |   | 49,194  |  |   | 24,123 
| |  | Legal fees              |   | 14,913  |  |   | -      
| |  | Rent                    |   | 11,273  |  |   | 10,067 
| |  |                         |   |         |  |   |        
| |  |                         | $ | 255,915 |  | $ | 156,074

|10. | SUBSEQUENT EVENTS
|--- | -----------------
|   
|    | a)               
|   
|    | b)               
|   
|    | c)               

F-24

---

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING
  AND FINANCIAL DISCLOSURE

None.

ITEM 8A. 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 the
  design and operation of our disclosure controls and procedures. Based on that
  evaluation, our management, including the CEO and CFO, concluded that the disclosure
  controls and procedures were effective as of March 31, 2005, in ensuring that
  all material information required to be filed in this annual report has been
  made known to them in a timely manner.

There has been no change to our internal control over financial reporting
  during the quarter or fiscal year ended March 31, 2005 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 Morgan & Company 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, Morgan & Company
  expressed no such opinion.

ITEM 8B. OTHER INFORMATION

None.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROLPERSONS;
  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The 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         | 53  | Chief Executive Officer, President and Director
|Douglas J. Glaspey (1) | 52  | Chief Operating Officer and Director           
|John H. Walker         | 56  | Chairman of the Board and Director             
|Paul A. Larkin (1) (2) | 55  | Director                                       
|Jon Wellinghoff (1)    | 56  | Director                                       
|Kerry D. Hawkley       | 51  | Chief Financial Officer and Secretary          
|Kevin Kitz             | 44  | Vice President, Development, Geo-Idaho         
|Robert Cline           | 48  | Vice President, Engineering, Geo-Idaho         

| | (1) | Member of the Audit Committee.                    
| | --- | --------------------------------------------------
| | (2) | Audit Committee Financial Expert. Not independent.

27

---

Daniel J. Kunz is 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 and Chief Executive Officer 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 28 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 TSX Venture Exchange, including Jinshan Gold Mines Inc., Triumph Gold Corp.,
  Tyner Resources Ltd., and Chesapeake Gold Corp. Mr. Kunz serves as Chairman
  of the Board of Directors of China Mineral Acquisition Corporation, which is
  a publicly traded company on the OTC Bulletin Board.

Douglas J. Glaspey is 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 December
  1986 to the present, Mr. Glaspey has been a Metallurgical Engineer and Project
  Manager with Twin Gold Corporation. Mr. Glaspey has 27 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

28

---

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., Tyner
  Resources Ltd., and Webtech Wireless Inc.

Jon Wellinghoff is a director of GTH, a position he has held since
  December 2003. Since November 2000, Mr. Wellinghoff has been an attorney in
  private practice with the firm of Beckley Singleton of Las Vegas, Nevada. From
  May 1999 to November 2000, he served as Regional Manager of Noresco, and served
  as General Counsel with Nevada P.U.C. from May 1998 to May 1999. He was an attorney
  in private practice from July 1989 until joining Nevada P.U.C. Mr. Wellinghoff
  has an extensive background in the renewable energy field including, Federal
  Trade Commission with a focus on renewable energy development. He was the first
  Nevada Consumer Advocate and wrote the first integrated resource planning acts
  for Nevada. He has been involved with and advised clients in connection with
  the negotiation of power purchase agreements with utilities and PURPA issues.
  Mr. Wellinghoff drafted and advocated the Nevada Renewable Portfolio Standard,
  and is counsel for other geothermal and renewable power producers.

Kerry D. Hawkley serves as the company’s Chief Financial Officer
  and as its Secretary. He has served as the company’s controller since
  July 2003, and became CFO and Secretary 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 28 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.

Kevin Kitz is the Vice President-Development of Geo-Idaho. He joined
  the company in April 2003. He is a mechanical engineer with 18 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 75MW 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 MW.

Robert Cline is the Vice President-Engineering of Geo-Idaho. He joined
  the company in February 2005. He is a civil engineer with 23 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.

Code of Ethics.Management has submitted a proposed “Code of
  Ethics” to the Board of Directors for review and comment. GTH anticipates
  approval of the code of ethics at the board

29

---

meeting to be held in conjunction with the annual general meeting in September
  2005. When approved, the code of ethics will apply to all directors, officers
  and employees of the company.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth information concerning the annual compensation
  earned or paid to Daniel Kunz, the chief executive officer (the "named executive
  officer") for the year ended March 31, 2005. No executive officer of GTH or
  Geo-Idaho had compensation that exceeded $100,000 during the fiscal years
  ending March 31, 2004 and March 31, 2005. Long term compensation in the form
  of options that had been issued prior to December 19, 2003, were cancelled in
  accordance with the vote of the shareholders of GTH approving the acquisition
  of Geo-Idaho. Annual bonuses or other compensation have not been paid to the
  named executive officer for any period prior to March 31, 2005, except for the
  stock options listed below.

Mr. Kunz has an employment agreement with the company which provides that
  he will devote at least one-half of working time to the company. Mr. Kunz may
  engage in other business activities provided he does not engage in any activities
  which another executive officer determines is competitive, or will otherwise
  interfere with the performance of Mr. Kunz’s duties to the company. In
  addition to monetary compensation, Mr. Kunz is entitled to receive 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, 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 upon one month written notice may terminate the agreement. The agreement
  includes covenants by Mr. Kunz of confidentiality and noncompetition, and provides
  for equitable relief in the event of breach. A copy of Mr. Kunz’s employment
  agreement is included as Exhibit 10.12 in Part II of the SB-2 registration statement
  dated April 7, 2005.

|Name and Principal
      position(s) | Year Ended
      March 31,
      2005 | Annual Compensation | Long-term Compensation
      Awards   
|------------------------------------ | ------------------------------------- | ------------------- | --------------------------------------
|                                     |                                       | Salary ($)          | Securities underlying options/SARs (#)
|                                     |                                       |                     |                                       
|Daniel J. Kunz                       | 2005                                  | $60,500             | NIL                                   
|Chief Executive Officer              |                                       |                     |                                       
|and President                        |                                       |                     |                                       

On November 10, 2004, GTH granted 460,000 stock options to officers, employees
  and consultants. The number of stock options granted to executive officers is
  identified below. The options vest in quarterly increments, starting with the
  date of grant and every six months thereafter. The exercise price on the date
  of grant was the fair market value of the company’s stock on the date
  of grant.

|                 | Number of Shares   | Percentage of Total |                |                  
|---------------- | ------------------ | ------------------- | -------------- | -----------------
|                 | Underlying Options | Options Granted to  |                |                  
|Optionee         | Granted            | Employees           | Exercise Price | Expiration Date  
|Kerry D. Hawkley | 60,000             | 13.04               | CDN$0.72       | November 10, 2009

30

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On October 19, 2004, Daniel J. Kunz and Douglas J. Glaspey 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     | 86,506      | $25,952  | 63,494/50,000       | CDN$12,670/$10,000   
|Douglas J. Glaspey | 77,866      | $23,360  | 72,134/50,000       | CDN$14,427/$10,000   

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

Directors who are not otherwise remunerated per an employment agreement are
  paid $2,000 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.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT
  AND RELATED STOCKHOLDERS

The following table sets forth the common stock owned by (1) our directors
  and "named executive officers," (2) persons known by us to beneficially own,
  individually, or as a group, more than 5% of our outstanding common stock as
  of May 31, 2005 and (3) all of our current directors and executive officers
  as a group.

|                        |                 |             |              | Total Number       |              
|----------------------- | --------------- | ----------- | ------------ | ------------------ | -------------
|Name and                | Shares          |             |              | Beneficially Owned | Percentage of
|Address (2)             | Outstanding (3) | Options (1) | Warrants (1) | (1)                | Shares       
|                        |                 |             |              |                    |              
|Daniel J. Kunz          | 2,629,175       | 113,494     | 652,439      | 3,395,108          | 18.76%       
|                        |                 |             |              |                    |              
|Douglas J. Glaspey      | 1,190,145       | 122,134     | 16,148       | 1,328,427          | 7.60%        
|                        |                 |             |              |                    |              
|Paul A. Larkin          | 987,693         | 113,370     | 16,147       | 1,117,210          | 6.40%        
|                        |                 |             |              |                    |              
|Kerry D. Hawkley        | 0               | 70,000      | 0            | 70,000             | 0.40%        
|                        |                 |             |              |                    |              
|John H. Walker          | 102,807         | 80,000      | 0            | 182,807            | 1.05%        
|                        |                 |             |              |                    |              
|Jon Wellinghoff         | 0               | 60,000      | 0            | 60,000             | 0.34%        
|                        |                 |             |              |                    |              
|Vulcan Power Company(4) | 1,755,159       | 0           | 2,420,217    | 4,175,376          | 21.14%       
|                        |                 |             |              |                    |              
|All Directors and       |                 |             |              |                    |              
|Officers as a group (5) | 4,909,820       | 558,998     | 684,734      | 6,153,552          | 33.13%       

|(1) | This tabular information is intended to conform with Rule 13d-3 promulgated
      under the Securities Exchange Act of 1934 relating to the determination
      of beneficial ownership of securities. The tabular information gives effect
      to the exercise of warrants and options exercisable on or before August
      4, 2005, owned in each case by the person or group whose
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31

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|    | percentage ownership is set forth opposite the respective percentage
      and is based on the assumption that no other person or group exercise their
      warrants or options.                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Unless otherwise indicated, the address for each of the above is c/o
      U.S. Geothermal Inc., 1509 Tyrell Lane, Suite B, Boise, Idaho, 83706.                                                                                                                                     
|   
|(3) | A majority of the shares of Messrs. Kunz, Glaspey, Larkin and Walker
      and of Vulcan Power Company included in this column are subject to the Escrow
      Agreements described below in paragraph 5 of the section titled “Certain
      Relationships and Related Transactions.
|   
|(4) | Vulcan Power Company's address is 1183 NW Wall Street, Suite G, Bend,
      Oregon, 97701. Steve Munson is the CEO and Chairman of the Board of Vulcan
      Power Company.                                                                                                          
|   
|(5) | Vulcan Power Company is not included in the totals for all directors
      and officers as a group.                                                                                                                                                                                  

Please also see Item 5 above with respect to securities authorized for issuance
  under equity compensation plans.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

1.              On
  April 25, 2003, GTH (then U.S. Cobalt Inc.) entered into loan agreements for
  an aggregate $269,000 in bridge loans to commence well inspection work on
  the Raft River Project. Pursuant to the loan agreements, convertible notes were
  issued to the lenders identified in the table below. The loan was convertible
  into units, with each unit comprising one share and one half of one share purchase
  warrant on the same terms as the private offering closed in December 2003 in
  connection with the acquisition of Geo-Idaho. The interest rate was 20% per
  annum. On January 23, 2004, Daniel Kunz was repaid his principal plus accrued
  interest, and on February 12, 2004, Kevin Kitz was repaid $22,000 of his
  principal. The remaining principal amounts, plus accrued interest, were converted
  as of February 20, 2004 into 385,864 shares and 192,932 share purchase warrants.

|Name of Lender        | Principal Amount of
      Loan | Accrued Interest at February 20,
      2004 | Amount Repaid             | Principal
      Converted | Accrued Interest
      Converted    | Converted at
      $0.45 per unit
|--------------------- | ------------------------------ | ------------------------------------------- | ------------------------- | ------------------------- | ----------------------------------- | ---------------------------------
|Daniel Kunz           | $            100,000           | $    15,398.00                              | $            115,398      | $                       - | $                          
      - | -                                
|Kevin Kitz            | $              24,000*         | $      3,782.95                             | $              22,000     | $                2,000    | $              3,782.95             | 12,851                           
|Toll Cross Securities | $              75,000          | $    11,822.10                              | $                       - | $              75,000     | $            11,822.10              | 192,938                          
|Wendell King          | $              30,000          | $      4,728.75                             | $                       - | $              30,000     | $              4,728.75             | 77,175                           
|Donald Falconer       | $              10,000          | $      1,576.25                             | $                       - | $              10,000     | $              1,576.25             | 25,725                           
|Wayne Beach           | $              30,000          | $      4,728.75                             | $                       - | $              30,000     | $              4,728.75             | 77,175                           
|                      | $            269,000           | $         42,036                            | $            137,398      | $147,000                  | $                 26,639            | 385,864                          

*Converted a portion of amounts due to him for services to
  loan.

2.             
  In July 2003, Vulcan Power Company approached Geo-Idaho for a loan of $30,000,
  to be secured by an executed direction to the company to issue 60,000 each of
  the shares and the warrants that were issuable to Vulcan upon closing of the
  merger with Geo-Idaho, if the loan had not been repaid by the earlier of July
  30, 2004 and such closing. Geo-Idaho did not have the resources to make the
  loan, so Mr. Kunz agreed to loan the money personally. Mr. Kunz was concerned,
  however, that he might have difficulties in perfecting and/or realizing on a
  security interest in property not actually held by the proposed debtor. As an
  accommodation, Geo-Idaho effectively acted as an administrator of the loan,
  for the benefit of the true creditor, Mr. Kunz. In September 2003, Vulcan again
  approached Geo-Idaho for a loan, this time for $25,000, to be secured by
  an executed direction to the company to issue 50,000 each of the shares and
  the warrants that were issuable to Vulcan upon closing of the merger with Geo-Idaho,
  if the loan had

32

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not been repaid by the earlier of September 30, 2004 and such closing. Geo-Idaho
  did not have the resources to make this loan, so Messrs. Kunz, Bourgeois, Glaspey,
  Kitz and Larkin (each of whom were then officers and/or directors of the company)
  agreed to loan the money personally. To address the same concerns with respect
  to difficulties of perfection and/or realization, Geo-Idaho again accommodated
  the parties by acting as an administrator of the loan. The deadline for payment
  of both the July and September loans was extended by agreement dated December
  11, 2003 in consideration of, among other things, a direction for an additional
  51,474 each of the shares and warrants upon release from escrow (as described
  in paragraph 5, below), and were issued on May 24, 2005.

3.             
  On December 19, 2003, as consideration for the acquisition of Geo-Idaho, the
  company issued 6,939,992 common shares and 2,420,217 share purchase warrants
  exercisable at $0.75 per share until December 15, 2005. As shareholders
  of Geo-Idaho, the following persons received:

|Name                 | No. of Shares | No. of Warrants
|-------------------- | ------------- | ---------------
|Daniel J. Kunz       | 1,254,769     | --             
|Douglas J. Glaspey   | 1,014,649     | --             
|Paul A. Larkin       | 863,187       | --             
|Ronald Bourgeois(a)  | 821,425       | --             
|John Walker          | 73,807        | --             
|Vulcan Power Company | 1,755,156     | 2,420,217      
|Subtotal             | 5,782,993     | 2,420,217      
|All other Geo-Idaho  |               |                
|shareholders         | 1,156,999     | --             
|Total                | 6,939,992     | 2,420,217      

(a)
    Mr. Bourgeois was then the Chief Financial Officer and Secretary
  of the company and a director of Geo-Idaho.

4.             
  Mr. Kunz also participated as a subscriber in the private offering completed
  December 19, 2003, in connection with the merger acquisition of Geo-Idaho. He
  subscribed for 1,111,111 units at a purchase price of $0.45 per unit.

5.             
  In connection with the acquisition of Geo-Idaho and the closing of the private
  placement conducted in connection with the acquisition, two escrow agreements
  were entered into. In accordance with standard TSX Venture Exchange rules and
  regulations, one escrow was established for the 5,782,993 shares and 2,420,217
  warrants of the above related individuals and Vulcan Power Company, as officers,
  directors and/or principal stockholders. Pursuant to the terms of that agreement
  and TSX rules, an additional 1,111,111 shares (for an aggregate of 6,894,104
  shares in escrow) and 555,556 warrants (for an aggregate of 2,975,773 warrants
  in escrow) which Mr. Kunz acquired as an investor in the private placement were
  also added to the escrow. Ten percent of the 6,894,104 shares and the 2,975,773
  warrants were released from escrow upon closing of the transaction, leaving,
  90%, or 6,204,694 shares and 2,678,195 warrants held in escrow. These shares
  and warrants are released at the rate of 15% every 6 months over a 36-month
  period. Releases from escrow occur on June 19 and December 19, annually. As
  of June 19, 2005, 3,102,346 of these shares and 1,339,098 of these warrants
  remain in this escrow.

The first escrow arrangement also includes a condition imposed as part of
  the business transaction, and effectively creates additional restrictions to
  the release of the last 1,000,000 in the aggregate of the shares issued to Messrs.
  Kunz, Glaspey, Bourgeois, Walker and Larkin and 585,052 of the shares issued
  to Vulcan. 750,000 of the individuals’ shares and all of the Vulcan shares
  will be released if the Raft River Project is licensed and holds the necessary
  key

33

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documents (prior to construction) to be able to generate and distribute ten
  megawatts of electricity at standard commercial prices. The balance of the individuals’
  250,000 shares will be released if an additional five megawatts of electricity
  is licensed.

A second escrow arrangement, also required by standard TSX Venture Exchange
  rules and regulations, was established with respect to shares of the company
  held by Messrs. Kunz, Glaspey and Larkin prior to the merger. A total of 211,300
  shares are held pursuant to the second agreement for a period of 18 months,
  with one third released on June 19, 2004 one third released on December 19,
  2004 and the remaining one third to be released on June 19, 2005.

A third escrow arrangement (dating back to Mango management, and which has
  expired) is currently included in the company’s escrow figures. The number
  of shares in this arrangement is 23,573 and the company is in the process of
  making an application with the TSX Venture Exchange to have these shares cancelled.

6.            
  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  shares
|------------- | ------------------------ | ------------------------ | --------------------- | -------------------------
|Daniel Kunz   | $     40,550.00          | $     51,903.60          | $     0.60            | 86,506                   
|Doug Glaspey  | $     36,500.00          | $     46,719.60          | $     0.60            | 77,866                   
|Ron Bourgeois | $     13,000.00          | $     16,639.80          | $     0.60            | 27,733                   
|Paul Larkin   | $     40,607.42          | $     51,978.00          | $     0.60            | 86,630                   
|              |                          |                          |                       |                          
|Totals        | $   130,657.42           |                          |                       | 278,735                  

ITEM 13. EXHIBITS

See the exhibits index to this Form 10-KSB.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees billed by the Company’s principal accountant for
  the fiscal years ended March 31, 2004 and 2005 are as follows:

|Year ended | Audit Fees | Audit-Related | Tax Fees | All Other
|---------- | ---------- | ------------- | -------- | ---------
|March 31   | (1)        | Fees (2)      | (3)      | Fees (4) 
|           |            |               |          |          
|2005       | $38,300    | $0            | $0       | $0       
|           |            |               |          |          
|2004       | $13,870    | $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”.                   

34

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|(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 Morgan & Co to perform the annual audit of
  the financial statements of the company, and to attest to the adequacy of the
  company’s internal controls over financial reporting. Audit fees and scope
  of work are monitored and approved by the Audit Committee.

SUPPLEMENTAL INFORMATION PURSUANT TO SECTION 15(d) BY NON-REPORTING
  ISSUERS

The company is not sending an annual report or any proxy material to its security
  holders.

35

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SIGNATURES

In accordance with Section 13 or 15(d) 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)        
|                    |                     
|Date: July 12, 2005 | By                  
|                    |                     
|                    |                     
|                    |                     
|                    |                     
|Date: July 12, 2005 | By                  
|                    |                     
|                    |                     

In accordance with the Securities Exchange Act of 1934, this report has been
  signed below by the following persons on behalf of the registrant and in the
  capacities and on the dates indicated.

|/s/
      Daniel J. Kunz    | . | Director              | July 12, 2005
|--------------------------- | - | --------------------- | -------------
|Daniel J. Kunz              |   |                       |              
|                            |   |                       |              
|/s/Douglas
      J. Glaspey | . | Director              | July 12, 2005
|Douglas J. Glaspey          |   |                       |              
|                            |   |                       |              
|/s/
      John Walker       | . | Director and Chairman | July 12, 2005
|John Walker                 |   |                       |              
|                            |   |                       |              
|/s/
      Paul Larkin       | . | Director              | July 12, 2005
|Paul Larkin                 |   |                       |              
|                            |   |                       |              
|/s/
      Jon Wellinghoff   | . | Director              | July 12, 2005
|Jon Wellinghoff             |   |                       |              

36

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EXHIBIT LIST

|EXHIBIT |            
|------- | -----------
|NUMBER  | DESCRIPTION

|3.1   | Certificate of Incorporation of U.S. Cobalt Inc.
      (now known as U.S. Geothermal Inc.) (1)                                                                                                                                               
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2   | Certificate of Domestication of Non-U.S. Corporation
      (1)                                                                                                                                                                               
|3.3   | Certificate of Amendment of Certificate of Incorporation
      (changing name of U.S. Cobalt Inc. to U.S. Geothermal Inc.) (1)                                                                                                               
|3.4   | Bylaws of U.S. Cobalt Inc. (now known as U.S.
      Geothermal Inc.) (1)                                                                                                                                                                     
|3.5   | Plan of Merger of U.S. Geothermal Inc., an Idaho
      corporation and EverGreen Power Inc., an Idaho corporation (1)                                                                                                                        
|3.6   | Amendment to Plan of Merger (1)                                                                                                                                                                                                              
|4.1   | Form of Stock Certificate (1)                                                                                                                                                                                                                
|4.2   | Form of Warrant Certificate (1)                                                                                                                                                                                                              
|4.3   | Provisions Regarding Rights of Stockholders (1)                                                                                                                                                                                              
|10.1  | Agreement by and between U.S. Geothermal Inc.
      And Vulcan Power Company dated December 3, 2002 (1)                                                                                                                                      
|10.2  | Amendment No. 1 to "Agreement by and between
      U.S. Geothermal Inc. And Vulcan Power Company" dated November 15, 2003 (1)                                                                                                                
|10.3  | Amendment No. 2 to "Agreement by and between
      U.S. Geothermal Inc. And Vulcan Power Company" dated December 30, 2003 (1)                                                                                                                
|10.4  | Letter Agreement dated January 8, 2004 between
      U.S. Geothermal Inc. and Vulcan Power Company (1)                                                                                                                                       
|10.5  | Geothermal Lease and Agreement dated July 11,
      2002, by and between Sergene Jensen, Personal Representative of the Estate
      of Harlan B. Jensen, and U.S. Geothermal Inc., an Idaho corporation (1)                                 
|10.6  | Geothermal Lease and Agreement dated June 14,
      2002, by and between Jensen Investments Inc. and U.S. Geothermal Inc., an
      Idaho corporation (1)                                                                                    
|10.7  | Geothermal Lease and Agreement dated March 1,
      2004, by and between: Jay Newbold and U.S. Geothermal Inc., an Idaho corporation
      (1)                                                                                               
|10.8  | Geothermal Lease and Agreement dated June 28,
      2003, by and between Janice Crank and the children of Paul Crank and U.S.
      Geothermal Inc., an Idaho corporation (1)                                                                
|10.10 | Administrative Services Contract between U.S.
      Geothermal Inc. and New Dawn Holdings Ltd . (1)                                                                                                                                          
|10.12 | Employment Agreement for Daniel Kunz (1)                                                                                                                                                                                                     
|10.15 | Escrow Agreement made December 19, 2003, among
      U.S. Geothermal Inc., Pacific Corporate Trust Company as escrow agent, and
      certain security holders (1)                                                                           
|10.16 | Escrow Agreement made December 19, 2003, among
      U. S. Geothermal Inc., Pacific Corporate Trust Company as escrow agent,
      and certain security holders .(1)                                                                         
|10.17 | First Amended and Restated Merger Agreement among
      U.S. Cobalt Inc., a Delaware corporation, EverGreen Power Inc., an Idaho
      corporation, U.S. Geothermal Inc., an Idaho corporation ("Geo"), and the
      stockholders of Geo (1)
|10.18 | Agreement with Dundee Securities Corporation
      dated June 28, 2004 (1)                                                                                                                                                                   
|10.19 | Stock Option Plan of U.S. Cobalt Inc. (now known
      as U.S. Geothermal Inc.) dated April 3, 2003 (1)                                                                                                                                      
|10.20 | Geothermal Lease and Agreement dated December
      1, 2004, by and between Reid S. Stewart and Ruth O. Stewart and U.S. Geothermal
      Inc., an Idaho corporation (2)                                                                     

37

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|10.21 | Employment Agreement for Kevin Kitz (2)                                                                                           
|----- | ----------------------------------------------------------------------------------------------------------------------------------
|10.22 | Employment Agreement for Kerry D. Hawkley (2)                                                                                     
|10.23 | Employment Agreement for Douglas Glaspey (2)                                                                                      
|10.24 | Power Purchase Agreement dated December 29, 2004 with Idaho
      Power Company (2)                                               
|10.25 | Power Purchase Agreement dated May 5, 2005 with Idaho Power
      Company (3)                                                     
|10.26 | Power Purchase Agreement dated May 5, 2005 with Idaho Power
      Company (3)                                                     
|10.27 | Service Agreement for Point-to-Point
      Transmission Service dated June 24, 2005 with Bonneville Power Administration
      (4)
|21    | List of Subsidiaries (1)                                                                                                          
|31.1  | Certification of Chief Executive
      Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (4)                      
|31.2  | Certification of Chief Financial
      Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (4)                      
|32.1  | Certification of Chief Executive
      Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (4)                      
|32.2  | Certification of Chief Financial
      Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (4)                      

(1) Filed as part of Form SB-2 filed with the SEC on July 8, 2004, and incorporated
  herein by this reference.
  (2) Filed as part of Amendment No. 2 to Form SB-2 filed with the SEC on January
  10, 2005, and incorporated herein by this reference. 
  (3) Filed as part of Form 8-K filed with the SEC on May 10, 2005, and incorporated
  herein by this reference. 
  (4) Filed herewith.

38

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