Filed by Automated Filing Services Inc. (604) 609-0244 - Linux Gold Corp.

20-F 1 form20f.htm ANNUAL REPORT FOR THE PERIOD ENDED FEBRUARY 28, 2006 Filed by Automated Filing Services Inc. (604) 609-0244 - Linux Gold Corp. - Form 20F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - For the fiscal year ended February 28, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-30084

LINUX GOLD CORP.
(Exact name of registrant as specified in its charter)

British Columbia, Canada
(Jurisdiction of incorporation or organization)

1103-11871 Horseshoe Way
Richmond, British Columbia V7A 5H5, Canada
(Address of principal executive offices)

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)

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

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

Indicate the number of outstanding shares of each of the issuer's class of capital or common stock as of the close of the period covered by the annual report.

Title of Each Class	Outstanding at February 28, 2006
Common Shares, no par value	68,287,773

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ ] No [ X ]

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

Indicate by check mark whether the registrant is a large accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated file [ ] Non-accelerated filer [ X ]

Indicate by check mark which financial statement the registrant has elected to follow.
Item 17. [ ] Item 18. [ X ]

TABLE OF CONTENTS

PART I		6

ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS	6

ITEM 2.	OFFER AND STATISTICS AND EXPECTED TIMETABLE	6

ITEM 3.	KEY INFORMATION	6
A.	SELECTED FINANCIAL DATA	6
B.	CAPITALIZATION AND INDEBTEDNESS	8
C.	REASON FOR THE OFFER AND USE OF PROCEEDS	8
D.	RISK FACTORS	8

ITEM 4.	INFORMATION ON THE COMPANY	13
A.	HISTORY AND DEVELOPMENT	13
B.	BUSINESS OVERVIEW	14
C.	ORGANIZATIONAL STRUCTURE	27
D.	PROPERTY, PLANT AND EQUIPMENT	27

ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	27
A.	OPERATING RESULTS	27
B.	LIQUIDITY AND CAPITAL RESOURCES	29
C.	RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC	30
D.	TREND INFORMATION	30

ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	32
A.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	32
B.	COMPENSATION	33
C.	BOARD PRACTICES	34
D.	EMPLOYEES	34
E.	SHARE OWNERSHIP	34

ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	35
A.	MAJOR SHAREHOLDERS	35
B.	RELATED PARTY TRANSACTIONS.	35
C.	INTERESTS OF EXPERTS AND COUNSEL.	35

ITEM 8.	FINANCIAL INFORMATION	35
A.	CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION	35
B.	SIGNIFICANT CHANGES	36

ITEM 9.	THE OFFER AND LISTING	36

ITEM 10.	ADDITIONAL INFORMATION	37
A.	SHARE CAPITAL	37
B.	MEMORANDUM AND ARTICLES OF ASSOCIATION	37
C.	MATERIAL CONTRACTS	38
D.	EXCHANGE CONTROLS	39
E.	TAXATION	39
F.	DIVIDENDS AND PAYING AGENTS	39
G.	STATEMENT BY EXPERTS	39
H.	DOCUMENTS ON DISPLAY.	40
I.	SUBSIDIARY INFORMATION	40

ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	40

ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	40

PART II		41

ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELIQUENCIES	41

ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.	41
A.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS	41
B.	USE OF PROCEEDS	41

ITEM 15.	CONTROLS AND PROCEDURES	41

ITEM 16.	AUDIT COMMITTEE FINANCIAL EXPERT, CODE OF ETHICS AND PRINCIPAL ACCOUNTANT FEES AND SERVICES	41
A.	AUDIT COMMITTEE FINANCIAL EXPERT	41
B.	CODE OF ETHICS	42
C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	42

PART III		42

ITEM 17.	FINANCIAL STATEMENTS	42

ITEM 18.	FINANCIAL STATEMENTS	42

ITEM 19.	EXHIBITS	42

SIGNATURE PAGE		45

GLOSSARY OF MINING TERMS

The following is a glossary of some of the terms used in the mining industry and referenced herein:

alluvial: A term used to identify particular types of, or minerals found associated with, deposits made by flowing water, such as alluvial gold

Arsenopyrite: A major ore of arsenic, Arsenopyite can contain a small amount of gold as an impurity

assay – a precise and accurate analysis of the metal contents in an ore or rock sample

Au - gold.

auger drill – a handheld machine that produces small, continuous core samples in unconsolidated materials

breccia: A fragmental rock; any rock formation essentially composed of uncemented, or loosely consolidated, small angular

contained gold – total measurable gold in grams or ounces estimated to be contained within a mineral deposit. Makes no allowance for economic criteria, mining dilution or recovery losses.

diamond drill – a large machine that produces a more or less continuous core sample of the rock or material being drilled.

feasibility study – a detailed report assessing the feasibility, economics and engineering of placing a mineral deposit into commercial production

fracture: The general term to include any kind of discontinuity in a body of rock if produced by mechanical process such as shear stress or tensile stress

gm/mt or gpt - grams per metric tonne.

gold deposit - means a mineral deposit mineralised with gold.

gold resource – see geological or mineral resource

grams per cubic meter - alluvial mineralisation measured by grams of gold contained per cubic meter of material, a measure of gold content by volume not by weight.

graphite: A allotropic form of carbon found in nature

inferred mineral resource: That part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes

indicated mineral resource: That part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed

intrusive: cuts across (is intrusive into)

Listwanite: (carbonate altered serpentinite) is associated with gold mineralization.

lode mining – mining of gold bearing rocks, typically in the form of veins or stockworks

measured resource means that part of a mineral resource for which quantity, grade or quality, densities, shape, physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both

geological and grade continuity.

mineral claim or mining claim: The portion of mining ground held under law by a claimant.

mineralization: Implication that the rocks contain sulphide minerals and that these could be related to ore.

net profit interest (NPI) – effectively a royalty based on the net profits generated after recovery of all costs

net smelter royalty or NSR - a royalty based on the gross proceeds received from the sale of minerals less the cost of smelting, refining, freight and other related costs.

ore – a naturally occurring rock or material from which economic minerals can be extracted at a profit

ounce or oz. - a troy ounce or 20 pennyweights or 480 grains or 31.103 grams.

opt – troy ounces per short ton

placer: A place where gold is obtained by washing; an alluvial or glacial deposit, as of sand or gravel, containing particles of gold or other valuable minerals including gemstones.

probable reserve - the economically mineable part of an indicated, and in some circumstances a measured resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.

prospect – an area prospective for economic minerals based on geological, geophysical, geochemical and other criteria

proven reserve means the economically mineable part of a measured resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.

reserve: That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.

reverse circulation drill – a large machine that produces a continuous chip sample of the rock or material being drilled

skarn: a finegrained metamorphic rock that is usually coloured green or red, ocassionally grey, black, brown or white. It forms through thermal metamorphism as the mineralogical, chemical and crystallographic changes in a solid-state rock, i.e. without melting, in response to new conditions of pressure and/or temperature, and/or introduction of fluids.

Stockwork: Small veins of mineralization that have so penetrated a rock mass that the whole rock mass can be considered mineralized

ton - short ton (2,000 pounds).

tonne - metric tonne (2,204.6 pounds).

trenching – the surface excavation of a linear trench to expose mineralization for sampling

vein – a tabular body of rock typically of narrow thickness and often mineralized occupying a fault, shear, fissure or fracture crosscutting another pre-existing rock

For ease of reference, the following conversion factors are provided:

1 mile	= 1.609 kilometres	2,204 pounds	= 1 tonne
1 yard	= 0.9144 meter	2,000 pounds/1 short ton	= 0.907 tonne
1 acre	= 0.405 hectare	1 troy ounce	= 31.103 grams

Unless the context otherwise requires, all references to the “Registrant” or the “Company” or “Linux” refer to Linux Gold Corp. All monetary figures are in terms of United States dollars unless otherwise indicated.

Foreign Private Issuer Status

Foreign Private Issuer Status:

Linux Gold Corp. (the "Company”), is a Canadian corporation incorporated under the laws of the Province of British Columbia. Over 50% of its common stock is held by non-United States citizens and residents; our business is administered principally outside the United States; and more than 50% of our assets are located outside the United States. As a result, we believe that we qualify as a "foreign private issuer" for continuing to report regarding the registration of our common stock using this Form 20-F annual report format.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

This Form 20-F is being filed as an annual report under the Exchange Act, and accordingly, the information called for in Item 1 is not required. Please see “Item 6 – Directors, Senior Management and Employees –Directors and Senior Management”.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

This Form 20-F is being filed as an annual report under the Exchange Act, and accordingly, the information called for in Item 2 is not required.

ITEM 3. KEY INFORMATION

A. SELECTED FINANCIAL DATA

The summary consolidated financial information set forth below should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements, as of and for the years ended February 28, 2006 and February 28, 2005, together with the notes thereto, which appear elsewhere in this annual report. The Consolidated Financial Statements as of and for the years ended February 28, 2006 and February 28, 2005 have been audited by Smythe Ratcliffe and Manning Elliott, respectively. The Consolidated Financial Statements are prepared in accordance with U.S. GAAP. See Note 2 of the Notes to Consolidated Financial Statements.

The selected financial data set forth in the following table is expressed in Canadian dollars. Since June 1, 1970, the Government of Canada has permitted a floating exchange rate to determine the value of the Canadian dollar as compared to the United States dollar. At February 28, 2006, US$1.00 was equal to approximately C$1.1379.

The following represents our selected financial data for each of the past five fiscal years, ending on February 28/29. The data presented is prepared in accordance with generally accepted accounting principles in the United States:

Fiscal Years Ended February 28/29

	2006	2005 (Re-stated)	2004 (Re-stated)	2003	2002
Net Revenue	$ -	$ -	$ -	$ -	$ -
Income (loss) from continuing operations	(830,605)	(793,940)	(433,297)	(125,020)	(420,261)
Income (loss) from discontinued operations	-	-	369,213	(25,000)	(366,448)
Income (loss) from continuing operations per Common Share	(0.01)	(0.01)	(0.00)	-	(0.02)
Income (loss) from discontinued operations per Common Share	-	-	(0.01)	-	(0.01)
Total Assets	542,640	544,708	322,610	92,719	11,240
Working Capital (deficit)	69,670	128,204	(91,924)	(514,235)	(1,549,592)
Shareholders’ Equity (deficit)	79,845	148,729	(85,924)	(514,233)	(1,542,141)
Cash Dividends per common share	$ nil	$ nil	$ nil	$ nil	$ nil

Reference is made to "Item 4. Information on the Company" and "Item 5. “Operating and Financial Review and Prospects” for a description of the initiation and progression of our activities since incorporation.

Currencies and Exchange Rates:

We publish our financial statements in Canadian dollars. Unless otherwise indicated, monetary amounts referred to in this annual report are in Canadian dollars. Unless otherwise indicated, all translations from Canadian dollars to US dollars have been made at a rate of CDN$ 1.1379 to US$ 1.00, the noon buying rate as certified for customs purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate") on February 28, 2006. We do not represent that Canadian dollar or US dollar amounts could be converted into US dollars or Canadian dollars, as the case may be, at any particular rate, the rates below or at all. On June 8, 2006, the Noon Buying Rate was CDN$ 1.1233 to US$ 1.00. The following table sets forth noon buying rate for US dollars in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York for the periods indicated:

The following table reflects the monthly high and low exchange rates for U.S.$1.00 to the Canadian dollar for the following periods.

Month	Year	High (CAD$)	Low (CAD$)
November	2005	1.196	1.1656
December	2005	1.1736	1.1507
January	2006	1.1726	1.1436
February	2006	1.1577	1.1379
March	2006	1.1722	1.132
April	2006	1.1708	1.1203
May	2006	1.1232	1.0989

The following table lists the average exchange rate for US$1.00 to the Canadian dollar for the last five years based on the average month-end exchange rates.

Year	Average	Low/High	February 29/28
2006	1.1992	1.1379/ 1.2425	1.1379
2005	1.2888	1.1774/1.3968	1.2314
2004	1.3667	1.269 / 1.4905	1.3405
2003	1.5438	1.5995 / 1.488	1.4880
2002	1.5625	1.5102/1.6128	1.6049

B. CAPITALIZATION AND INDEBTEDNESS

This Form 20-F is being filed as an annual report under the Exchange Act, and accordingly, the information called for in this Item 3.B is not required

C. REASON FOR THE OFFER AND USE OF PROCEEDS

This Form 20-F is being filed as an annual report under the Exchange Act, and accordingly, the information called for in Item 3.C is not required.

D. RISK FACTORS

The occurrence of any of the following risks could hurt our business, financial condition or results of operations. In such case, the trading price of our shares could decline and you could lose all or part of your investment. Other risks and uncertainties not now known to us or that we think are immaterial may also impair our business.

RISK FACTORS RELATED TO OUR BUSINESS

Our Limited and Changing Operating History. We initially focused the business of the Company on natural resource development. We changed direction becoming involved in the information technology industry to take advantage of the booming technology sector and the declining precious metals markets. We were not successful in that industry segment. We have returned our focus on mining and exploration.

Financing Risks. There is no assurance that we will be able to secure the financing necessary to explore, develop and produce our mineral properties.

We do not presently have sufficient financial resources or operating cash-flow to undertake solely all of our planned exploration and development programs. The development of our properties may therefore depend on obtaining a joint venture partners, and on our ability to obtain additional required financing. There is no assurance we will be successful in obtaining the required financing, the lack of which could

result in the loss or substantial dilution of our interests (as existing or as proposed to be acquired) in our properties as disclosed herein. In addition, we have no experience in developing mining properties into production and its ability to do so will be dependent upon securing the services of appropriately experienced personnel or entering into agreements with other major mining companies which can provide such expertise.

As noted in our audited consolidated financial statements for the year ended February 28, 2006 we have incurred significant operating losses and have an accumulated deficit of $ 9,212,774 at February 28, 2006. Furthermore, we had working capital deficit of $ 69,670 as at February 28, 2006, which is not sufficient to achieve our planned business objectives. Our ability to continue as a going concern is dependent on continued financial support from our shareholders and other related parties, the ability of the Registrant to raise equity financing, and the attainment of profitable operations, external financings and further share issuances to meet our liabilities as they become payable.

Our ability to continue as a going concern is dependent on continued financial support from our shareholders and other related parties, our ability to raise equity capital financing, and the attainment of profitable operations, external financings and further share issuance to satisfy working capital and operating needs. The auditors’ report on the February 28, 2006 consolidated financial statements include additional comments for U.S. readers that states that conditions exist that raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty.

Significant Losses for the Foreseeable Future. We expect to incur significant losses for the foreseeable future and cannot be certain when or if we will achieve profitability. Failure to become and remain profitable will adversely affect the value of our Common Shares and our ability to raise capital and continue operations.

Volatility of The Over-the-Counter Bulletin Board (“OTC BB”) may adversely affect the price of the Common Stock. Certain stocks listed on the OTC BB have recently experienced significant price and volume fluctuations and decreases which have adversely affected the market price of our and other stocks listed on the OTC BB without any regard to the underlying fundamentals of such stocks. These broad market fluctuations, which may occur in the future may continue to adversely affect the market price of the Common Stock.

We do not expect to pay cash dividends. We intend to retain any future earnings to finance our business and operations and any future growth. Therefore, we do not anticipate paying any cash dividends in the foreseeable future.

Potential lack of attractive investment targets. Continued volatility of stock prices on the OTC BB may have a material adverse effect on our ability to raise capital on the OTC BB or by private investment, and the price of our common stock could fluctuate substantially.

Other Factors. Our areas of business may be affected from time to time by such matters as changes in general economic conditions, changes in laws and regulations, taxes, tax laws, prices and costs, and other factors of a general nature which may have an adverse effect on our business.

Conflict of Interest. Some of our current officers and directors have other unrelated full-time positions or part-time employment. Some officers and directors will be available to participate in management decisions on a part-time or as-needed basis only. Our management may devote its time to other companies or projects which may compete directly or indirectly with us.

U.S. Investors May Not Be Able To Enforce Their Civil Liabilities Against Us or Our Directors, Controlling Persons and Officers. We are organized under the laws of Canada. All of our directors, controlling persons and officers are residents of Canada and all or a substantial portion of their assets and substantially all of our assets are located outside of the United States. As a result, it may be difficult for U.S. holders of our common shares to effect service of process on these persons within the United States or to realize in the United States upon judgments rendered against them. In addition, you should not assume that the courts of Canada (i) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States, or (ii) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or other laws of the United States.

However, U.S. laws would generally be enforced by a Canadian court provided that those laws are not contrary to Canadian public policy, are not foreign penal laws or laws that deal with taxation or the taking of property by a foreign government and provided they are in compliance with applicable Canadian legislation regarding the limitation of actions. Also, a judgment obtained in a U.S. court would generally be recognized by a Canadian court except, for example:

where the U.S. court where the judgment was rendered had no jurisdiction according to applicable Canadian law;
the judgment was subject to ordinary remedy (appeal, judicial review and any other judicial proceeding which renders the judgment not final, or enforceable under the laws of the applicable state) or not final, conclusive or enforceable under the laws of the applicable state;
the judgment was obtained by fraud or in any manner contrary to natural justice or rendered in contravention of fundamental principles of procedure;
a dispute between the same parties, based on the same subject matter has given rise to a judgment rendered in a Canadian court or has been decided in a third country and the judgment meets the necessary conditions for recognition in a Canadian court;
the outcome of the judgment of the U.S. court was inconsistent with Canadian public policy;
the judgment enforces obligations arising from foreign penal laws or laws that deal with taxation or the taking of property by a foreign government; or
there has not been compliance with applicable Canadian law dealing with the limitation of actions.

Changes to Economic Policies in China. We are currently exploring our property in China. We could be adversely affected if China changes its economic policies. As part of its economic reform, China has designated certain areas as Special Economic Zones. Foreign enterprises in these areas benefit from greater economic autonomy and more favorable tax treatment than enterprises in other parts of China. Changes in the policies or laws governing Special Economic Zones could have a material adverse effect on us. Moreover, economic reforms and growth in China have been more successful in certain provinces than others, and the continuation or increase of these disparities could affect the political or social stability of China.

RISK FACTORS RELATED TO THE NATURAL RESOURCE INDUSTRY

Exploration and Development Risks. There is no assurance given by the Company that our exploration and development programs and properties will result in the discovery, development or production of a commercially viable ore body. The business of exploration for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. At present, none

of the Registrant’s properties have defined ore bodies with reserves and resources, and the proposed exploration programs are an exploratory search for ore. There is no assurance that our mineral exploration and development activities will result in any discoveries of bodies of commercial ore. The probability of an individual prospect ever having “reserves” and being commercially viable is extremely remote, and, in all probability, our properties do not contain any reserves, and any funds spent on exploration will probably not be recovered. Unusual or unexpected geological structures or formations, fires, power outages, labour disruptions, floods, explosions, cave-ins, land slides and the inability to obtain suitable or adequate machinery, equipment or labour are other risks involved in the operation of mines and the conduct of exploration programs. We have relied and may continue to rely upon consultants and others for construction and operating expertise. The economics of developing gold and other mineral properties are affected by many factors including capital and operating costs, variations of the grade of ore mined, fluctuating mineral markets, costs of processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. Depending on the price of gold or other minerals produced, we may determine that it is impractical to commence or continue commercial production. Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes to extract metal from ore and to develop the mining and processing facilities and infrastructure at any site chosen for mining. No assurance can be given that funds required for development can be obtained on a timely basis. The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately foreseen or predicted, such as market fluctuations, the global marketing conditions for precious and base metals, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting minerals and environmental protection.

Estimates of Mineral Deposits. There is no assurance that any estimates of mineral deposits herein will not change. Although all figures with respect to the size and grade of mineralized deposits included herein have been carefully prepared by the Company, or, in some instances have been prepared, reviewed or verified by independent mining experts, these amounts are estimates only and no assurance can be given that any identified mineralized deposit will ever qualify as a commercially viable mineable ore body that can be legally and economically exploited.

Mineral Prices. There is no assurance that mineral prices will not change. The mining industry is competitive and mineral prices fluctuate so that there is no assurance, even if commercial quantities of a mineral resource are discovered, that a profitable market will exist for the sale of same.

Title Opinions. The existence of title opinions should not be construed to suggest that we have good and marketable title to all of our properties. We follow the usual industry practice in obtaining title opinions with respect to our lands. No examination has been made of the ground to determine if any of our mineral claims have been staked or assessment work carried out.

Regulatory Approvals. Our operations require the procurement of numerous permits and compliance with an extensive number of codes and regulations. Mining, exploration and exploitation permits are required. While we believe that all requirements in this regard have been met, failure to comply with regulatory requirements could result in permits being withdrawn or suspended. Further, changes in these regulations or in their application may adversely affect our operations.

Environmental Issues. We must comply with environmental laws and regulations. There can be no assurance that violations will not occur. In the event of a future violation of environmental laws we could be held liable for damages and for the costs of remedial actions. Environmental laws could become more stringent over time imposing greater compliance costs and increasing risks and penalties associated with a violation.

Third Party Reliance. Our rights to acquire interests in certain mineral properties have been granted by third parties who themselves hold only an option to acquire such properties. As a result, we may have no direct contractual relationship with the underlying property holder.

UNCERTAINTIES AND RISKS RELATING TO COMMON SHARES

There is only a limited public market for our common shares on the OTC Bulletin Board and that market is extremely volatile. There is only a limited public market for our common shares on the OTC Bulletin Board, and there is a risk that that a broader or more active public trading market for our common shares will never develop or be sustained, or that current trading levels will not be sustained.

The market price for the common shares on the OTC Bulletin Board has been and we anticipate will continue to be extremely volatile and subject to significant price and volume fluctuations in response to a variety of external and internal factors. This is especially true with respect to emerging companies such as ours. Examples of external factors, which can generally be described as factors that are unrelated to the operating performance or financial condition of any particular company, include changes in interest rates and worldwide economic and market conditions, as well as changes in industry conditions, such as changes in oil and natural gas prices, oil and natural gas inventory levels, regulatory and environment rules, and announcements of technology innovations or new products by other companies. Examples of internal factors, which can generally be described as factors that are directly related to our consolidated financial condition or results of operations, would include release of reports by securities analysts and announcements we may make from time-to-time relative to our operating performance, drilling results, advances in technology or other business developments.

Because we have a limited operating history and no profits to date, the market price for the common shares is more volatile than that of a seasoned issuer. Changes in the market price of the common shares, for example, may have no connection with our operating results or prospects. No predictions or projections can be made as to what the prevailing market price for the common shares will be at any time, or as to what effect, if any, that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

You will be subject to the penny stock rules to the extent our stock price on the OTC Bulletin Board is less Than $5.00 . Since the common shares are not listed on a national stock exchange or quoted on the NASDAQ Market within the United States, trading in the common shares on the OTC Electronic Bulletin Board is subject, to the extent the market price for the common shares is less than $5.00 per share, to a number of regulations known as the "penny stock rules". The penny stock rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC, to provide the customer with additional information including current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the customer's account, and to 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. To the extent these requirements may be applicable they will reduce the level of trading activity in the secondary market for the common shares and may severely and adversely affect the ability of broker-dealers to sell the common shares.

You should not expect to receive dividends. We have never paid any cash dividends on shares of our capital stock, and we do not anticipate that we will pay any dividends in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion of 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 consolidated financial condition, results of operations, capital requirements and other factors as our board of directors may deem relevant at that time.

Our right to issue additional capital stock at any time could have an adverse effect on your proportionate ownership and voting rights. We are authorized under our Articles of Incorporation to

issue 200,000,000 common shares. Subject to compliance with applicable corporate and securities laws, we may issue these shares under such circumstances and in such manner and at such times, prices, amounts and purposes as our board of directors may, in their discretion, determine to be necessary and appropriate. Your proportionate ownership and voting rights as a common shareholder could be adversely affected by the issuance of additional common shares, including a substantial dilution in your net tangible book value per share.

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT

The Company was incorporated on February 27, 1979 under a perpetual charter pursuant to the British Columbia Company Act by registration of its Memorandum and Articles and was extraprovincially registered in the Province of Alberta on October 12, 1995 under the name Flame Petro-Minerals Corp. At an extraordinary general meeting held on March 15, 2000, our shareholders approved the change of name of the Company from Flame Petro-Minerals Corp. to LinuxWizardry Systems, Inc, which name change was effected on March 21, 2000. At our annual meeting of shareholders on February 20, 2003, our shareholders approved the change of name of the Company from LinuxWizardry Systems, Inc. to Linux Gold Corp., which name change was effected March 18, 2003. Our authorized capital consists of 200,000,000 Common Shares without par value. Of these, 68,287,773 shares were issued and outstanding as of February 28, 2006 and 68,387,773 shares were issued and outstanding as of the date of this Form 20-F. Our head office is located at #1103 -11871 Horseshoe Way, Richmond, B.C., V7A 5H5.

On February 20, 2003 we held a shareholders meeting at which our shareholders voted to change our name from LinuxWizardry Systems, Inc. to Linux Gold Corp. and obtained a new OTC BB trading symbol LNXGF. We believe our new name, Linux Gold Corp. more closely represents our true business activities.

On March 29, 2004, the new British Columbia Business Corporations Act (the "BCA") came into force in British Columbia and replaced the former British Columbia Company Act (“Former Act”) , which is the statute under which we were previously governed. Under the BCA, we have two years within which to transition ("Transition") under the new statute. In accordance with the BCA, we cannot amend our Articles or Notice of Articles until the Transition to the BCA is completed. We filed a transition application with the Registrar of Companies British Columbia and completed the Transition on June 11, 2004.

Concurrent with the completion of the Transition, we were required in accordance with the BCA to incorporate certain provisions known as the "Pre-Existing Company Provisions" (the "Pre-Existing Company Provisions") into our Notice of Articles, which replaced the existing Memorandum . The Company is a “pre-existing company” under the BCA (that is, a company in existence at the time the BCA came into force). The Pre-Existing Company Provisions provide our company with certain default provisions in case certain provisions which are required to be included in the Articles under the BCA are not included in our Articles.

We filed our Notice of Articles with the Registrar of Companies which contains basic information relating to the Company, including our name, the particulars of the directors and the authorized capital. This was a mandatory requirement for transition to the BCA.

On August 16, 2004, at the Annual General Meeting of shareholders, our shareholders passed a special resolution that the Notice of Articles, filed September 15, 2005, be altered to remove the Pre-existing Company Provisions set forth in Part 16 of the Regulations to the Business Corporations Act (British Columbia); and delete and replace our Articles in their entirety and no longer apply to Linux Gold Corp. The New Articles, among other things, incorporate and amend certain of the information required by the Pre-Existing Company Provisions.

Our Incorporation Number is BC0187279. Our Articles do not restrict the nature of the business that may be carried on by the Company.

Since our inception and during the three fiscal years ending in February 2006, we had been involved in oil and gas exploration/production and mineral property exploration. We have investigated several mineral properties in Canada, the United States, China and Chile.

We also own a 1.277% net working interest in an oil well located in Fayette County, Texas. To date, we have received no revenues from our mining property activities, and have received negligible net revenues after operating costs from our interest in the Fayette County oil well during the past five fiscal years. As a result, we wrote off our interest in the oil well located in Fayette County.

We have no current plans to pursue further activities in either the oil or gas business.

Our current plans are to joint venture and explore our mineral properties in Northern B.C., Alaska and China. The Company has acquired a 100% interest in the TY and ORO properties in B.C. and has a 50% interest in the Fish Creek property in Alaska, which is optioned to Teryl Resources Corp., and an option on a private company, which has an option to earn up to 85% of a mining property in Hebei Province, China.

We are currently in the exploration stage and equity financing is required to continue exploration work on our mineral claims. As a result of the uncertainty that is typical in an explorative company there is doubt about our ability to continue as going concern as ultimate success will be based on securing adequate equity financing and/or the determination of economically recoverable mineral reserves on its mineral property claims.

B. BUSINESS OVERVIEW

Nature of the Company’s Operations

Mineral Properties

We are an exploration stage company and there is no assurance that a commercially viable mineral deposit exists on any of our properties. Further exploration will be required before a final evaluation as to the economic and legal feasibility is determined.

If we complete our current exploration programs and if we are successful in identifying a mineral deposit, we will have to spend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit or reserve on any of our properties.

We will seek equity financing to provide working capital and to meet exploration commitments on all our properties.

Fish Creek Claims, Alaska

We currently own a 50% joint venture interest in 30 state of Alaska mining claims known as the Fish Creek Prospect, located in the Fairbanks Mining District in Alaska. These claims are subject to an option agreement with Teryl Resources Corp. Teryl Resources Corp. may purchase the 5% net royalty for $500,000 U.S. within 1 year after production on a 25% working interest. Teryl also agrees to expend a minimum of $500,000 U.S. after three years from the date of the agreement.

The Fish Creek project is located 25 miles north of Fairbanks in a road accessible mining district with excellent land status and infrastructure. The project is located within host rocks that contain commercially viable mineralization elsewhere in the Fairbanks Mining District and is located on streams that were mined

extensively for alluvial gold in the past both upstream and downstream of the Fish Creek project. Limited exploration conducted between 1992 and 2003 did not reveal significant bedrock exposures of mineralization however a significant lode gold deposit has been outlined immediately adjacent to the Fish Creek property on the south (the Gil deposit) and the Fort Knox gold mine, a large-scale open pit gold mine 3 miles upstream from the Fish Creek property has been in operation since 1996. Wide-spaced placer gold drilling on a small area of the property conducted in 2003 did not encounter significant placer gold mineralization however, more extensive and closer spaced placer gold drilling conducted in 2004 indicated the presence of significant concentrations of placer gold on the claims.

Two independent technical consultants are utilized by the Company for work on the Fish Creek property. Evaluations for alluvial (placer) gold are managed by Jeff Keener of NordWand Enterprize, P.O. Box 82811, Fairbanks, Alaska, 99708, USA. Mr. Keener is a graduate of the University of Alaska, with a B.S. degree in Geology (1991). Mr. Keener is a member of the Alaska Miners Association and has applied for membership with the American Institute of Professional Geologists. From 1986 to the present he has been actively employed in various capacities in the mining industry in numerous locations in Alaska, Nevada, Arizona, and California.

For lode gold exploration we utilize Avalon Development Corp. of Fairbanks, Alaska, to conduct any proposed exploration work on the Fish Creek Property. Mr. Curt Freeman is the President of Avalon Development Corporation, P.O. Box 80268, Fairbanks, Alaska, 99708, USA. Mr. Freeman is a graduate of the College of Wooster, Ohio, with a B.A. degree in Geology (1978), and a graduate of the University of Alaska with an M.S. degree in Economic Geology (1980). Mr. Freeman is a licensed geologist in Alaska (AA#159) and is a member of the American Institute of Professional Geologists (CPG#6901), the Society of Economic Geologists, the Geological Society of Nevada, the Alaska Miners Assoc. and the Prospectors and Developers Assoc. of Canada. From 1980 to the present, he has been actively employed in various capacities in the mining industry in numerous locations in North America, Central America, South America, New Zealand and Africa.

The following map shows the location of and access to our property.

A ground magnetic survey was completed on the Fish Creek property on November 20, 2003 on the right limit (southeast) side of Fish Creek Valley, approximately 600 – 700 feet down-valley from the toe of the Fort Knox mine fresh water supply dam. This program was an orientation survey to test the right limit bench of Fish Creek for a suspected buried placer gold-bearing channel. High grade gold placer accumulations were encountered in a narrow right-limit channel during excavation of the Fort Knox mine fresh water dam site but their extent and grade downstream on the Fish Creek property has never been explored. Magnetic surveys of this type have been successful in locating elevated magnetic field intensities associated with the heavy, magnetic mineral concentrations often associated with placer gold accumulations. The field survey consisted of two lines with 200-foot line spacing and 10-foot station spacing, which appears to provide sufficient detail to extrapolate magnetic data between lines. Total field and vertical gradient magnetic data have a good correlation, suggestive of adequate base station data. Signatures from the two traverses are interpreted to cross five features, of which three have the possibility of being associated with alluvial concentrations of various characteristics.

The two anomalies recommended for physical testing are those indicative of alluvial heavy magnetic mineral concentration encountered on the west side of Lines 100N and 300N, just east of Fish Creek, and the strong anomaly on the eastern extent of Line 300N. Depth estimates for these targets, are generally 8 to 12 feet. A program of additional ground magnetics followed by trenching and/or large-diameter auger drilling to evaluate the two most promising alluvial gold targets was recommended for early 2004.

In May, 2004 we commenced a closely spaced magnetic survey over the previous magnetic targets that were discovered in 2003 . The magnetic survey located two anomalies indicative of a potential buried placer gold bearing channel

In July 2004 a total of 20 soil samples were collected near Odden Creek with a hand held power auger to depths from 2 to 7.5 feet. These holes were placed on a grid pattern with hole spacings of 200 feet to test for metal anomalies and to examine bedrock chips in proximity to intrusive colluvium found on the surface. Several groupings of holes were weakly anomalous in gold pathfinder elements and identified as prospective lode gold targets. Total cost of this program was $1,800.

In September and October 2004 a 22 hole (1,506 feet) reverse circulation drilling program was completed on the property. Twenty holes were drilled on two widely spaced lines to test the placer gold potential while two deeper holes were drilled to test an intrusive-related lode gold target (Keener, 2005b). Six of the twenty placer holes returned intervals with gold values in excess of 0.01 ounces of gold per cubic yard. Values ranged from 0.0108 to 0.0629 ounces per cubic yard over widths of 5 to 8 feet. These values suggest potential for commercially viable alluvial gold resources may exist on the Fish Creek project. Total cost of the combined placer and lode drilling program was approximately $54,000.

After completing the placer drilling, two lode gold exploration holes totaling 405 feet of drilling were completed on the south side of Odden Creek. Samples were collected every five feet, but did not result in any significant concentrations of metals or other pathfinder elements. The best values for gold were 0.038 ppm and 0.040 ppm, found in T04RC01 at 195 feet and 200 feet, respectively.

There currently are no resources or reserves on the Fish Creek property that comply with the Canadian Institute of Mining and Metallurgy (CIM) Standards on Mineral Resources and Reserves Definitions and Guidelines adopted by CIM Council on August 20, 2000. While encouraging in its results, the drill hole density of the 2004 placer drilling campaign at Fish Creek was not sufficient to allow estimation of CIM compatible resources or reserves

Additional work on the Fish Creek property will be based on results from the previous drilling programs. Each successive phase of exploration is dependent on generation of encouraging results from the previous programs and the increasing potential for delineation of commercially viable resources on the project. A two phase program has been recommended as follows:

1.	Infill Reverse Circulation Drilling: Infill drilling using large diameter reverse circulation methods is warranted on the property to better define the placer gold mineralization outlined in 2004. Previous experience by Keener and other operators within the Fish Creek drainage has shown that drilling is an effective method of sampling and valuating the placer deposit and provides predictable estimates of subsequent production. Previous work suggests that drilling to obtain samples with volumes of 0.05 cubic yards each are adequate to estimate the volume and value of the placer gold deposit. Sampling procedures similar to those utilized in 2004 should be followed except that the volume of each sample should be measured to provide a more accurate estimate of the gold grades and to evaluate the recovery of the drilling system. Additionally, all holes should be continued into bedrock for at least 25 feet to test for the presence of lode gold mineralization. The primary goal of this program would be to enable industry acceptable mineral resources to be calculated between the two lines of drilling completed in 2004. A secondary goal would be to determine if significant lode gold mineralization exists in the area drilled. Recommended future work on the Fish Creek property should include drilling 20 reverse circulation drill holes (8” diameter) for a total of 1,600 feet of drilling. Construction of an all- weather creek crossing for off-road vehicles, near the mouth of Odden Creek, will facilitate this work. The estimated cost of such work is $50,000. Fieldwork will take about one to two weeks, whereas sample analysis and reporting will take an additional two to four weeks.

2.	Step-out Reverse Circulation Drilling: if results of the phase 1 infill drilling are encouraging, step-out drilling using large diameter reverse circulation methods is warranted on the property to expand on the placer gold mineralization outlined in 2004. Sampling procedures similar to those utilized in 2004 should be followed except that the volume of each sample should be measured to provide a more accurate estimate of the gold grades and to evaluate the recovery of the drilling system. Additionally, all holes should be continued into bedrock for at least 25 feet to test for the presence of lode gold mineralization. The primary goal of this program would be to enable industry compliant mineral resources to be calculated for areas of the property that lie up and downstream from the 2004 drill lines. A secondary goal would be to determine if significant lode gold mineralization exists in the area drilled. Recommended future work on the Fish Creek property should include drilling 55 reverse circulation drill holes (8” diameter) for a total of 4,400 feet of drilling. Construction of an all-weather creek crossing for off-road vehicles, near the mouth of Odden Creek, will facilitate this work. The estimated cost of such work is $150,000. Fieldwork will take about two to three weeks, whereas sample analysis and reporting will take an additional four to six weeks.

In August 2005, we commenced an extensive auger drilling program on the All Gold Creek geophysical anomaly. The auger track rig can drill up to a depth of 80’, several auger drill holes are planned to test the aerial geophysical anomaly and the coincident gravity low target for future R/C drilling, based on positive results for the auger drilling program.

TY Gold Property, Bralorne Mining District, British Columbia

The Ty and ORO properties are located adjacent to one another and roughly 6 miles east of Goldbridge, British Columbia. Access to the property from either Goldbridge (10 km west) or Lillooet (96 km east) is readily gained by way of a gravel highway, which runs along the north side of Carpenter Lake. Since the property is situated close to the coast of British Columbia and lies between 640 and 1040 meters altitude, it has reasonably long, warm summers and short, crisp winters.

The Alpha zone is situated in a 20 meter wide shear zone in massive green and purple volcanics. It strike N80E and dips vertically. The Beta zone is not explosed over its full width due to bedrock depths at both ends of the backhoe trenches being beyond the digging range of a backhoe. The zone strikes NE/SW and dips 30° -50° NW. It is bounded on the hanging wall by a 3 – 5 cm wide, rusty shear which shows well developed slickensides and graphite (the footwall side was not exposed because the bedrock surface slopes off too steeply and is beyond digging range).

The Beta zone may have a hanging wall and footwall vein – as is typical of gold systems in the Bridge River area and many other vein gold districts (ie the Motherlode system of California). This would explain the presence of two intersections in some of the holes. The geology of the zone is not yet understood, as rotary drill cuttings are not as informative as drill core.

On May 2, 2003 we announced that we had acquired an option to a 100% interest in 21 units in the Bralorne/Lillooet mining division in British Columbia, called the TY Gold Property. We will pay $30,000 over three years and 150,000 common shares. The TY Gold Property is subject to a 2% net smelter interest (NSR). We have an option to purchase each 1% NSR for $1,000,000 prior to production. The TY Gold Property is adjacent to our newly acquired ORO Property. We now have a total of 41 units in the Bralorne area.

Previous drilling completed on the TY Gold Property on the Beta zone encountered values up to 5 feet of 5.86 oz/ton silver and 1.129 oz/ton gold. Additional drilling was recommended by Sampson Engineering Inc. to further explore the Beta zone.

In August 2003, we completed a phase I drill program. Four diamond drill holes of approximately 200 feet each in length were drilled in the Beta Gold zone to confirm the high-grade results of drilling in 1987.

All four holes drilled have encountered extensive stockwork zones and listwanite alteration, favourable geology for hosting Bralorne-type gold deposits. The core was split and assayed for gold and silver. Soil sampling is also underway to ascertain the strike length and surface extent of the Beta zone. Based on drill results, a phase II, 3,000 foot diamond drilling program will be recommended to explore the western side of the Beta zone.

On September 2, 2003, we announced that additional units had been staked surrounding the Company’s TY Gold property and in several strategic locations in the Bralorne Mining District. Four diamond drill holes have been completed on the TY Gold property to confirm the high-grade results. Results from the 4 holes are expected in early September.

In September 2003, we continued a second phase of drilling on the TY Gold property. The purpose of the program was to confirm high-grade results encountered by previous drilling on the property.

On November 6, 2003, we announced that diamond drilling results from Holes 3TD-1 through 6. Gold values were mixed though generally low-grade with slightly elevated lead/zinc values over minor intervals. The highest gold value seen (1.48 g/t – hole 3TD 1:84’-89’) occurred within a highly stockworked, altered volcanic breccia.

While favorable gold indicators such as listwanite alteration, abundant stockworking and arsenopyrite mineralization were frequently encountered gold values were somewhat lower than anticipated. The drill program is to be extended for additional holes in an attempt to intercept higher-grade, known mineralization encountered by previous drilling in the 1980’s.

We will continue exploration work on the TY Gold property and will meet the terms of the acquisition agreement unless the Company decides to not continue due to poor results or economic reasons.

There currently are no resources or reserves on the Ty property that comply with the Canadian Institute of Mining and Metallurgy (CIM) Standards on Mineral Resources and Reserves Definitions and Guidelines adopted by CIM Council on August 20, 2000. While encouraging in its results, the previous drilling at Ty was not sufficient to allow estimation of CIM compatible resources or reserves

Additional work on the Ty property will be based on results from the previous exploration programs. Each successive phase of exploration is dependent on generation of encouraging results from the previous programs and the increasing potential for delineation of commercially viable resources on the project.

ORO Property, Lillooet Mining Division, British Columbia

The Alpha zone is situated in a 20 meter wide shear zone in massive green and purple volcanics. It strike N80E and dips vertically. The Beta zone is not explosed over its full width due to bedrock depths at both ends of the backhoe trenches being beyond the digging range of a backhoe. The zone strikes NE/SW and dips 30° -50° NW. It is bounded on the hanging wall by a 3 – 5 cm wide, rusty shear which shows well developed slikensides and graphite (the footwall side was not exposed because the bedrock surface slopes off too steeply and is beyond digging range).

The Beta zone may have a hanging wall and footwall vein – as is typical of gold systems in the Bridge River area and many other vein gold districts (ie the Motherloade system of California). This would explain the lower intersection in some of the holes. The geology of the zone is not yet understood, as rotary drill cuttings are not as informative as drill core.

In April 2003, we acquired a 100% interest in 20 mineral claim units, subject to a 2% net smelter return, called the ORO property in the Lillooet Mining Division, BC, for $10,000 and 100,000 shares of Linux Gold Corp. We have the option to purchase back each 1% NSR return for $1,000,000 prior to production. Several Very Low Frequency – Electromagnetic (VLF-EM) conductive zones have been located on the ORO property. The magnetic survey shows the entire property is underlain with sediments and volcanics, which are important in the placement of gold bearing quartz veins.

The Company has met the terms and conditions of the acquisition agreement by issuing 25,000 of its shares to the vendor during the nine months ended November 30, 2004. This was the final requirement of the purchase agreement. The vendor retains a 2% net smelter return interest.

We will continue exploration work on the ORO Gold property and will meet the terms of the acquisition agreement unless the Company decides to not continue due to poor results or economic reasons.

There currently are no resources or reserves on the ORO property that comply with the Canadian Institute of Mining and Metallurgy (CIM) Standards on Mineral Resources and Reserves Definitions and Guidelines adopted by CIM Council on August 20, 2000.

Additional work on the ORO property will be based on results from the previous exploration programs. Each successive phase of exploration is dependent on generation of encouraging results from the previous programs and the increasing potential for delineation of commercially viable resources on the project.

BLN Gold Property, Hebei Province, China

The Bo Luo Nuo (“BLN”) covers an area of 161km². It is connected by road to Beijing (about 4 hours drive). The elevation of this mountainous area is between 750-900 meters. The highest point is the peak of Mount Guang Ling which is 1,434 meters high and consists of Mesozoic granite. The climate is cool continental. The maximum annual temperature ranges between 35.7°C and -28.3°C.

BLN is located at the northern edge of the Northern China Platform, which is mainly composed of Archean crystallized basement. The most common rocks in this area are Archean metamorphic rocks including schist, gneiss, granulite, plagioamphibolite, marble, quartzite, and migmatite Locally, the outcrops of the Jurassic sedimentary and volcanic rocks can be seen, which include shale, sandstone, basalt and andesite.

Faults and folds are also well developed in the area. There are three groups of structures in the area. NNE, NNW and EW faults. The former two are the vital ore-host structures in the area.

The strike of the mineralization bodies in the north half part of the BLN is different from that of those in the southern part. The NNW or NW strike of the mineralization bodies in the north appears to have a dip to the NE while the NNE strike of mineralization bodies in the south have a dip to the SE. This may imply that the gold mineralization bodies are controlled by at least two different groups of faults.

The gold mineralization can be divided into two types: brown oxidized mineralizations and primary quartz-sulphide mineralization. The Oxided mineralization mainly consist of gold, quartz, hematite and limonite. Primary mineralization mineral assemblage is mainly gold, quartz cubic pyrite, galena, sphalerite, magnetite, chalcopyrite and chlorite. There is almost no difference about the mineral assemblage of primary mineralization in the various mines in the area.

On January 20, 2004 the Company acquired an option to purchase 100% of the shares of Ginyen Recovery Inc. Ginyen Recovery Inc. has an 85% interest in a co-operative joint venture with Bo Luo Neo Wang Yuan Gold Mine Company (“BLN Gold”) of Heibei Province, China. BLN Gold holds an operational gold recovery mill; option to acquire the and license to operate all existing small mines in the district; the option to explore, develop and produce gold and silver in the district and options to expand to other districts. The Company can earn a 100% interest in the private company, subject to a 5% net profits interest, by issuing 200,000 shares of Linux Gold Corp. in four stages and paying $50,000 cash, and expending a total of $500,000 in a three-phase work program.

We entered into a consulting agreement with Jim Yin, Ph.D., consulting geologist. Mr. Yin completed his Ph.D. of Science at the China University of Geosciences, Beijing, China. Mr. Yin has previously supervised four joint ventures as the project representative for mining exploration in China and completed a preliminary investigation report on the Linux Gold optioned property in December 2002.

In April, 2004 we announced assay results indicating high grade gold and silver on the Tuo Dao Gou gold zone, one of many prospects on the Bo Luo Nuo property in China. The Tuo Dao Gou gold zone reported 5.5 ounces of gold per ton with 9 ounces of silver by Acme Analytical Laboratories on April 1, 2004. The Lan Ying has the highest results, with one sample which assayed 11.75 ounces of gold and 5.75 ounces of silver per ton. The average grade from 15 grab? samples on the Ge Di Gou was 23.36 grams per ton. The third important zone is the Tuo Dao Gou, which was a gold producer zone with stable higher grade gold. The average grade from 18 samples was 11.58 grams per ton gold.

A total of 118 samples were collected from 12 different known gold zones for gold and silver and 32 samples were collected from the platinum, palladium prospect .

The gold zones/veins should be the main targets to follow up in the next exploration program to develop economic high grade gold reserves to feed the 50 ton a day mill.

On June 9, 2004 we announced that Bisheng Liu, of Beijing, China, has been appointed Vice President Corporate Administrator for our gold mining interests in the Peoples Republic of China. Mr. Bisheng is a resident of Beijing, the Peoples Republic of China, educated in the Tianjin’s Institute of Foreign Trade and received a Bachelor of Economics degree in China. Previous jobs included a position with the Ministry of Foreign Trade in Beijing and also work with the Chinese Embassy in Singapore for a three year period as Third Secretary for the commercial office. Mr. Liu is currently working as project manager with Cirque Du Soleil. The board of directors is very pleased to have a representative in China, such as Bisheng Liu, which is the fastest growing economy in the world today, and look forward to a successful relationship with our projects in China.

On October 12, 2004 we announced that we had received confirmation of approval for exploration for Wang Yuan Mine, an additional permit for exploration is to be submitted on the nearby Lan Ying Mine. The objective of this year’s exploration program is to develop sufficient gold reserves to feed the 50 ton per day mill, which is located on our optioned property. An exploration program has commenced on the Wang Yuan mine to dewater the mine and commence a sampling program on the known gold zone.

In November 2004, we announced that the exploration license for the Dong Gou Gold project has been negotiated by Bisheng Liu, of Beijing, China, our Vice President Corporate Administrator for this project. The terms and conditions are pursuant to the co-operative joint venture company agreement that has an option on mineral exploration rights in Hebei Province, China, covering an area of 161 kilometres.

The Dong Gou Gold project consists of 5.12 square kilometres. This area has had three small mines operating in the last seven years, which were mined mainly by hand by the Chinese farmers in the area. One of the past producing mines, the Lan Ying Mine, appears to be the best organized mine in the area. About 90,000 tons of mineralization has been mined out by hand in the past, at rates of 35 tons of ore per day, grading 11 grams (1/3 of an ounce) of gold per tonne. The exploration goal for this property, together with the adjacent Wang Yuan Gold project, is to develop sufficient economic gold reserves for the 50 ton per day mill, which is on the property. The sampling program on the Wang Yuan property known gold zones completed and the assays were completed in February 2005.

The term of the license is effective until a production decision is made by the Company.

In February 2005, we announced assays results for 22 rock samples on the Wang Yuan mine. Based on the results of the samples, a drilling program was recommended.

There currently are no resources or reserves on the BLN property that comply with the Canadian Institute of Mining and Metallurgy (CIM) Standards on Mineral Resources and Reserves Definitions and Guidelines adopted by CIM Council on August 20, 2000.

Additional work on the BLN property will be based on results from the previous exploration programs. Each successive phase of exploration is dependent on generation of encouraging results from the previous programs and the increasing potential for delineation of commercially viable resources on the project.

Granite Mountain Property, Seward Peninsula, Alaska

In March, 2005, we staked several mineralized areas in western Alaska, near Granite Mountain on the eastern Seward Peninsula, Alaska.

Granite Mountain forms the heart of the historic Koyuk Mining District and is known for the productive placer Au-PGM deposits and igneous hosted base-metal, precious metal and uranium prospects located on its flanks. All the staked lands are State of Alaska public lands and open to mineral entry. Staking was accomplished by helicopter and conforms to the MTRSC method of locating 160 acre state mining claims.

The Kiwalik igneous-hosted polymetallic property is located in western Alaska, approximately 240 kilometers (150 miles) northeast of the city of Nome and 56 kilometers (35 miles) north of the village of Koyuk (Candle B-5 and C-5 quadrangles). The property’s east boundary is four kilometers (22½ miles) west of Granite Mountain the tallest point on this part of the eastern Seward Peninsula, at 864 meters (2,835 feet) above sea level. The continental divide runs just east of the Kiwalik property and all streams originating within the property flow to the Kiwalik River, which flows north to Kotzebue Sound.

The Kiwalik property is composed of 120 State of Alaska 160 acre MTRSC mining claims covering almost 7770 hectares (19,200 acres) of state lands open to mineral entry (fig. 2). The mining claims are located on the Quartz Creek pluton and the surrounding volcanic and epiclastic country rock and is thought to be prospective for lode deposits of precious metals and base metals.

ACCESS, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY

The Kiwalik property is located in a remote region in western Alaska, about 240 kilometers (150 miles) by air northeast of the city of Nome. Nome is a modern city of about 4,000 residents with an international airport, a recently improved small boat harbor, and barge loading facilities. Villages near the property include Koyuk, 56 kilometers (35 miles) to the south, Council, about 130 kilometers (80 miles) to the west, and Buckland, about 97

kilometers (60 miles) to the north. There are several winter trails that may be permitted by government regulatory agencies to access the property with heavy equipment from Koyuk, Council, or Kiwalik Lagoon, about 64 km (40 miles) to the north. Currently, there is no improved overland access to the property and the only immediate access is by air transport. Koyuk, the nearest village to the Kiwalik property, is located at the mouth of the Koyuk River at the northeast head of Norton Bay. Koyuk enjoys a 760 meter (2,500 foot) airstrip capable of landing a loaded DC-6. Barge facilities are limited to loading from a stationary barge moored to the western bank of the Koyuk River. Koyuk is the seat of the Koyuk Village Corporation and owns the surface of the lands from the coast to the south shore of the Koyuk River near Dime Landing, 35 kilometers (22 miles) to the north. The Koyuk River is shallow and, without dredging, is only navigable by shallow-draft watercraft, barges and landing craft.

A fifty-foot easement from Koyuk to Dime Landing exists through the private corporate lands and allows for passage of heavy equipment. A native allotment at Dime Landing has been applied for by a resident of Koyuk, however, the grant has not been approved by the Bureau of Land Management. From Dime Landing to the Kiwalik mining claims, access is by way of existing winter trails for which authorization from the appropriate regulatory agencies must be acquired. Several airstrips are located near the Kiwalik property: at Granite Mountain, Quartz Creek, and Bear Creek. The Granite Mountain airstrip was constructed by the U.S. Air Force in 1957 to support the U. S. Department of Defense microwave relay facility (“White Alice”) on the summit of Granite Mountain. This facility was decommissioned in 1978 and lies abandoned. The Granite Mountain airstrip is located about five kilometers (three miles) east of the Kiwalik property at an elevation of 380- 400 meters (1250-1300 feet ) above sea level. It is improved with crushed and graded gravel over a length of 1220 meters (4,000 feet ). The landing surface is occasionally maintained by local miners and hunters who use it as primary access to stage equipment and supplies to outlying mines and hunting camps. The Granite Mountain airstrip is formally closed to the public, however, local air charter services have permission to land there.

The Quartz Creek airstrip, at 305 meters (1,000 feet ) above sea level, is limited to short take-off and landing aircraft and is located about 800 meters (one-half mile) east of the Kiwalik property. The Bear Creek airstrip is150 meters (500 feet ) above sea level and about 460 meters (1,500 feet ) long and has been maintained well by the local placer miners. This airstrip is located about 15 kilometers (9 miles) northeast of the Kiwalik property and is linked the Granite Mt. airstrip and the Kiwalik property by unimproved trails.

The Kiwalik property is rugged and dominated by tundra and talus covered hills and ridges. Elevation varies within the claim block from approximately 137 meters (450 feet) along the Kiwalik River, to 512 meters (1680 feet) on Weather Ridge; and climbs to 864 meters (2835 feet) a few kilometers to the east at Granite Mountain. Outcroppings of bedrock are sparse. Valley floors are narrow and recently developed, perhaps initiated by former alpine glaciation and controlled by regional structures. The climate is semi-arid with short moderate summers and long cold winters, typical of sub-arctic, interior Alaska.

The area is usually snow-free from early June to mid-September. There is no infrastructure developed on the Kiwalik property. As development of the Kiwalik property progresses, roads and other infrastructure will allow for year-round operation, as has been demonstrated elsewhere by the success of Teck-Cominco’s Red Dog zinc mine about 320 kilometers (200 miles) to the north.

GEOLOGIC SETTING

The country rock underlying the Kiwalik mineral property is composed of approximately equal volumes of mafic to intermediate epiclastic rocks and volcanic flows. The epiclastic rock is predominantly pebbly sandstone, but includes sparsely scattered conglomerate and laminated mudstone. The conglomerate is matrix supported, with well rounded volcanic clasts <=55 cm within a fine to medium grained sandy matrix.

Bedding is observed only in the laminated mudstone, but that may be due to the scarcity and limited size of outcroppings and the difficulty of seeing structure under the nearly complete covering of lichen. The volcanic flows vary from nearly aphyric to abundantly porphyritic. In the porphyritic rocks, subhedral plagioclase and pyroxene phenocrysts are commonly <=52-3mm, although a distinctive flow with abundant pyroxene phenocrysts <=51 cmwas observed on the west side of the property and in float elsewhere within the prospect area. Plagioclase and pyroxene phenocrysts retain their original igneous form, but plagioclase is milky white and/or pale green, and pyroxene is replaced by chlorite and possibly actinolite. The groundmass is a mixture of epidote and chlorite. Many of the volcanic rocks are magnetic; some have traces of very fine-grained sulfide, probably pyrite. Primary igneous and sedimentary features are preserved and the rocks are not foliated.

The volcanic rocks are described as andesitic (Patton, 1967) and interpreted to be upper components of the Koyukuk terrane, remnant of a Mesozoic intra-oceanic, volcanogenic island-arc that collided with the North American continent during the late Jurassic to early Cretaceous (Patton and others, 1994). The volcanogenic rocks were intruded by coeval plutonic rocks during a period of continuous subduction related magmatism in the early to mid-Cretaceous along the paleo-Pacific margin (Amato and others, 2004). Within Alaska, this magmatic belt includes calc-alkaline to alkaline plutons of the Yukon-Tanana upland, the Ruby Mountains, theYukon-Koyukuk Basin, and the Seward Peninsula. The event is traceable across the Bering Straits and is exposed in numerous locations throughout the Chukotka Peninsula.

On the Kiwalik property, the dominant intrusive rock is a biotite-hornblende quartz monzonite body known as the Quartz Creek pluton (Miller and Elliot, 1969). Rocks from the Quartz Creek pluton have not been dated, however, Granite Mountain, a composite pluton located several kilometers to the east has been radiometrically dated, giving a lead-alpha age of 100 ± 15 Ma (Patton, 1967) and K-Ar age of 108.7±3.0 Ma (on hornblende, Miller, 1971). These ages correlate the Granite Mountain pluton with other 99-108 Ma plutons nearby, in the western Yukon-Koyukuk basin. Presumably, the Quartz Creek pluton is of similar age. The igneous texture of the Quartz Creek pluton is generally equigranular with local aplitic and porphyritic phases. The plutonic rocks are poorly exposed in outcrop and primarily evident in talus on the hillsides and rare exposure in bedrock of streams at the headwaters of Quartz Creek and the Kiwalik River. Where mapped at the surface, the Quartz Creek pluton is in the shape of a fish-hook, about 13 kilometers (eight miles) long on its eastern ”shank” limb and eight kilometers (five miles) long on its western “barb” limb. The limbs vary from 400 to 1,600 meters (one-quarter mile to one mile) wide. The hook shape of the pluton suggests that only the edges of a much larger body is exhumed and that the overlying volcanic rock forms a roof pendant over the intrusive rock.

The structural geology of the Granite Mountain area is poorly understood. Outcrop is sparse and widely scattered, and measurable bedding or structural orientations or distinctive layers that can be traced for any distance is wanting. The few bedding orientations measured during reconnaissance mapping in 2005 include northeast dips between 40 and 50 degrees and south and southwest dips of 38 and 7 degrees respectively, suggesting broad folding around a west or northwest trending axis. Outcrop patterns and bedding orientations mapped in the Bear Creek area, north of the Peace claim block (Herreid, 1965) are consistent with northwest trending faults and fold axes. Shearing in an outcrop at the south end of Gossan Ridge trends northeasterly with nearly vertical dip. The shear zone is approximately normal to the trend of gossan trails mapped on Gossan Ridge, and the relationship between the two features is not known.

Outward from the Kiwalik property, late Cenozoic flood basalts are widespread in low lying areas, however, no evidence has been found to indicate that flood basalts once covered the property. More recently, glacial and periglacial mechanisms have modified the surface, in particular small alpine glaciers originating in headwall cirques on Granite Mt. may have removed much of the older cover. Deglaciation and the invasion of permafrost have resulted in a solifluction mantle that is common throughout interior and northern Alaska.

Although the results to date are very encouraging, no trenching or drilling have taken place. No quantifiable mineral resource has been established on the Kiwalik property.

The Peace River Claim Block includes 16 mining claims (4 square-miles) and is located on a satellite intrusive stock on the east flank of Granite Mountain at the headwaters of the Peace River. This area was examined in the early 1950s for its potential as a uranium prospect and was re-examined during the 1968 USGS Heavy Minerals Program. Samples of soil and rock indicated anomolous concentrations of base metals including over 2,000 ppm molybdenum obtained from a composite grab sample of veined syenite rubble. Pan concentrates collected from these headwater streams by the U.S. Geological Survey in 1951 and 1952 (Gault, et al, 1953, USGS Circ-250) showed an abundance of base metal sulfide minerals including bornite, as well as concentrations of uranothorianite and gummite (up to 0.76%eU) . Particles of placer gold were also found. The local concentration of uranothorianite in the placers is believed to be the best lead to a possible high grade uranium lode deposit.

The Dime Creek Claim Block is located about 15 miles to the south of Granite Mountain and is composed of 12 mining claims (3 square-miles). The placer gold-platinum deposits on Dime Creek were discovered in 1910, but it wasn’t until 1915 that rich pay was found, setting off a stampede to the area. By 1917, about 12,500 ounces of gold and platinum were recovered from shoveling-in on the creek placer and from underground drifting on several bench placers (Harrington, 1917, USGS B-692). The placer gold is unusually pure with a fineness of 960 and occurs in placer concentrates in a ratio to native platinum particles of 25:1 to 10:1. In later years, a small bucket-ladder dredge operated on the valley bottom from 1928 to 1941 while small open-cut and drifting operations continued on the benches until at least 1955. Total production is not known, but incomplete historical data shows production to be at least 25,000 ounces of gold and platinum. The placer deposit is considered to be highly prospective for significant additional placer reserves, as well as for lode sources of the placer gold and platinum.

During August of 2005, we conducted geologic mapping and geochemical sampling. Phase I orientation and reconnaissance exploration consisted of mapping rock contacts and units and collecting rock, soil, stream sediment and pan concentrate samples during ridge and stream traverses. This work confirmed and added more detail to previous mapping and sampling performed by the U.S. Geological Survey. Phase II mineral exploration during 2006 is recommended to consist of an airborne geophysical survey, additional geological mapping and geochemical sampling, and drilling two- 1,000 ft and four- 500 ft (total 4,000 ft) diamond drill holes.

Four types of geochemical samples were collected from the Kiwalik and Peace claim blocks, including 153 soil samples, 93 rock samples, 45 stream sediment samples, and 31 pan concentrate samples. The results of this program indicate that on the Kiwalik claims, a mineralized trend, striking north with a length of over 11 kilometers, is spatially associated with the eastern contact of the Quartz Creek pluton (quartz monzonite) and the andesitic flows and volcaniclastic country rock. A similar trend was detected on the Peace claims, where mineralization was found within plutonic (syenite) bedrock over a strike length of 1.7 kilometers. On both properties the limits of the mineralized trends are not clearly defined and may be more extensive than currently known.

At the ground surface, the Quartz Creek mineral trend appears to be zoned and can be partitioned into base-metal deposits within the volcanic wallrock and precious- metal deposits within both intrusive and volcanic rocks. Highlights of soil and rock grab samples collected within the base-metal zones include 52.3 g/t silver, over 10,000 ppm lead, over 10,000 ppm zinc, 1,256 ppm copper, 704 ppm antimony and 83 ppb gold. Precious metal zones were sampled with a soil grid placed on veined, brecciated, and oxidized volcanic rock, as well as with grab samples of veined and intensely altered intrusive rock, resulting in concentrations of up to 0.26 g/t gold, 29.2 g/t silver, over 10,000 ppm arsenic and elevated levels of lead, copper, and antimony. Pan concentrates that were collected on the upper branches of the Kiwalik River show a marked enrichment of gold (up to 20.6 g/t in fire assay) where the streams erode mineralized intrusive bedrock.

The Peace claims were sampled similarly to the Kiwalik claims, but to less extent. This work indicates that the eastern branch of the headwaters of the Peace River is eroded into mineralized syenite and is anomalous in precious and base metals in a relatively narrow trend, striking northeast. Results include 4.3 g/t gold, 0.15% tungsten, and 230 ppm uranium in pan samples and concentrations of up to 0.20 g/t gold, 83.5 g/t silver, 0.12% molybdenum, 6,327 ppm copper, 1,232 ppm antimony and elevated lead, bismuth and tungsten in rock grab samples.

Detailed analysis of the geochemical data is ongoing, however, the results to date suggest that several types of polymetallic deposits may be found near the surface along the Quartz Creek mineral trend and that a large porphyry system may lie at depth. The relationship of the Peace River polymetallic deposit to the Quartz Creek mineral belt is not known, but may represent another phase or portion of a larger plutonic porphyry system. A US$1.5 million budget is recommended in 2006 to explore the igneous system at depth and to search for additional evidence of mineral deposits near the surface. This work should include:

1. A regional airborne geophysical survey to indicate rock contacts, structure and alteration, as well as for the presence of sulfide enrichment zones;

2. Additional geological mapping and geochemical sampling to explore the extensions of the known mineralized trends and to investigate unexplored areas;

3. Diamond drill holes to explore the rocks underlying significant geochemical and (anticipated) geophysical anomalies;

4. Structural, chemical, and geochronological studies to examine the relationship of the Kiwalik and Peace igneous rocks and mineral trends with the goal of expanding the potential mineral resource.

This report was prepared by Jeffrey O. Keener, project geologist for the Granite Mountain exploration program and reviewed and approved by Robert B. Murray, registered geologist with the state of Oregon. Robert Murray is currently completing a National Instrument 43-101 report on the Granite Mountain property. [need consent]

Robert Murray, registered geologist and qualified person for the 2005 project has recommended the following drilling and exploration plan for 2006.

Objectives for Drilling and Exploration Plan for 2006:

To initiate a scout drilling program by placing four diamond-core drill holes on the mineral deposits located in 2005.

The Gossan Ridge sub-volcanic gold-silver-copper prospect.
The Saddle “cordilleran-vein” lead-zinc-silver prospect.
The Quartz Creek plutonic gold-copper-bismuth prospect.
The Peace River plutonic molybdenum-copper-gold-uranium prospect.

An additional hole will be placed to drill into the cupola of the Quartz Creek pluton to investigate the volcanic thermal contact zone overlying the intrusive.

Continue the geochemical surveying program by expanding the soil grids on the Gossan Ridge and Peace River prospects, place a soil grid on the Saddle prospect, and run discreet soil lines across linear structures identified in the geophysical survey or through surface geological mapping. Ongoing geological mapping will be conducted at a scale of 1:63,360 in previously unmapped areas and at a scale of 1:10,000 for detailed structural and mineralogic data.

The proposed budget to accomplish these goals is (U.S.) $1,500,000. Contracts and permits are currently being negotiated and applied for to start-up field work on July 1st.

Corporate Finance

During the year ended February 28, 2006:

	a)	During the year ended February 28, 2006, the Company issued 50,000 common shares at a value of $0.41 per share pursuant to the Ty mineral property option agreement.

	b)	During the year ended February 28, 2006, the Company completed a private placement and issued 3,000,000 shares at a price of US$0.20 per share for proceeds of $695,127 (US$600,000) before issue costs of $42,571. The Company issued 100,000 shares as a finder’s fee in connection with this private placement offering.

	c)	During the year ended February 28, 2006, the Company issued 93,750 common shares at a value of US$0.10 per share pursuant to the exercise of stock options.

	d)	During the year ended February 28, 2006, the Company issued 92,500 common shares at a value of US$0.20 per share pursuant to the exercise of share purchase warrants.

During the year ended February 28, 2005:

	a)	During the year ended February 28, 2005, the Company issued 25,000 common shares at a value of $0.10 per share pursuant to the mineral Oro mineral property option agreement .

	b)	During the year ended February 28, 2005, the Company issued 50,000 common shares at a value of $0.39 per share and issued 50,000 common shares as a finder’s fee pursuant to the BLN Gold Property option agreement .

	c)	During the year ended February 28, 2005, the Company completed a private placement and issued 2,777,777 units at a price of US$0.18 per unit for proceeds of $620,850 (US$500,000) before issue costs of $2,185. Each unit consisted of one common share and one warrant. One whole warrant entitles the holder to purchase one share at a price of US$0.18 per share for a two year period. The Company issued 208,333 shares as a finder’s fee in connection with this private placement offering.

	d)	During the year ended February 28, 2005, the Company completed a private placement and issued 1,219,500 units at a price of US$0.15 per unit for proceeds of $241,424 (US$182,925). Each unit consisted of one common share and one-half warrant. One whole warrant entitles the holder to purchase one share at a price of US$0.20 per share in the first year and US$0.25 per share in the second year.

Additionally, 87,500 stock options were exercised.

During the year ended February 28, 2004:

	e)	During the year ended February 29, 2004, the Company completed a private placement and issued 875,000 units at a price of US$0.20 per unit for proceeds of US$175,000. Each unit consisted of one common share and one-half warrant. One whole warrant entitles the holder to purchase one additional common share at a price of US$0.20 per share for a one year period.

	f)	During the year ended February 29, 2004, the Company issued 175,000 common shares at a value of $0.10 pursuant to the BLN property option agreement .

	g)	During the year ended February 29, 2004, the Company issued 1,000,000 shares pursuant to a consulting agreement for services beginning April 2, 2003 for a period of six months. The Company was also obligated to issue 100,000 shares per month starting May 2, 2003. On July 11, 2003, the Company terminated this agreement due to non-performance and has demanded return of the 1,000,000 shares previously issued.

	h)	The Company issued 200,000 shares to settle a prior year’s rental agreement.

Shareholder approval for the granting and exercise of incentive stock options was obtained at the Company’s annual general meeting held on August 26, 2005.

Description of the Markets in Which the Company Competes

This is no longer applicable due to the discontinuance of the business operations of our wholly-owned subsidiary.

Competition

Significant and increasing competition exists for the limited number of gold acquisition opportunities available in North, South and Central America and elsewhere in the world. As a result of this competition, some of which is with large established mining companies which have greater financial and technical resources than the Registrant, the Registrant may be unable to acquire additional attractive gold mining properties on terms it considers acceptable. Accordingly, there can be no assurance that the Registrant’s exploration and acquisition programs will yield any new reserves or result in any commercial mining operation.

Seasonality

We believe that there is no seasonality which affects our business.

Availability of Raw Materials

We do not manufacture any products directly.

Marketing Strategy

We do not have any plans for a marketing strategy at this time.

Dependence on Certain Commercial Agreements or Intellectual Property

We do not have any material agreements upon which we are dependent.

Material effects of Government Regulation

Exploration and development activities, require permits from various foreign, federal, state and local governmental authorities. To the best of our knowledge, we are operating in compliance with all applicable environmental regulations.

C. ORGANIZATIONAL STRUCTURE

For a list of our significant subsidiaries, see “Item 10 – Additional Information – Subsidiary Information”.

D. PROPERTY, PLANT AND EQUIPMENT

We do not own any properties. We currently utilize office space in a commercial business park building located in Richmond, British Columbia, Canada, a suburb of Vancouver. The space is shared with several other companies which share common management. The monthly rent for its portion of this 1,500 square foot space is $500.00. The present facilities are believed to be adequate for meeting our needs for the immediate future. If required in the future, we do not anticipate that we will have any difficulty in obtaining additional space at favorable rates. There are no current plans to purchase or otherwise acquire any properties in the near future.

Since our inception and during the three fiscal years ending in February 2006, we had been involved in oil and gas exploration/production and more recently, mineral property exploration and development.

Please refer to section 4.B. BUSINESS OVERVIEW, Nature of the Company’s Operations, Mineral Properties for a description of our mineral properties.

ITEM 4A. UNRESOLVED STAFF COMMENTS

This section is not applicable as we are not an accelerated filer or a large accelerated filer, as defined in Rule 12b-2 of the Exchange Act, or a well-known seasoned issuer as defined in Rule 405 of the Securities Act.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included elsewhere herein. The Consolidated Financial Statements have been prepared in accordance with US GAAP.

A. OPERATING RESULTS

Discontinued Operations

During fiscal 2002, we discontinued the business operations of our wholly-owned subsidiary, LinuxWizardry, Inc.

Continuing Operations

Fiscal Year Ended February 28, 2006 compared to Fiscal year Ended February 28, 2005 Results of Operations

During fiscal 2006, we received no revenues from operations as compared to $nil revenues in 2005.

Administrative expenses in 2006 totaled $500,00 as compared to $610,000 in 2005. The expenses decreased from the prior year due not issuing stock-based compensation in 2006. Travel totaled $24,000 compared to $40,000 in 2005. A significant portion of the decrease relates to the decrease in subcontracting costs of $134,000 in 2006 as compared to $234,000 in 2005. This decrease was due to not granting stock options for stock-based compensation as compared to 2005.

We paid $330,000 for mining acquisitions and related exploration work in 2006 as compared to $183,000 in 2005.

Fiscal Year Ended February 28, 2005 compared to Fiscal year Ended February 28, 2004

Results of Operations

During fiscal 2005, we received no revenues from operations as compared to $nil revenues in 2004.

Administrative expenses in 2005 totaled $659,000 as compared to $354,000 in 2004. The expenses increased from the prior year due to the increased activity of the Company. Office, rent and telephone totaled $200,000 compared to $65,000 in 2004. A significant portion of the increase relates to the increase in advertising and promotion costs of $111,000 in 2005 as compared to $23,000 in 2004, which are included in office, rent and telephone costs. Website hosting costs of $10,000 are also included in 2005, as compared to $nil in 2004. Professional fees totaled $42,000 compared to $28,000 in 2004. We also incurred an imputed interest charge of $35,000 compared to $23,500 in 2004. Imputed interest at 15% was charged to operations based on the advances from related parties and treated as donated capital. This amount increased during 2005 due to the additional advances received in the first three fiscal quarters of 2005, before being paid down in the last fiscal quarter of 2005. Consulting and subcontract expenses increased to $234,000 in 2005 from $174,000 in 2004. This increase was due to the inclusion of stock-based compensation of $100,000 recognized from the granting of stock options.

We paid $183,000 for mining acquisitions and related exploration work in 2005 as compared to $122,000 in 2004.

Fiscal Year Ended February 28, 2004 compared to Fiscal year Ended February 28, 2003

Results of Operations

During fiscal 2004, we received no revenues from operations as compared to $nil revenues in 2003.

Administrative expenses in 2004 totaled $354,000 as compared to $201,000 in 2003. The expenses increased from the prior year due to the increased activity of the Company. Office, rent and telephone totaled $65,000 compared to $13,000 in 2003. Professional fees totaled $28,000 compared to $16,000 in 2003. We also incurred an imputed interest charge of $23,000 compared to $90,00 in 2003. Imputed interest at 15% was charged to operations based on the advances from related parties and treated as donated capital. This amount decreased during 2004 due to the settlement of debt in 2003. Filing and regulatory expenses increased due to increased reporting activities. Consulting and subcontract expenses increased to $174,000 in 2004 from $17,000 in 2003. This increase was due to a payment of $100,000 to Barry Clarke and a payment of $30,000 to Capital Research for financing consulting.

In 2003 we recorded an option payment of $80,000 which represented the 200,000 shares we received pursuant to the joint venture agreement with Teryl Resources Corp. We paid $122,000 for mining acquisitions and related exploration work as compared to $6,000 in 2003. In 2003 we issued 3,000,000 shares to purchase a license from Mailprotek.com. The license value was valued at $238,000 but Mailprotek.com’s was $25,000 which resulted in a deemed dividend of $213,800.

B. LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Capital Resources

In the past, we have derived most of our development and operating capital primarily from the issuance of capital stock. Minor amounts were derived from interest.

We have been successful in the past in acquiring capital through the issuance of shares of our Common Stock, and through advances from related parties. Although we intend to continue utilizing these sources, there has been no assurance in the past that these sources and methods would continue to be available in the future. On July 16, 1999, we received from John G. Robertson, its then President, currently the Chairman of the Board, a "Commitment to Provide Financing to Flame Petro-Minerals Corp. as Required for Ongoing Operations". In substance, the Commitment states that if we are not able to obtain funds required for maintaining our ongoing operations and status as a publicly traded company, from other sources, Mr. Robertson agrees and commits to provide, and/or arrange for any such funds for us on either a loan, equity, or combination basis, on mutually agreeable terms, and which comply with any regulatory rules and regulations applicable to such transactions. Mr. Robertson further states that such maintenance funding requirements are estimated at approximately $50,000 per year and that he is capable of arranging for such funding and/or is able to generate net earnings from revenues which will sustain our ongoing operations.

In the event that Mr. Robertson were not able to raise funds, and no other sources of capital were available to us in the future, on a reasonable financial basis, it would face the same obstacles as many small, undercapitalized companies do, and, in the worst case, we could be forced to reorganize or liquidate, either of which consequence would likely have an adverse financial effect upon our shareholders.

Liquidity

Fiscal Year Ended February 28, 2006 compared to Fiscal year Ended February 28, 2005

During 2006 we financed our operations by the issue of 3,336,250 common shares for cash proceeds of $727,790. This consists of the issue of 3,000,000 common shares pursuant to private placement offerings completed during the year to raise cash proceeds of $652,556 after issue costs, the issue of 93,750 common shares pursuant to the exercise of stock options for cash proceeds of $10,838, and the issue of 92,500 shares pursuant to the exercise of share purchase warrants for cash proceeds of $21,825.

During 2006, we spent $703,000 of these funds on operating activities as discussed above under Results of Operation for the Year Ended February 28, 2006 as compared to $665,000 the year ended February 28, 2005.

Our cash position has decreased by $2,000 to $396,000 and our working capital as at February 28, 2006 was $70,000.

Fiscal Year Ended February 28, 2005 compared to Fiscal year Ended February 28, 2004

During 2005 we financed our operations by the issue of 4,543,110 common shares for cash proceeds of $908,195. This consists of the issue of 4,205,610 common shares pursuant to private placement offerings completed during the year to raise cash proceeds of $860,089 after issue costs, the issue of 87,500 common shares pursuant to the exercise of stock options for cash proceeds of $10,606, and the issue of 250,000 shares pursuant to the exercise of share purchase warrants for cash proceeds of $37,500.

During 2005, we spent $665,000 of these funds on operating activities as discussed above under Results of Operation for the Year Ended February 28, 2005 as compared to $154,000 the year ended February 28, 2004.

Our cash position has increased by $247,000 to $398,000 and our working capital as at February 28, 2005 was $98,000.

Fiscal Year Ended February 28, 2004 compared to Fiscal year Ended February 28, 2003

Liquidity

During 2004 we financed our operations and received $479,000 by:

	(i)	receiving financial support from companies affiliated with the President of the Company in the amount of $179,000. These amounts are unsecured, non-interest bearing and due on demand;

	(ii)	issuing shares for $301,000.

During 2004, we spent $154,000 of these funds on operating activities as discussed above under Results of Operation for the Year Ended February 29, 2004 as compared to $144,000 the Year Ended February 28, 2003.

Our cash position has increased by $141,000 to $152,000 and our working capital deficit, as at February 29, 2004 was $92,000.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Our aggregate research and development expenditures over the past three years ended February 29, 2004, February 28, 2005 and February 28, 2006 amount to $nil, $nil and $nil respectively. We do not hold any patents, trademarks or copyrights.

D. TREND INFORMATION

We currently have no active business operations that would be effected by recent trends in productions, sales, etc. We have no material net sales or revenues that would be affected by recent trends other than the general effect of mineral prices on our ability to raise capital and those other general economic items.

E. OFF-BALANCE SHEET ARRANGEMENTS

There are no known off-balance sheet arrangements other than those disclosed in this Form 20-F and in our audited consolidated financial statements for the year ended February 28, 2005.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table provides information as of the latest fiscal year end balance sheet date with respect to the Company’s known contractual obligations specified below.

	Payments due by period
	Payments due by period
Contractual Obligations	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
Mineral Property Obligations	$555,000 and 200,000 shares	-	$555,000 and 200,000 shares	-	-
Long-term debt obligations	-	-	-	-	-
Capital (Finance) Lease obligations	-	-	-	-	-
Operating lease obligations	$28,395	$25,918	$2,477	-	-
Purchase Obligations	$25,000	$25,000	-	-	-
Other Long-term liabilities reflected on the Company’s Balance sheet under US GAAP	-	-	-	-	-
Total	$608,395 and 200,000 shares	$50,918	$557,477 and 200,000 shares	-	-

As we explore our properties, we decide which ones to proceed with and which ones to abandon. To fully exercise the options under various agreements for the acquisition of interests in properties located in Canada, Alaska and China, we must incur exploration expenditures on the properties and make payments to the optionors as follows:

Property	Calendar Year	Option/Advance Royalty Payment	Expenditure Commitment	Number of Shares

TY, BC, Canada	2006	$ -	$ -	-
	2007	$ -	$ -	-
ORO, BC, Canada	2006	$ -	$ -	-
	2007	$ -	$ -	-
BLN Gold Property, Hebei Province, China	2005- 2006	$55,000	$500,000	150,000

These amounts may be reduced in the future as we determine which properties are of merit and abandon those with which we do not intend to proceed.

G. Safe Harbor

This annual report includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include conclusions of prefeasibility and feasibility studies, estimates of future production, capital and operating costs, prices of silver and gold and other known and unknown risks. These and other factors and uncertainties may cause material differences from future results as expressed or implied by these forward looking statements. These risks, uncertainties and other factors include but are not limited to the risks involved in the exploration, development and mining business.

All statements, other than statements of historical facts, included in this annual report that address activities, events or developments which we expect or anticipate will or may occur in the future are forward-looking statements. The words "believe", "intend", "expect", "anticipate", "project", "estimate", "predict" and similar expressions are also intended to identify forward-looking statements.

Our estimated or anticipated future results or other non-historical facts are forward-looking and reflect our current perspective of existing trends and information. These statements involve risks and uncertainties that cannot be predicted or quantified, and consequently actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, the success of our exploration and development activities, environmental and other regulatory requirements, foreign exchange issues, mineral deposit estimates and mineral prices, competition by other mining companies, financing risks, mineral title issues, insider conflicts of interest, political stability issues, and other risks and uncertainties detailed in this report and from time to time in our other Securities and Exchange Commission (“SEC”) filings.

Consequently, all of the forward-looking statements made in this annual report are qualified by these cautionary statements. We cannot assure you that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected effect on us or our business or operations.

Forward-looking statements are subject to a variety of risks and uncertainties in addition to the risks referred to in “Risk Factors” under Item 3.D above.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

As of February 28, 2006, our Board of Directors consisted of four Directors, two of whom are independent (or “outside”) non-executive Directors. The following table provides certain information about the members of our Board of Directors as of February 28, 2006.

Name	Position with Registrant	Term of Office	Office Held Since
John G. Robertson	President, CEO and Chairman of the Board and Director, and Director of Subsidiary	Annual Shareholders Meeting in 2003	3/05/79
Jennifer Lorette	Director	Annual Shareholders Meeting in 2003	6/01/94
Susanne Robertson	Director	Annual Shareholders Meeting in 2003	8/28/02
Monique van Oord	Chief Financial Officer and Corporate Secretary	Annual Shareholders Meeting in 2004	8/16/04

John G. Robertson. Mr. Robertson is the Chairman of the Board, CEO and founder of the Company and a Director of the Company since its inception. Mr. Robertson has been the Chairman, President and Chief Executive Officer of REGI U.S., Inc., an Oregon corporation traded on the OTC bulletin board, since July 1992, a U.S. public company engaged in the development of a rotary engine/compressor (“Rand Cam Engine”) and hydrogen separator technology. Since October 1984 Mr. Robertson has been President and a Director of Reg Technologies Inc., a British Columbia corporation listed on the TSX Venture Exchange that has financed the research on the Rand Cam Engine since 1986. REGI U.S. is ultimately controlled by Reg Technologies Inc. Mr. Robertson has been the President and Principal Executive Officer and a Director of IAS Communications, Inc. since its formation in December 1994, a U.S. public company which is developing and marketing proprietary antenna technology. Since June 1997 Mr. Robertson has been President, Principal Executive Officer and a Director of Information Highway.com, Inc., a Florida corporation. Mr. Robertson is also the President and founder of Teryl Resources Corp., a British Columbia company trading on the TSX Venture Exchange involved in mineral exploration. Since May 1977 Mr. Robertson has been President and a member of the Board of Directors of SMR Investments Ltd., a private British Columbia corporation engaged in management of public companies. Mr. Robertson is also the President and Director of the following private companies: JGR Petroleum, Inc., BlueCrow Internet Co. Ltd., 394754 B.C. Ltd., dba SOVO Computer Centre, Pavlik Travel Services Ltd., World Tel-Internet (Toronto) Ltd., International Diamond Syndicate Ltd., Argon Investment Corporation, and Airstream Communications, Inc. Mr. Robertson is a citizen and resident of Canada.

Jennifer Lorette - Ms. Lorette has held several positions with the Company since June 1994. Also, since June 1994 Ms. Lorette, has been Vice President of REGI U.S., Inc., an Oregon corporation traded on the OTC bulletin board. Since April 1994 she has also been Vice President of Administration for Reg Technologies, Inc., a British Columbia corporation listed on the TSX Venture Exchange. REGI U.S. is ultimately controlled by Reg Technologies Inc. Since June 1997 Ms. Lorette has been Secretary/Treasurer, and a Director of Information Highway.com, Inc., a Florida corporation. Ms. Lorette is a founder, and has been Secretary/Treasurer of IAS Communications, Inc. since February 1995. Ms. Lorette is a citizen and resident of Canada.

Susanne Robertson - Ms. Robertson was elected a director of the Company in August 2001. She is also a director of Teryl Resources Corp. and owns SMR Investments Ltd. a company providing management services to public companies. Ms. Robertson is a citizen and resident of Canada.

Monique van Oord – Ms. van Oord was elected a director of the Company in August 2004. She is the Company’s Chief Financial Officer and Secretary. She is also a director of Teryl Resources Corp. Ms. van Oord is a citizen and resident of Canada.

B. COMPENSATION

For the fiscal year ended February 29, 2006 the Company and its subsidiaries paid $42,000 in compensation to directors, officers and related companies as a group. $30,000 of this amount was not paid, but was accrued.

SMR Investments Ltd., a company owned by Susanne M. Robertson, wife of John G. Robertson, receives, in accordance with a management agreement $2,500 per month for management fees provided to the Company. A further $1,000 per month is paid to the Chairman of the Board of the Company, John G. Robertson, as a director's fee. John G. Robertson is also president and a director of SMR Investments Ltd.

No cash or non-cash compensation was paid or distributed to the executive officers of the Company under any pension or other plans nor is there any plan for such payments or distributions during the following fiscal year contributed to the directors and officers.

During the fiscal year ended February 28, 2006 no new stock options were granted pursuant to stock option plans, 93,750 options were exercised and 1,050,000 options were cancelled (expired)(see Note 8 to our Financial Statements).

Total options currently exercisable at the date of this 20-F are 2,343,750. All exercise prices are US dollars. Of those, 1,800,000 are exercisable at $0.10 expiring on dates ranging from February 21, 2008 to October 20, 2008. 318,750 options are exercisable at $0.18 and expire on September 17, 2007, 225,000 are exercisable at $0.30 expiring between June 9, 2006 and April 22, 2009. Please see Note 8 to the financial statements.

Options to Purchase Registrant's Common Shares Held by Officers and Directors of Registrant

NAME OF OPTIONEE	NUMBER OF OPTIONS	EXERCISE PRICE (US $)	EXPIRY DATE
John G. Robertson	1,000,000	$0.10	February 21, 2008
Jennifer Lorette	150,000	$0.10	February 21, 2008
Monique van Oord	50,000	$0.30	April 22, 2009
Susanne Robertson	300,000	$0.10	February 25, 2008
TOTAL HELD AS A GROUP:	1,500,000

Options to Purchase Registrant’s Common Shares Held by Persons Other than Officers and Directors of the Registrant

Name of Optionee	No. of Optioned Shares	Exercise Price Per Share	Expiry Date
James Vandeberg	75,000	$0.10 US	February 21, 2008
Bruce Bragagnolo	50,000	$0.10 US	February 25, 2008
James Kerr	75,000	$0.10 US	February 25, 2008
Arnie Winrob	12,500	$0.10 US	February 25, 2008
James Kerr	75,000	$0.10 US	September 17, 2008
Peter Zihlmann	62,500	$0.10 US	October 20, 2008
Jillian Thow	300,000	US$0.18	Sept. 17, 2007
Arnie Winrob	25,000	US$0.30	April 22, 2009
Wazmakay Charlwood	150,000	US$0.30	June 9, 2006
Jagdish Singh	-	US$0.20	November 9, 2009
Cindy Broad	18,750	US$0.20	November 9, 2009
Hal Clark	-	US$0.05	April 1, 2006
TOTAL HELD AS A GROUP:	843,750

C. BOARD PRACTICES

Under section 224 of the Business Corporations Act, S.B.C. 2002, c. 57, the directors of a company must, at their first meeting on or after each annual reference date, elect an audit committee, to hold office until the next annual reference date. The audit committee must be composed of at least 3 directors, and a majority of the members of the committee must not be officers or employees of the company or of an affiliate of the company. The members must elect a chair from among their number and determine their own procedures. The auditor of a company must be given reasonable notice of, and has the right to appear before and to be heard at each meeting of the company’s audit committee and must appear before the audit committee when request to do so by the committee and after being given reasonable notice to do so. Our Board of Directors established an Audit Committee which members consist of Monique van Oord, Susanne Robertson and Jennifer Lorette.

The Directors are elected by the shareholders to hold office for a term of one year or until re-elected at the next annual general meeting.

D. EMPLOYEES

We employed no employees during any of the years ended February 28, 2006, February 28, 2005 and February 28, 2004. Our legal, accounting, marketing and administrative functions are, and have been during the last three fiscal years, contracted out to consultants.

We have no employees; as such, no directors of officers belong to any labor unions. We have not been subject to any strikes or other labor disturbances that have interfered with our operations.

E. SHARE OWNERSHIP

The following table sets forth the ownership of our common shares by our Directors and Officers as at June 27, 2006:

Shareholder	Number of shares issued and outstanding	Percentage ownership (1)
John G. Robertson	2,318,138 (2)	3.39%
Jennifer Lorette	238,100 (3)	*
Monique van Oord	75,000 (4)	*
Susanne Robertson	6,381,327 (5)	9.3%

	(1)	as at June 27, 2006, there were 68,287,773 issued and outstanding common shares.
	(2)	includes 8,482 shares registered in the name of Access Information Services, Ltd., a corporation controlled by the Robertson Family Trust, and 1,000,000 options that are currently exercisable. Mr. Robertson is one of three trustees of the Robertson Family Trust, which acts by the majority vote of the three trustees. Mr. Robertson disclaims beneficial ownership of the shares owned or controlled by the Robertson Family Trust. Mr. Robertson's address is the same as our address.
	(3)	Includes 88,100 options that are currently exercisable. Ms. Lorette's address is the same as our address.
	(4)	Includes 25,000 options that are currently exercisable. Ms. van Oord’s address is the same as the Company’s.
	(5)	includes 5,284,3278 shares registered in the name of SMR Investments Ltd., and 797,000 options that are currently exercisable. Ms. Robertson's address is the same as the Company’s.

* Beneficially owns less than one percent of our common shares.

For information regarding the ownership of stock options to acquire our common shares which are held by our

Directors and Officers, and also by our employees, please refer to Item 6.B above “ Stock Options Granted to Employees, Directors and Senior Managers”.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS.

To the best of our knowledge, we are not indirectly owned or controlled by any other corporation, foreign government or by any other natural or legal person, except as set out below.

As of June 27, 2006, 68,387,773 Common Shares were outstanding. At such date, we are aware of one shareholder who owns 5% or greater of the voting shares of the Company. Sue Robertson, our director, owns 6,381,327 of our issued and outstanding common shares. Of these, 5,284,327 shares are registered in the name of SMR Investments Ltd., a corporate controlled by Ms. Robertson. Mrs. Robertson does not have any different voting rights.

Over the past three years, there has not been a significant change in the percentage ownership held by any major shareholder.

We do not know of any arrangements which could result in a change in control of the Company.

B. RELATED PARTY TRANSACTIONS.

We are a party to a management services agreement with SMR Investment Ltd. (“SMR”) under which SMR incurred management fees of $30,000 in each of fiscal years 2006, 2005 and 2004, and rent of $3,000 in fiscal 2004. SMR is a private company owned by Susanne M. Robertson, the wife of John G. Robertson.

We paid a director's fee of $12,000 to John G. Robertson, our Chairman of the Board, during each of fiscal years 2006, 2005 and 2004.

We had related party advances outstanding of $204,394 at the February 2006 year-end, compared to $188,156 at the end of our previous fiscal year. These were unsecured, non-interest bearing and with no fixed terms of repayment.

Also refer to “Liquidity and Capital Resources” regarding the "Commitment to Provide Financing to Flame Petro-Minerals Corp. as Required for Ongoing Operations" by John Robertson.

C. INTERESTS OF EXPERTS AND COUNSEL.

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See page F-1 to F-13 following Item 19.

Legal Proceedings

We are not a party to any material legal proceedings.

Dividend Distribution Policy

We have not paid any cash dividends to date and we do not intend to pay cash dividends in the foreseeable future.

B. SIGNIFICANT CHANGES

None.

ITEM 9. THE OFFER AND LISTING

Not applicable, except for Item 9.A.4 and Item 9.C.

Our shares traded solely on the Alberta Stock Exchange (the "ASE") between November, 1995 and December 14, 1999, at which time it voluntarily delisted from the ASE. The Company's stock currently trades on the Over the Counter Bulletin Board under the symbol LNXGF.

The following table shows the annual high and low closing prices of our stock traded on the OTC Bulletin Board during the last five fiscal years as follows:

Year	High	Low	Close
2006	$0.54	$0.10	$0.351
2005	$0.35	$0.12	$0.19
2004	$0.455	$0.04	$0.30
2003	$0.094	$0.011	$0.07
2002	$0.14	$0.01	$0.013

The following table shows the quarterly high and low closing prices of our stock traded on the OTC Bulletin Board during the last two fiscal years, for each quarter as follows:

Period	High	Low	Close	Volume
2006 Q4 2/28/06	$0.54	$0.23	$0.351	34,939,979
Q3 11/30/05	0.275	0.11	0.236	9,902,368
Q2 8/31/05	0.17	0.105	0.1203	3,250,142
Q1 5/31/05	0.21	0.10	0.125	5,162,488
2005 Q4 2/28/05	$0.35	$0.12	$0.19
Q3 11/30/04	0.20	0.12	0.185	6,986,354
Q2 8/31/04	0.24	0.12	0.19	10,631,057
Q1 5/31/04	$0.35	$0.20	$0.21	12,924,713
2004 Q1 5/31/03	$0.08	$0.04	$0.05	5,055,400
Q2 8/31/03	$0.10	$0.04	$0.077	9,792,900
Q3 11/30/03	$0.28	$0.053	$0.265	26,849,789
Q4 2/29/04	$0.45	$0.20	$0.30	32,438,989

_________
all prices in US$

(Information provided by The Over The Counter Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission and may not represent actual transactions.)

The following table shows the high and low closing prices of our stock traded on the OTC Bulletin Board during the most recent six months, for each month as follows:

Month	High*	Low*
2006, May	0.575	0.37

2006, April	0.50	0.33
2006, March	0.394	0.32
2006, February	0.41	0.285
2006, January	0.54	0.33
2005, December	0.33	0.23

_________
* All prices are in U.S. dollars.

(Information provided by The Over The Counter Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission and may not represent actual transactions.)

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

The Memorandum and Articles of the Company are incorporated by reference to the information in our registration statement on Form 20-F filed with the Securities and Exchange Commission, in Washington, D.C. on June 4, 1999, which became effective August 3, 1999, to which our Articles of Incorporation and Memorandum were filed as exhibits.

On March 29, 2004, the new British Columbia Business Corporations Act (the "BCA") came into force in British Columbia and replaced the former Company Act (“Former Act”) , which is the statute under which we were previously governed. Under the BCA, we have two years within which to transition ("Transition") under the new statute. In accordance with the BCA, we cannot amend our Articles or Notice of Articles until the Transition to the BCA is completed. We filed a transition application with the Registrar of Companies British Columbia and completed the Transition on June 11, 2004.

On August 16, 2004, at the Annual General Meeting of shareholders, our shareholders passed a special resolution that the Notice of Articles, once filed, be altered to remove the Pre-existing Company Provisions set forth in Part 16 of the Regulations to the Business Corporations Act (British Columbia); and delete and replace our Articles in their entirety and no longer apply to Linux Gold Corp.

The New Articles, among other things, incorporate and amend certain of the information required by the Pre-Existing Company Provisions.

Our Incorporation Number is BC0187279. Our Articles do not restrict the nature of the business that may be carried on by the Company.

On June 6, 2006, we registered in the State of Alaska under a Certificate of Authority.

C. MATERIAL CONTRACTS

During the past two years ended February 28, 2006 and February 28, 2005, we entered into the following material contracts.

Property Option Agreement – Peter Tse

Ginyen Recovery Inc. (“Ginyen”) has a license to mine the Bo Luonuo (the “BLN Project”) District of Hebei Province in China. Peter Tse own 100% of Ginyen. Tse granted Linux the sole, exclusive and irrevocable option to purchase up to 100% of the rights, title and interest in and to 100% of all the outstanding shares of Ginyen, subject to the grant of a 5% Net Profits royalty in the BLN Project.

Linux exercised an option as to 25% of the Optioned Shares by paying to Tse, $10,000 and issuing 50,000 Linux Shares to Tse and causing to be carried out the Phase I mining exploration and/or development work in respect of the BLN and expending in connection therewith the total sum of $160,000.

Linux may exercise the option as to a further 35% of the Optioned Shares following the completion of the Phase I Program by (i) paying the additional sum of $15,000 and issuing a further 50,000 Linux Shares to Tse; and (ii) causing to be carried out the Phase II mining exploration and/or development work in respect of the BLN Project or such other secondary work program as shall be recommended by a qualified engineer or geologist acceptable to the parties hereto (the "Phase II Program") and expending in connection therewith the total sum of $130,000.

Provided that Linux has previously exercised the 35% Option we may exercise the option as to a further 25% of the Optioned Shares following the completion of the Phase II Program by (i) paying the additional sum of $15,000 and issuing a further 50,000 Linux Shares to Tse; and (ii) causing to be carried out the Phase III mining exploration and/or development work in respect of the BLN Project or such other continuing work program as shall be recommended by a qualified engineer or geologist acceptable to the parties hereto (the "Phase III Program") and expending in connection therewith the total sum of $210,000. Provided that Linux has previously exercised the above mentioned options, we may exercise the Option as to the final 5% of the Optioned Shares, following the completion of the Phase III Program by (i) issuing a further 50,000 Linux Shares to Tse; and (ii) entering into a Royalty Agreement which grants to Tse a Net Profits Royalty in the BLN Project.

If and when the option is exercised in full, 100% of all right, title and interest in and to the Optioned Shares shall vest in Linux free and clear of all charges, encumbrances and claims.

Fish Creek Joint Venture Agreement

On March 5, 2002 we announced that a joint venture has been completed for a 50% interest in 30 Fish Creek claims in Alaska based on the following terms and conditions. Teryl Resources Corp. will issue 200,000 treasury shares of its common shares, which shares were issued on December 16, 2002, and will give to Linux Gold Corp. a 5% royalty interest until $2,000,000 U.S. has been received from the royalty payments. Teryl Resources Corp. may purchase the 5% net royalty for $500,000 U.S. within 1 year after production. Teryl also agrees to expend a minimum of $500,000 U.S. after three years from the date of the agreement.

On November 4, 2002, we amended the March 5, 2002 agreement with Teryl Resources Corp. We agreed that in consideration for receiving a mining license which was not disclosed to us at the time of the March 5, 2002 agreement, both parties agreed to grant Linux a back in working interest for a 25% interest in the mining lease after Teryl completes the US$500,000 expenditures.

In March 2005, the joint venture agreement was extended until March 5, 2007. Other than the extension, all other terms remain the same. Subject to regulatory approval, Teryl shall issue 100,000 shares of its common stock to Linux Gold Corp. as consideration for the extension.

D. EXCHANGE CONTROLS.

There are no governmental laws, decrees or regulations in Canada relating to restrictions on the export of capital affecting the remittance of interest, dividends or other payments to nonresident holders of the Registrant's shares. Any such remittances, however, are subject to withholding tax. See Item 10.E, "Taxation".

There are no limitations under the laws of Canada, the Province of British Columbia or in the charter or any other constituent documents of the Company on the right of foreigners to hold or vote the shares of the Company. However, under the provisions of the Investment Canada Act, when control of a Canadian business is acquired by a non- Canadian, the transaction may be reviewable in certain circumstances by Investment Canada, an agency of the federal government of Canada. Reviewable transactions are those in which a non-Canadian acquires the assets of a Canadian business or the voting shares of a Canadian corporation the value of which assets or shares exceeds $5 million (Canadian). Also, certain transactions are specifically exempted from review.

E. TAXATION.

Withholding

Generally, cash dividends paid by Canadian corporations to nonresident shareholders are subject to a withholding tax of 25 percent. However, pursuant to Article X[2 of the Canada-United States tax treaty, dividends paid to a resident if a company of the United States are only subject to a 15 percent withholding tax. Further, if the United states resident owns 10 percent or more of the voting shares of the Canadian company paying the dividends, the withholding tax is reduced to 10 percent. In addition to dividend withholding, interest paid to United States residents is subject to a 15 percent withholding tax pursuant to Article XI[2 of the Canada-United States tax treaty.

Capital Gains

A nonresident purchaser who holds shares of the Company as capital property will not be subject to tax on capital gains realized on the disposition of such shares unless such shares are "taxable Canadian property" within the meaning of the Income Tax Act (Canada) and no relief is afforded under any applicable tax treaty. The shares of the Company would be taxable Canadian property of a nonresident purchaser if the nonresident purchaser used the shares in carrying on a business in Canada or if at any time during the five-year period immediately preceding the disposition not less than 25 percent of the issued shares of any class of the Company belonged to the particular purchaser, persons with whom the purchaser did not deal at arm's length or any combination thereof.

Holders of Common Shares of the Company should seek independent advice from their own professional tax advisors with respect to the Canadian Income Tax consequences arising from the holding of Common Shares of the Company.

F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENT BY EXPERTS.

Not applicable.

H. DOCUMENTS ON DISPLAY.

We filed a registration statement on Form 20-F filed the Securities and Exchange Commission in Washington, D.C. (Registration No. 000-30084) on June 4, 1999, which became effective August 3, 1999. The Registration Statement contains exhibits and schedules. Any statement in this annual report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to the Registration Statement, the contract or document is deemed to modify the description contained in this annual report. You must review the exhibits themselves for a complete description of the contract or documents.

You may inspect and copy our registration statements, including their exhibits and schedules, and the reports and other information we file with the Securities and Exchange Commission in accordance with the Exchange Act at the public reference facilities maintained by the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, Room 1024, N.W., Washington, D.C. 20549 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may also inspect the registration statements, including their exhibits and schedules, at the office of the New York Stock Exchange, Wall Street, New York, New York 10005. Copies of such material may also be obtained from the Public Reference Section of the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You may obtain information regarding the Washington D.C. Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330 or by contacting the Securities and Exchange Commission over the Internet at its website at http://www.sec.gov.

I. SUBSIDIARY INFORMATION.

We hold a 100% interest in LinuxWizardry, Inc., a private Florida corporation which is currently inactive.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133. "Accounting For Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 was effective for our fiscal year beginning March 1, 2004. The Company believes that it does not have any material exposure to interest or commodity risks. The Company does not own any derivative instruments, does not engage in any hedging transactions and does not have any outstanding long-term debt. Because we are not involved in any activities covered by SFAS No. 133, the adoption of SFAS No. 133 is not expected to have a material effect on our financial position or results of operations.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELIQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

A. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

None.

B. USE OF PROCEEDS.

Not applicable

ITEM 15. CONTROLS AND PROCEDURES

Based upon the evaluation of the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, the disclosure controls and procedures were effective to ensure that material information relating to the Registrant was made known to others within the company particularly during the period in which this annual report and accounts were being prepared, and such controls and procedures were effective to ensure that information required to be disclosed by the Registrant in the reports that it files or submits under regulatory rules and securities laws is recorded, processed, summarized and reported, within the time periods specified. Management of the Registrant recognizes that any controls and procedures can only provide reasonable assurance, and not absolute assurance, of achieving the desired control objectives, and management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Controls over Financial Reporting.

There were no changes in the Registrant's internal controls over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

ITEM 16. [Reserved]

ITEM 16A. Audit Committee Financial Expert

We do not currently have a financial expert in our audit committee due to our relatively small size. In 2006, we had no employees and we relied upon the services of a chartered accounting firm in Vancouver, BC, Canada, to prepare our interim unaudited quarterly consolidated financial statements. Also, we retained the audit services of Smythe Ratcliffe Chartered Accountants to perform the audit on our year-end consolidated financial statements.

Moreover, the audit committee is comprised of seasoned business professionals, whereby two members have over 25 years of experience in the investment business and are board members of several corporations.

On these bases, we believe that the audit committee has adequate resources available to it when financial expertise and advice are necessary.

ITEM 16B. Code of Ethics

We have not adopted a formal written code of ethics given our relatively small size, whereby we had no employees in 2006.

Directors are subject to the laws of the Province of British Columbia, Canada, whereby they are required to act honestly, in good faith and in the best interests of the Company.

ITEM 16C. Principal Accountant Fees and Services

The following table discloses accounting fees and services of the Registrant:

(Stated in terms of Canadian dollars)

	2006	2005
Type of Services Rendered	Fiscal Year	Fiscal Year


(a) Audit Fees	US$16,900	US$16,500

(b) Audit-Related Fees	$1,200	$nil

(c) Tax Fees	$870	$500

(d) All Other Fees	$nil	$nil

PART III

ITEM 17. FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

Reference is made to Item 19 for a list of all financial statements filed as part of this annual report.

Our consolidated financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The consolidated financial statements as required under Item 18 are included immediately following the text of this Report.

ITEM 19. EXHIBITS

The following consolidated financial statements, together with the report of Smythe Ratcliffe Chartered Accountants on the annual financial statements referred to below, are filed as part of this annual report, and are included immediately following the text of this 20-F:

Report of Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Loss and Deficit
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements

Documents filed as exhibits to this annual report:

Number	Description

1.1	Memorandum and articles of incorporation with bylaws dated February 27, 1979	(1)
1.2	Altered memorandum and special resolution dated September 20, 1993 increasing the authorized capital to 100,000,000 common shares from 90,000,000 and redesignating Class “A” Common voting shares without par value as common shares without par value and redesignating Class “B” Common non-voting shares as common shares without par value	(1)
1.3	Altered memorandum and special resolution dated March 15, 2000 changing the name of the Company from Flame Petro-Minerals Corp. to LinuxWizardry Systems, Inc.
1.4	Altered memorandum and special resolution dated February 20, 2003 changing the name of the Company from LinuxWizardry Systems, Inc. to Linux Gold Corp.	(5)
1.5	Memorandum and articles of incorporation amended effective September 15, 2004	(7)
2.1	Specimen copy of Registrant’s common share certificate	(2)
4.1	Commitment by John G. Robertson dated July 16, 1999 to provide financing to the Registrant as required for ongoing operations	(2)
4.2	Share Purchase Agreement dated January 7, 2000 between Flame Petro- Minerals Corp. and Mike Carpenter and LinuxWizardry, Inc.	(3)
4.3	Purchase order dated May 22, 2000 between LinuxWizardry, Inc. and Motorola, Inc., Personal Communications Sector	(4)
4.4	License Agreement dated June 30, 2000 between LinuxWizardry Systems, Inc. and LinuxWizardry, Inc. and Lineo, Inc	(4)
4.5	Vendor Agreement dated January 5, 2001 between Merrimack Services Corporation d/b/a PC Connection and LinuxWizardry Systems, Inc.	(4)
4.6	Joint Venture Agreement between Linux Gold Corp. and Teryl Resources Corp. dated March 5, 2002	(5)
4.7	Amendment to Joint Venture Agreement between Linux Gold Corp. and Teryl Resources Corp. dated November 4, 2002	(5)
4.8	Edward Skoda Purchase Agreement – TY Gold Property	(6)
4.9	Edward Skoda Purchase Agreement – ORO Mineral Claims	(6)
4.10	Property Option Agreement – Peter Tse	(6)
12.1	Certification pursuant to Title 18, United States Code, Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (John G. Robertson)	(8)
12.2	Certification pursuant to Title 18, United States Code, Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Monique van Oord)	(8)

13.1	Certification pursuant to Title 18, United States Code, Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (John G. Robertson)	(8)
13.2	Certification pursuant to Title 18, United States Code, Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Monique van Oord)	(8)
14.1	Consent of Independent Auditors	(8)

	(1)	incorporated by reference to the Registrant’s Registration Statement on Form 20-F filed on June 4, 1999 with the US Securities and Exchange Commission
	(2)	incorporated by reference to the Registrant’s Amendment No. 1 to the Registration Statement dated July 22, 1999
	(3)	incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on September 14, 2000
	(4)	incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on July 14, 2001
	(5)	incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on August 25, 2003
	(6)	incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on July 19, 2004
	(7)	incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on July 19, 2005
	(8)	attached hereto.

SIGNATURE PAGE

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this transitional report on its behalf.

LINUX GOLD CORP.
REGISTRANT

Dated: August 11, 2006	By:	/s/ John G. Robertson
		John G. Robertson
		Chairman of the Board/Director

LINUX GOLD CORP.

(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian dollars)

February 28, 2006 and 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE DIRECTORS AND STOCKHOLDERS OF LINUX GOLD CORP.
(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheet of Linux Gold Corp. (An Exploration Stage Company) as of February 28, 2006 and the related consolidated statements of loss, stockholders' deficiency and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We also have audited the adjustments described in Note 13 that were applied to restate the 2005 and 2004 financial statements to correct an error. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2005 and 2004 financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2005 and 2004 financial statements taken as a whole.

We conducted our audit in accordance with auditing standards of the Public Company Accounting Oversight Board (United States of America). 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 audit provides a reasonable basis for our opinion.

In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as at February 28, 2006 and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going-concern. As discussed in note 2 to the financial statements, the Company has no revenues and limited capital, which together raise substantial doubt about its ability to continue as a going-concern. Management plans in regard to these matters are also described in note 2. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

“Smythe Ratcliffe” (signed)

Chartered Accountants

Vancouver, Canada
June 12, 2006

LINUX GOLD CORP.

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

(Expressed in Canadian Dollars)

		February 28
		2006			2005

ASSETS
Current
Cash and cash equivalents	$	396,049		$	398,433
Amounts receivable		53,417			49,550
Marketable securities		72,000			70,000
Prepaid expenses and deposits		10,999			6,200
Total Current Assets		532,465			524,183
Property and Equipment (Note 4)		10,175			20,525

Total Assets	$	542,640		$	544,708

LIABILITIES
Current
Accounts payable	$	142,943		$	100,868
Accrued liabilities		26,643			32,395
Accrued liabilities to related parties (Note 6(a))		88,815			74,560
Due to related parties (Note 6(b))		204,394			188,156
Total Liabilities		462,795			395,979

Commitments (Note 10)

STOCKHOLDERS’ EQUITY

Common Stock and Paid-in Capital (Note 7)
200,000,000 Shares authorized with no par value
68,287,773 Issued and outstanding (2005 –64,951,523)		9,005,424			8,277,425

Donated Capital		295,195			263,473

Accumulated Other Comprehensive Loss		(8,000	)		(10,000	)

Deficit Accumulated from Prior Operations		(7,524,145	)		(7,524,145	)

Deficit Accumulated During the Exploration Stage		(1,688,629	)		(858,024	)
Total Stockholders’ Equity		79,845			148,729

Total Liabilities and Stockholders’ Equity	$	542,640		$	544,708

Approved by the Directors:

“J. Robertson”		“J. Lorette”
J. Robertson – Director		J. Lorette – Director

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

F-3

LINUX GOLD CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT

(Expressed in Canadian Dollars)

											Cumulative
											From Inception
		Years Ended									May 1, 2003
											Through
		February 28,			February 28,			February 29,			February 28,
		2006			2005			2004			2006

General and Administrative Expenses
Amortization of property
and equipment	$	10,686		$	5,346		$	–		$	16,032
Consulting and subcontract		133,953			233,789			173,555			541,297
Filing and regulatory fees		14,632			26,103			26,113			66,848
Foreign exchange (recovery)		6,407			6,877			(38,254	)		(24,970	)
Imputed interest (Note 6(b))		31,722			35,013			22,960			89,695
Management and directors’
fees (Note 6(a))		30,000			30,250			34,500			94,750
Office, rent and telephone
(Note 6(a))		198,856			193,522			61,839			454,217
Professional fees		54,909			42,235			27,662			124,806
Travel		23,902			39,750			3,902			67,554
Less: Interest income		(4,053	)		(1,858	)		(624	)		(6,535	)
		501,014			611,027			311,653			1,423,694

Natural Resources
Exploration costs		309,091			137,342			61,298			507,730
Mineral acquisition costs		20,500			45,571			60,346			126,418
		329,591			182,913			121,644			634,148

Loss from Continuing Operations		(830,605	)		(793,940	)		(433,297	)		(2,057,842	)

Income from Discontinued Operations		–			–			369,213			369,213

Net Loss for the Period	$	(830,605	)	$	(793,940	)	$	(64,084	)	$	(1,688,629	)


Basic and Diluted Loss Per Share	$	(0.01	)	$	(0.01	)	$	–

Weighted Average Number of Common
Shares Outstanding		64,981,000			61,345,000			58,664,000

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

F-4

LINUX GOLD CORP.

(An Exploration Stage Company)

Consolidated Statements of Stockholders’ Deficiency

Period from Inception May 1, 2004 to February 28, 2006

(Expressed in Canadian Dollars)

										Deficit
			Common				Deficit			Accumulated
	Shares of		Stock and				Accumulated			During the			Other			Total
	Common Stock		Paid-in				from Prior			Exploration			Comprehensive			Stockholders’
	Issued		Capital		Donated Capital		Operations			Stage			Income (Loss)			Deficiency

Balance from prior operations,
March 1, 2003	57,458,413	$	6,804,412	$	205,500	$	(7,524,145	)	$	–		$	–		$	(514,233	)
Common stock issued for mineral property	175,000		17,500		–		–			–			–			17,500
Common stock issued for services	1,000,000		100,000		–		–			–			–			100,000
Common stock issued for settlement of
rent obligation	200,000		19,200		–		–			–			–			19,200
Options exercised	150,000		19,812		–		–			–			–			19,812
Warrants exercised	1,300,000		280,922		–		–			–			–			280,922
Imputed interest	–		–		22,960		–			–			–			22,960
Marketable securities adjustment	–		–		–		–			–			44,000			44,000
Net loss for period	–		–		–		–			(64,084	)		–			(64,084	)

Balance, February 29, 2004	60,283,413		7,241,846		228,460		(7,524,145	)		(64,084	)		44,000			(73,923	)
Common stock issued for mineral property	125,000		45,384		–		–			–			–			45,384
Common stock issued for cash	4,205,610		860,089		–		–			–			–			860,089
Options exercised	87,500		10,606		–		–			–			–			10,606
Warrants exercised	250,000		37,500		–		–			–			–			37,500
Imputed interest	–		–		35,013		–			–			–			35,013
Stock based-compensation	–		82,000		–		–			–			–			82,000
Marketable securities adjustment	–		–		–		–			–			(54,000	)		(54,000	)
Net loss for year	–		–		–		–			(793,940	)		–			(793,940	)

Balance, February 28, 2005	64,951,523	$	8,277,425	$	263,473	$	(7,524,145	)	$	(858,024	)	$	(10,000	)	$	148,729

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

F-5

LINUX GOLD CORP.

(An Exploration Stage Company)

Consolidated Statements of Stockholders’ Deficiency (Continued)

Period from Inception May 1, 2004 to February 28, 2006

(Expressed in Canadian Dollars)

										Deficit
			Common				Deficit			Accumulated
	Shares of		Stock and				Accumulated			During the			Other			Total
	Common Stock		Paid-in				from Prior			Exploration			Comprehensive			Stockholders’
	Issued		Capital		Donated Capital		Operations			Stage			Income (Loss)			Deficiency

Balance, February 28, 2005	64,951,523	$	8,277,425	$	263,473	$	(7,524,145	)	$	(858,024	)	$	(10,000	)	$	148,729
Common stock issued for mineral property	50,000		20,500		–		–			–			–			20,500
Common stock issued for cash	3,100,000		672,556		–		–			–			–			672,556
Options exercised	93,750		10,838		–		–			–			–			10,838
Warrants exercised	92,500		21,825		–		–			–			–			21,825
Imputed interest	–		–		31,722		–			–			–			31,722
Stock based-compensation	–		2,280		–		–			–			–			2,280
Marketable securities adjustment	–		–		–		–			–			2,000			2,000
Net loss for year	–		–		–		–			(830,605	)		–			(830,605	)

Balance, February 28, 2006	68,287,773	$	9,005,424	$	295,195	$	(7,524,145	)	$	(1,688,629	)	$	(8,000	)	$	79,845

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

F-6

LINUX GOLD CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian Dollars)

										Cumulative
										From Inception
		Years Ended								May 1, 2003
										Through
		February 28,			February 28,			February 29,		February 28,
		2006			2005			2004		2006

Cash Flows Used In Operating Activities
Net loss for the period	$	(830,605	)	$	(793,940	)	$	(64,084	)	(1,688,629	)

Items not involving cash
Amortization of property
and equipment		10,686			5,346			–		16,032
Imputed interest		31,722			35,013			22,960		89,695
Stock-based compensation		2,280			82,000			–		84,280
Shares issued for services		20,000			–			100,000		120,000
Shares issued for mineral
properties		20,500			22,000			17,500		60,000
Shares issued for settlement of
rent obligation		–			–			19,200		19,200
Write-off of subsidiary’s
accounts payable		–			–			(369,213	)	(369,213	)
		(745,416	)		(649,581	)		(273,637	)	(1,668,634	)
Changes in non-cash working capital
Accounts receivable		(3,867	)		(41,981	)		(5,986	)	(51,834	)
Prepaid expenses		(4,799	)		27,009			(33,209	)	(10,999	)
Accounts payable and
accrued liabilities		36,323			3,359			(55,777	)	(16,095	)
Accrued liabilities to related
parties		14,255			38,560			36,000		88,815
Advances from (repayments
to) related parties		–			(42,474	)		178,574		136,100
		41,912			(15,527	)		119,602		145,987
Cash Used in Operating Activities		(703,504	)		(665,108	)		(154,035	)	(1,522,647	)

Cash Flows Used In Investing Activities
Purchase of property and
equipment		(337	)		(19,871	)		(6,000	)	(26,208	)

Cash Flows Provided By Financing Activities
Advances from related parties		16,238			–			–		16,238
Private placement costs		(42,571	)		–			–		(42,571	)
Proceeds from sale of
common stock		727,790			931,580			300,733		1,960,103
		701,457			931,580			300,733		1,933,770

(Decrease) Increase in Cash and
Cash Equivalents		(2,384	)		246,601			140,698		384,915

Cash and Cash Equivalents,
Beginning of Period		398,433			151,832			11,134		11,134

Cash and Cash Equivalents,
End of Period	$	396,049		$	398,433		$	151,832		396,049

NON-CASH FINANCING AND INVESTING ACTIVITIES (Note 11)

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

F-7

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

1.	NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS

	The Company was incorporated February 27, 1979 in Canada under the British Columbia Company Act and was extraprovincially registered in the province of Alberta on October 12, 1995.

	The Company voluntarily delisted from the Canadian Venture Exchange on December 14, 1999. The Company’s stock currently trades on the Over the Counter Bulletin Board in the United States under the symbol “LNXGF”.

	On February 20, 2003, the shareholders approved a change of name to Linux Gold Corp. and increased the authorized share capital to 200,000,000 common shares without par value. The Company had been previously pursuing various business opportunities and, elective March 1, 2003, the Company changed its principal operations to mineral exploration. Accordingly, as of March 1, 2003, the Company is considered an exploration stage company.

2.	GOING-CONCERN

	These consolidated financial statements have been prepared by management on the basis of generally accepted accounting principles applicable to a “going-concern”, which assumes the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.

	The Company has an accumulated deficit during the exploration stage of $1,688,629 and total since inception of $9,133,381, has not yet commenced revenue-producing operations, and has significant expenditure requirements to continue to advance its exploration and development activities.

	These consolidated financial statements do not reflect adjustments that would be necessary if the going-concern assumption were not appropriate because management believes that the actions already taken or planned will mitigate the adverse conditions and events, which raise doubts about the validity of the going-concern assumption used in preparing these consolidated financial statements. Management intends to raise additional capital through share issuances to finance operations and invest in other business opportunities.

	If the going-concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.

	The continuation of the Company as a going-concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations and to determine the existence, discovery and successful exploitation of economically recoverable reserves in its resource properties, confirmation of the Company’s interest in the underlying properties, and the attainment of profitable operations. These consolidated financial statements have been prepared on a going-concern basis.

3.	SIGNIFICANT ACCOUNTING POLICIES

	a)	Basis of Accounting

		These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States and are presented in Canadian dollars. There are no consolidated financial statements prepared using Canadian generally accepted accounting principles. The Company is an exploration stage company, as defined by Statement of Financial Accounting Standard (“SFAS”) No. 7 “Accounting and Reporting by Development Stage Enterprises”.

	b)	Principles of Consolidation

		These financial statements include the accounts of the Company and its wholly-owned subsidiary, LinuxWizardry Inc., a US corporation. All significant intercompany balances and transactions have been eliminated.

F-8

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (Continued)

	c)	Foreign Currency Translation

		The Company’s functional and reporting currency is the Canadian dollar. The financial statements of the Company are translated to Canadian dollars in accordance with SFAS No. 52, “Foreign Currency Translation”. Foreign currency transactions are primarily undertaken in U.S. dollars. Monetary assets and liabilities denominated in U.S. dollars are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

	d)	Use of Estimates

		The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

	e)	Basic and Diluted Net Income (Loss) Per Share

		The Company computes net income (loss) per share in accordance with SFAS No. 128, "Earnings per Share". SFAS No. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

	f)	Stock-Based Compensation

		The Company accounts for stock-based compensation in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation.” This statement requires that stock awards granted subsequent to January 1, 1995, be recognized as compensation expense based on fair market value at the date of grant. Alternatively, a company may account for granted stock awards to employees under Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees", and disclose pro forma income amounts, which would have resulted from recognizing such awards at the fair market value. The Company has elected to account for stock-based compensation for employees under APB No. 25 and make the required pro forma disclosures for compensation expense in accordance with SFAS No. 123. The Company accounts for stock issued for services to non-employees in accordance with SFAS No. 123. Compensation expense is based on the fair market value for stock award or fair market value of the goods and services received, whichever is more reliably measurable.

		The options are granted for services provided to the Company. The fair value of the employees’ purchase rights under SFAS 123 was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

		Years Ended
	February 28,	February 28,	February 29,
	2006	2005	2004

Risk-free interest rate	N/A	3.38%	5.80%
Expected volatility	N/A	154%	50%
Expected dividends	N/A	–	–
Expected option life (in years)	N/A	3	0.50

F-9

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (Continued)

	f)	Stock-Based Compensation (Continued)

		If compensation expense had been determined pursuant to SFAS 123, the Company’s net loss and net loss per share for the years ended February 28, 2005 and 2004 would have been as follows:

		Years Ended
	February 28,	February 28,	February 29,
	2006	2005 restated	2004 restated

Net loss — as reported	$ (830,605)	$ (793,940)	$ (64,084)
Add: Stock-based compensation expense included in net loss -
as reported	N/A	82,000	–
Deduct: Stock-based compensation expense determined
under fair value method	N/A	(96,000)	(9,186)

Net loss — pro forma	$ (830,605)	$ (807,940)	$ (73,270)

Net loss per share (basic and diluted) — as reported	$ (0.01)	$ (0.01)	–
Net loss per share (basic and diluted) — pro forma	$ (0.01)	$ (0.01)	–

	g)	Exploration Expenditures

		The Company is in the exploration stage of developing its mineral properties and has not yet determined whether these properties contain ore reserves that are economically recoverable.

		Exploration expenses incurred prior to determination of the feasibility of a mining operation and administrative expenses are expensed as incurred. Mineral property acquisition costs and exploration and development expenditures incurred subsequent to the determination of the feasibility of a mining operation are deferred until the property is placed into production, sold, allowed to lapse or abandoned. Acquisition costs include cash and the fair market value of common shares. These capitalized costs will be amortized over the estimated life of the property following commencement of commercial production or written off if the property is sold, allowed to lapse or abandoned, or when an impairment of value has occurred.

		Ownership in mineral interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequent, ambiguous conveyance history characteristic of mineral interests. The Company has investigated ownership of its mineral interests, and to the best of its knowledge, ownership of its interests is in good standing.

	h)	Cash and Cash Equivalents

		The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

	i)	Assets Retirement Obligations

		The basis of this policy is the recognition of a legal liability for obligations related to the retirement of property, plant and equipment and obligations arising from the acquisition, construction, development or normal operations of those assets. Such asset retirement costs must be recognized at fair value when a reasonable estimate of fair value can be estimated in the period in which the liability is incurred. A corresponding increase to the carrying amount of the related asset, when one is identifiable, is recorded and amortized over the life of the asset. Where a related future value is not easily identifiable with a liability, the change in fair value over the course of the year is expensed. The amount of the liability is subject to re- measurement at each reporting period. The estimates are based principally on legal and regulatory requirements.

F-10

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (Continued)

	i)	Assets Retirement Obligations (Continued)

		It is possible that the Company’s estimates of its ultimate reclamation and closure liabilities could change as a result of changes in regulations, changes in the extent of environmental remediation required, changes in the means of reclamation, or changes in cost estimates. Changes in estimates are accounted for prospectively commencing in the period the estimate is revised.

		Although the Company has begun drilling, a reasonable estimate cannot be made at this time, therefore, no liability has been recorded. There is no effect on prior years as a result of adopting this new recommendation.

	j)	Financial Instruments

		i)	Fair value

			The carrying values of cash and cash equivalents, marketable securities and accounts payable and accrued liabilities approximate their fair values because of the short-term maturity of these financial instruments.

		ii)	Interest rate risk

			The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary assets and liabilities.

		iii)	Credit risk

			The Company’s financial asset that is exposed to credit risk consists primarily of cash. To manage the risk, cash is placed with major financial institutions.

		iv)	Currency risk

			The Company translates the results of its foreign operations into Canadian currency using rates approximating the average exchange rate for the year. The exchange rates may vary from time to time. At February 28, 2006, the Company held foreign currencies of CDN $381,663 (US $323,436) (2005 – CDN $(19,116), US $(15,782)).

	k)	Long-Lived Assets

		In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

	l)	Marketable Securities

		The Company reports investments in debt and marketable equity securities at fair value based on quoted market prices or, if quoted prices are not available, discounted expected cash flows using market rates commensurate with credit quality and maturity of the investment. Substantially all investment securities are designated as available for sale with unrealized gains and losses included in stockholders' equity, net of applicable taxes and other adjustments. The Company regularly reviews investment securities for impairment based on criteria that include the extent to which the carrying value of the investments exceeds its related market value, the duration of the market decline, the Company’s ability to hold to recovery and the financial strength and specific prospects of the issuer of the security. Unrealized losses that are other than temporary are recognized in earnings. Realized gains and losses are accounted for on the specific identification method.

F-11

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (Continued)

	m)	Income Taxes

		Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted SFAS No. 109, “Accounting for Income Taxes”, as of its inception. Pursuant to SFAS No. 109, the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

	n)	Comprehensive Loss

		SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at February 28, 2006 and February 28, 2005, the Company’s only component of comprehensive loss was unrealized holding gains and losses on available-for-sale securities.

					Years Ended
		February 28,			February 28,			February 29,
		2006			2005 restated			2004 restated
Net loss for the year	$	(830,605	)	$	(793,940	)	$	(64,084	)

Other comprehensive income (loss)
Unrealized holding gain (loss) on investments		2,000			(54,000	)		34,000
Comprehensive loss for the year	$	(828,605	)	$	(847,940	)	$	(30,084	)

	o)	Property and Equipment

		Property and equipment consists of office furniture, computer equipment and vehicle, which are recorded at cost. Office furniture is amortized on a declining-balance basis at 20% per annum, computer equipment is amortized on a straight-line basis over three years, and the vehicle is amortized on a declining-balance basis at 30% per annum.

	p)	Recent Accounting Pronouncements

		In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 153, “Exchanges of Non-monetary Assets - An Amendment of APB Opinion No. 29”. The guidance in APB Opinion No. 29, “Accounting for Non-monetary Transactions”, is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. SFAS No. 153 amends APB Opinion No. 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non- monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted and companies must apply the standard prospectively. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

F-12

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

3.	SIGNIFICANT ACCOUNTING POLICIES (Continued)

	p)	Recent Accounting Pronouncements (Continued)

		In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

		In December 2004, the FASB issued SFAS No. 123R, “Share Based Payment”. SFAS 123R is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation”, and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and its related implementation guidance. SFAS 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award – the requisite service period (usually the vesting period). SFAS 123R requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Public entities that file as small business issuers will be required to apply SFAS 123R in the first interim or annual reporting period that begins after December 15, 2005. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

		In March 2005, the SEC staff issued Staff Accounting Bulletin No. 107 (“SAB 107”) to give guidance on the implementation of SFAS 123R. The Company will consider SAB 107 during implementation of SFAS 123R.

		The FASB has issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statements No. 133 and 140”, and No. 156, “Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140”, but they will not have any relationship to the operations of the Company therefore a description and its impact for each on the Company’s operations and financial position have not been disclosed.

4.	PROPERTY AND EQUIPMENT

		February 28, 2006
		Accumulated	Net Carrying
	Cost	Amortization	Value

Computer hardware	$ 25,358	$ 25,358	$ –
Office furniture	1,408	898	510
Vehicle	15,531	5,866	9,665

	$ 42,297	$ 32,122	$ 10,175

F-13

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

4.	PROPERTY AND EQUIPMENT (Continued)

		February 28, 2005
		Accumulated	Net Carrying
	Cost	Amortization	Value


Computer hardware	$ 25,021	$ 18,323	$ 6,698
Office furniture	1,408	782	626
Vehicle	15,531	2,330	13,201


	$ 41,960	$ 21,435	$ 20,525

5.	MINERAL PROPERTIES

		February 28, 2006
		British
	Alaska	Columbia	China	Total

Acquisition costs:	$ –	$ 20,500	$ –	$ 20,500

Exploration and development costs:
Staking and recording fees	33,938		–	33,938
Geological consulting	229,442	3,875	–	233,317
Transportation	41,836	–	–	41,836

Incurred during the year	$ 305,216	$ 24,375	$ –	$ 329,591

		February 28, 2005
		British
	Alaska	Columbia	China	Total

Acquisition costs:	$ 1,023	$ 16,385	$ 39,000	$ 56,408

Exploration and development costs:
Field supplies and other	99	–	5,901	6,000
Assaying	–	1,059	7,603	8,662
Staking and recording fees	2,264	4,066	26,602	32,932
Geological consulting	–	4,560	46,555	51,115
Transportation	–	–	27,796	27,796

Incurred during the year	$ 3,386	$ 26,070	$ 153,457	$ 182,913

F-14

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

5.	MINERAL PROPERTIES (Continued)

	a)	Alaska Mineral Properties

		i)	Fish Creek Property: The Company owns a 50% joint venture interest in 30 claims located in the Fairbanks Mining Division, Alaska, USA, known as the Fish Creek Claims. During fiscal 2003, the Company optioned its 50% interest in the 30 Fish Creek Claims to Teryl Resources Corp. (“Teryl”) (a related company). Under the terms of the agreement, Teryl issued 200,000 common shares to the Company at a fair value of $80,000 and must expend $500,000 over three years. The Company retained a 5% net royalty interest, until US$2,000,000 has been received, and may convert into a 25% working interest. The Company entered into an amending agreement with Teryl to extend the term of the original Fish Creek Claims agreement until March 7, 2007. Teryl will issue 100,000 common shares to the Company, and also agrees to expend a minimum of US$500,000 within two years from the date of this amending agreement. All other terms of the original agreement remain the same.

		ii)	Granite Mountain Property: The Company staked three claim blocks consisting of a total of 148 mining claims located in the state of Alaska.

	b)	British Columbia Mineral Properties

		i)	TY Property: The Company acquired the TY Area, TY Grid 2 and 3 (21 units) mineral claims located in the Lillooet Mining Division in British Columbia under the following terms and conditions:

			a)	The Company must pay $30,000 in various stages to December 1, 2004 (paid).

			b)	The Company must issue 150,000 shares as follows: 100,000 upon signing the agreement and receiving regulatory approval (issued), and 50,000 shares upon completion of Phase III (issued).

			c)	The vendor will retain a 2% net smelter return interest (“NSR”). The Company may purchase the NSR for $1,000,000 for each 1% prior to commercial production, in shares or in cash.

		During the year ended February 29, 2004, the Company staked an additional three mineral claims representing 35 units.

		ii)	ORO Property: The Company acquired the ORO claim (20 units) in the Lillooet Mining Division in British Columbia under the following terms and conditions:

			a)	The Company paid $10,000 and issued 100,000 common shares.

			b)	The vendor will retain a 2% NSR. The Company may purchase the NSR for $1,000,000 for each 1% prior to commercial production, in shares or in cash.

		During the year ended February 29, 2004, the Company staked an additional mineral claim representing 5 units. The President of the Company is the registered owner of the mineral properties. The Company is entered into a trust agreement stating that these mineral claims are held in trust on behalf of the Company. The Company has re-staked the TY property and acquired additional claims in the same area.

	c)	China Mineral Property

		On January 20, 2004, the Company acquired an option to purchase 100% of the shares of Ginyen Recovery Inc. Ginyen Recovery Inc. has an 85% interest in a co-operative joint venture with Bo Luo Neo Wang Yuan Gold Mine Company (“BLN Gold”) of Heibei Province, China. BLN Gold holds an operational gold recovery mill; the right and license to operate all existing small mines in the district; the right to explore, develop and produce gold and silver in the district and options to expand to other districts.

		To complete the option agreement, the Company must:

		i)	pay $55,000 as follows: $10,000 upon regulatory approval (paid); $15,000 upon completion of Phase I; $15,000 upon completion of Phase II; and a minimum of $15,000 annually or 5% of net profits paid quarterly, whichever is greater. The Company is currently in Phase I.

F-15

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

5.	MINERAL PROPERTIES (Continued)

		ii)	issue 200,000 shares as follows: 50,000 upon regulatory approval (issued); 50,000 upon completion of Phase I; 50,000 upon completion of Phase II; and 50,000 upon completion of Phase III. The Company also issued 50,000 common shares as a finders’ fee. The Company is currently in Phase I.

		iii)	incur production expenses, subject to successful results in each phase, of $500,000 as follows: $160,000 ($114,457 incurred) for Phase I; $130,000 for Phase II; and $210,000 for Phase III.

6.	RELATED PARTY TRANSACTIONS

	a)	All related party transactions are in the normal course of business and have been measured at their exchange amounts. The Company incurred the following transactions during the year:

		i)	Pursuant to a management services agreement, the Company accrued management fees of $30,000 (2005 - $30,000) to a company where the President of the Company is a director. These amounts are included in accrued liabilities at February 28, 2006.

		ii)	The Company paid a director’s fee of $12,000 (2005 - $12,000) to the President of the Company.

		iii)	Refer to Note 5(a) for a joint venture agreement with a related company.

		iv)	Refer to Note 5(b) for ownership of mineral claims.

		v)	At February 28, 2006, the Company is indebted in the amount of $88,815 (2005 - $74,560) representing unpaid management fees and rent to a company where the President of the Company is a director. These amounts are non-interest bearing, unsecured and have no specific terms of repayment.

	b)	Amounts due to related parties are unsecured, non-interest bearing and have no fixed terms of repayment. Imputed interest, at 15%, totalling $31,922 (2005 - $35,013) was charged to operations and treated as donated capital. Unless otherwise indicated, the following table represents companies controlled by the President and CEO of the Company or companies where he is the President and CEO.

		February 28,			Advances			February 28,
		2005			(Repayments)			2006

Access Information Services, Inc.	$	48,287		$	–		$	48,287
IAS Communications Inc.		(3,151	)		–			(3,151	)
JGR Petroleum, Inc.		64,599			1,500			66,099
J. Robertson, President and CEO		–			3,029			3,029
Rainbow Network		59,801			8,809			68,610
Reg Technologies Inc.		–			–			–
REGI U.S., Inc.		(38	)		–			(38	)
SMR Investments Ltd.		18,658			(37,316	)		(18,658	)
Teryl Resources Corp.		–			40,215			40,216

	$	188,156		$	16,237		$	204,394

F-16

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

7.	COMMON STOCK

	a)	During the year ended February 28, 2006, the Company completed a private placement and issued 3,000,000 units at a price of US$0.20 per unit for proceeds of $600,000. Each unit consists of one common share and one-half warrant. One whole warrant entitles the holder thereof to purchase an additional common share, exercisable for a period of two years from the date of closing, exercisable at a price of US$0.25 in the first year and US$0.30 in the second year. The 3,000,000 common shares and the common shares issued as part of the units upon conversion of the warrants are subject to a one-year hold period from the date of issuance of the units. The Company issued 100,000 shares and paid $42,571 in cash as a finder’s fee in connection with the private placement.

	b)	During the year ended February 28, 2006, the Company issued 50,000 common shares at a value of $0.41 per share pursuant to the mineral property agreement referred to in Note 5(b).

	c)	During the year ended February 28, 2005, the Company issued 25,000 common shares at a value of $0.19 per share pursuant to the mineral property option agreement referred to in Note 5(b).

	d)	During the year ended February 28, 2005, the Company issued 50,000 common shares at a value of $0.39 per share and issued 50,000 common shares at a value of $0.39 as a finder’s fee pursuant to the mineral property option agreement referred to in Note 5(c).

	e)	During the year ended February 28, 2005, the Company completed a private placement and issued 2,777,777 units at a price of US$0.18 per unit for proceeds of $620,850 (US$500,000) before issue costs of $2,185. Each unit consisted of one common share and one warrant. One whole warrant entitles the holder to purchase one share at a price of US$0.18 per share for a two-year period. The Company issued 208,333 shares as a finder’s fee in connection with this private placement offering.

	f)	During the year ended February 28, 2005, the Company completed a private placement and issued 1,219,500 units at a price of US$0.15 per unit for proceeds of $241,424 (US$182,925). Each unit consisted of one common share and one-half warrant. One whole warrant entitles the holder to purchase one share at a price of US$0.20 per share in the first year and US$0.25 per share in the second year.

8.	WARRANTS

	A summary of the changes in the Company’s share purchase warrants is presented below:

	February 28, 2006		February 28, 2005
		Weighted		Weighted
		Average		Average
	Number	Exercise Price	Number	Exercise Price

Balance, beginning of year	3,563,527	US$ 0.21	863,500	US$ 0.33
Granted	1,500,000	US$ 0.25	3,387,527	US$ 0.18
Exercised	(92,500)	US$ 0.20	(250,000)	CDN$ (0.15)
Forfeited / Expired	(160,000)	US$ 0.23	(437,500)	US$ (0.20)

Balance, end of year	4,811,027	US$ 0.20	3,563,527	US$ 0.21

As at February 28, 2006, the following share purchase warrants were outstanding:

	Exercise	Years Ended
	Price	2006	2005

October 18, 2005	$ 0.20	0	160,000
July 6, 2006	$ 0.07	0	16,000
November 18, 2005/2006	$ 0.20/$ 0.25	533,250	609,750
December 6, 2006	$ 0.18	2,777,777	2,777,777
February 21, 2007/February 21, 2008	$ 0.25/$ 0.30	1,500,000	0
		4,811,027	3,563,527

F-17

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

9.	STOCK OPTIONS

The Company has a stock option plan to issue up to 10% of the issued common shares to certain directors and employees. A summary of the changes in the Company’s common share purchase options is presented below:

	February 28, 2006		February 28, 2005
		Weighted		Weighted
		Average		Average
		Exercise		Exercise
	Number	Price	Number	Price

Balance, beginning of year	3,587,500	US$ 0.11	3,575,000	US$ 0.09
Granted	–	–	900,000	US$ 0.22
Exercised	(93,750)	US$ 0.10	(87,500)	US$ (0.10)
Forfeited / Expired	(1,050,000)	US$ 0.20	(800,000)	US$ (0.14)

Balance, end of year	2,443,750	US$ 0.13	3,587,500	US$ 0.11

Additional information regarding options outstanding as at February 28, 2006 is as follows:

		Outstanding		Exercisable
		Weighted
		average	Weighted		Weighted
		remaining	average		average
	Number of	contractual	exercise	Number of	exercise
Exercise price	shares	life (years)	price	shares	price

US$ 0.00 – $ 0.10	1,893,750	2.27	US$ 0.10	1,893,750	US$ 0.10
US$ 0.11 – $ 0.20	325,000	2.21	US$ 0.18	325,000	US$ 0.18
US$ 0.21 – $ 0.30	225,000	1.73	US$ 0.30	225,000	US$ 0.30

	2,443,750	2.21	US$ 0.13	2,443,750	US$ 0.13

During the year ended February 28, 2006, the total stock-based compensation recognized under the fair value method was $2,280 (2005 - $82,000) using the Black-Scholes option pricing model (Note 3(f)).

The following assumptions were used for the Black-Scholes option pricing model valuation of stock options granted:

	Years Ended February 28,
	2006	2005

Expected life (years)	5	3
Interest rate	3.07%	3.38%
Volatility	78%	154%
Dividend yield	–	–

Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock option.

F-18

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

10.

COMMITMENTS

The Company entered into a two-year lease agreement to rent 1,018 square feet of office space commencing April 1, 2004. Subsequent to year-end, the Company extended the agreement to June 1, 2006. Basic annual rent is $30,336. The future commitment is as follows:

		2007
Basic rent	$	3,816
Property taxes and operating expenses		3,768
	$	7,584

11.	NON-CASH FINANCING AND INVESTING ACTIVITIES

	During the year ended February 28, 2006:

	i)	50,000 common shares were issued with a fair market value of $20,500 as part consideration under the mineral property option agreement described in Note 5(c)(ii).

	ii)	100,000 common shares were issued for finder’s fees pursuant to a private placement agreement.

	During the year ended February 29, 2005:

	i)	25,000 common shares were issued with a fair value of $4,750 as part consideration under the mineral property option agreements described in Note 5(b).

	ii)	50,000 common shares were issued with a fair market value of $19,500 as part consideration under the mineral property option agreement described in Note 5(c).

	iii)	50,000 common shares were issued with a fair market value of $19,500 for finder’s fees under the mineral property option agreement described in Note 5(c).

	iv)	208,333 common shares were issued for finder’s fees for a private placement offering (Note 7 (e)).

12.	INCOME TAXES

	Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted SFAS No. 109, “Accounting for Income Taxes”, as of its inception. The Company has incurred Canadian non-capital losses as scheduled below:

Year of			Year of
Loss		Amount	Expiration

2000	$	164,000	2007
2001		1,223,000	2008
2002		239,000	2009
2003		28,000	2010
2004		347,000	2011
2005		399,000	2015
2006		361,000	2016

	$	2,761,000

F-19

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

12.	INCOME TAXES (Continued)

	Pursuant to SFAS No. 109, the Company is required to compute tax asset benefits for non-capital losses carried forward. Potential benefit of non-capital losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the losses carried forward in future years.

	The reconciliation of income tax attributable to continuing operations computed at the statutory tax rates to income tax expense is:

		2006			2005

Income tax benefit computed at Canadian statutory rates	$	283,569		$	271,051
Amortization in excess of capital cost allowance		(3,648	)		(1,825	)
Share issuance and financing costs		(14,534	)		0
Non-deductible stock-based compensation		(778	)		(27,995	)
Non-deductible write-down of investment		(683	)		18,436
Utilized (unrecognized) tax losses		(263,926	)		(259,667	)

Future income tax benefit	$	0		$	0

Significant components of the Company’s future tax assets and liabilities, after applying enacted corporate income tax rates, are as follows:

		2006			2005

Future income tax assets
Excess of book value over market value of marketable securities	$	2,731			3,414
Excess of undepreciated capital cost over net book
value of fixed assets	$	2,635		$	1,825
Excess of unused exploration expenditures for Canadian
tax purposes over net book value of resource properties		456,457			343,934
Net losses carried forward		942,605			845,306

		1,404,428			1,194,479
Valuation allowance for future income tax assets		(1,404,428	)		(1,194,479	)

Future income tax assets, net	$	0		$	0

The valuation allowance reflects the Company’s estimate that the tax assets, more likely than not, will not be realized and consequently have not been recorded in these financial statements.

F-20

LINUX GOLD CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2006 and 2005

(Expressed in Canadian Dollars)

13.	RESTATEMENT

	During 2004, the Company accrued $3,000 of rent and $9,000 of director’s fees all of which had already been paid. Also, during 2005 the Company accrued $6,000 of rent and $12,000 of director’s fees all of which had also been paid.

	During the years ended 2004 and 2005 the Company expensed $30,152 in each of the years. These amounts represent amortization of discount on convertible debt, which was settled in 2002. Since the debt was settled in 2002, these amounts along with the remaining unamortized balance of $19,091 should have been fully expensed when the debt was settled.

	As a result of the above errors, prior period statements have been retroactively restated to reflect the reversal of such errors. The effect of this correction on net loss and related per share amounts is as follows:

		2005			2004

Net loss as previously reported	$	(842,092	)	$	(106,234	)
Over accrued rent		6,000			3,000
Over accrued director’s fees		12,000			9,000
Amortization of debt discount		30,152			30,150

Net loss as restated	$	(793,940	)	$	(64,084	)

Basic net loss per share, as previously reported	$	(0.01	)	$	(0.01	)
Prior period adjustments		0.00			0.00

Basic net loss per share, as restated	$	(0.01	)	$	(0.01	)

14.	SUBSEQUENT EVENTS

	a)	The Company signed a consulting agreement with CEOcast, Inc. on March 8, 2006 for investor relations services at $7,500 per month for six months, and 350,000 shares of the Company common stock.

	b)	The Company completed a private placement financing of US$2,000,000 on May 8, 2006 with several institutional investors consisting of secured convertible discount notes (the “Discount Notes”). The Discount Notes were issued at an issue discount of 5%, are convertible into common stock at a conversion price of $0.40 per share and mature on November 8, 2007. The Company received proceeds of US$1,500,000 at closing with the remaining US$500,000 to be funded upon the filing of a resale registration statement with the United States Securities and Exchange Commission. The investors will also receive five-year warrants to purchase, in the aggregate, 5,000,000 shares of common stock at a conversion price of $0.50 per share and warrants to purchase, in the aggregate, an additional 2,500,000 shares of common stock at a conversion price of $0.52 per share exercisable upon the earlier of one year after the effectiveness of the resale registration statement or May 8, 2016. The Company will receive approximately $1,825,000 net proceeds from this transaction. The funds will be used for continued exploration and development expenses on the Granite Mountain claims and for general working capital purposes.

F-21