---

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

FORM
10-Q/A
(Amendment No. 1)

(Mark One)

|                                                                                           
|-------------------------------------------------------------------------------------------
|x QUARTERLY REPORT PURSUANT TO SECTION 13 OR
 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended August 31, 2008                                             
|                                                                                           
|or                                                                                         
|                                                                                           
|o TRANSITION REPORT PURSUANT TO SECTION 13 OR
 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from _________ to _________                                      
|                                                                                           
|Commission File Number: 000-50703                                                          
|                                                                                           
|U.S.
 PRECIOUS METALS, INC.                                                                
|(Exact Name of registrant as specified in its charter)                                     

|                                          |  |                                    |  | 
|----------------------------------------- |  | ---------------------------------- |  | 
|Delaware                                  |  | 14-1839426                        
|                                          |  |                                   
|(State
 or jurisdiction of incorporation) |  | (IRS
 Employer Identification No.)
|                                          |  |                                   
|171 Walnut
 Crest Run, Sanford, FL        |  | 32771                             
|                                          |  |                                   
|(Address of principal
 executive offices) |  | (Zip Code)                        

|                                                     |                | 
|---------------------------------------------------- | -------------- | 
|                                                     | (407) 566-9310 | 
|                                                     |                | 
|(Registrants telephone number, including area code)

|                                                                                    |     | 
|----------------------------------------------------------------------------------- | --- | 
|                                                                                    | N/A | 
|                                                                                    |     | 
|(Former name, former address and former fiscal year, if changed since
 last report)

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 ninety days.

Yes x No o

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

|                        |   |                           |  
|----------------------- | - | ------------------------- | -
|Large accelerated filer | o | Accelerated filer         | o
|Non-accelerated filer   | o | Smaller reporting company | x

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by
check mark where the registrant has filed all documents and reports required to
be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date:48,893,499 shares of common stock issued and outstanding as of February 5,
2009

---



EXPLANATORY NOTE

U.S.
Precious Metals, Inc. (the Company) is filing this amendment (the Amendment)
to our quarterly report on Form 10-Q for the quarterly period ended August 31,
2008, as filed on October 20, 2008 (the Original First Quarter 2009 Form 10-Q).
This Amendment is being filed to effectuate the restatement previously
announced in the Current Report on Form 8-K filed on January 23, 2009 (the Current
Report). As a result of the Companys internal review and analysis,
certain errors were discovered in the Consolidated Balance Sheet, Consolidated
Statements of Operations and the Consolidated Statements of Cash Flows
contained in the Original First Quarter 2009 Form 10-Q. These errors resulted
in a net overstatement in assets of $160,050 and an understatement of the net
loss of the three month period ending August 31, 2008 of $19,486. These errors
partially arose during the consolidation process of the Companys Mexican
subsidiary, U.S. Precious Metals de Mexico, S.A. de C.V. (the Mexican Sub),
and were the result of recording amounts on the books of the Mexican Sub which
duplicated entries that had been made on the books of the parent in the
previous year.

The
effect on the statement of operations also reflects adjustments made to the
Mexican Subs books for the three month period ended August 31, 2008. These
adjustments involved correction of the accounting for mine development costs
and of the accounting for remeasurement of the Mexican Subs records when they
were translated to U.S. dollars. The balance sheet and the statement of cash
flows were also affected by these corrections. The Mexican Sub started
maintaining its own accounting records in the fiscal year ended May 31, 2008.

Finally,
a loan to an affiliated company was deemed uncollectible and written off as of
May 31, 2008. These statements reflect that $109,259 charge to bad debts
as of May 31, 2008 and the reversal of related interest income recorded in
this three-month period ended August 31, 2008.

This
Amendment is being filed only to modify and update Part I, Item 1. Consolidated
Financial Statements, Part I, Item 2., Management Discussion and Analysis, and
Part I, Item 4., Control and Procedures. Except as otherwise provided,
this Amendment does not modify or update the disclosures made in the Original
First Quarter 2009 Form 10-Q in any way.

Currently
dated certifications from our Chief Executive Officer and Chief Financial
Officer have been included as exhibits to this Amendment as required by the
applicable SEC rules.

2

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Amendment
contains certain forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. When used in this document,
the words anticipate, believe, estimate, intend, and expect and
similar expressions, are intended to identify forward-looking statements. Such
statements relate to future events or our future financial performance that are
based on the beliefs and assumptions made by the Companys management as well
as information currently available to management and are subject to certain
risks, uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, intended or expected. In addition to the other information
set forth in this report, certain of these risks and uncertainties are discussed
in the Companys earlier filings with the U.S. Securities and Exchange
Commission, including its Annual Report on Form 10-KSB for the year ended May
31, 2005 and its Form SB-2 Registration Statement, as amended, filed on
September 6, 2005 and August 26, 2005, respectively, under the caption Risk Factors and should be carefully
considered as these risk factors could
materially affect our business, financial condition or future results. The
risks described in these earlier filings are not the only risks facing us.
Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial may also adversely affect our business,
financial condition and/or operating results. In general you should be aware
that certain risks exist with respect to the Company and its business, which
risks include: its limited assets, lack of revenues and only losses since
inception, industry risks, limited geological work conducted on existing
concessions, the need for additional capital; environmental risks; risks
inherent in having its operations outside the United States such as political
and economic unrest and instability, currency fluctuations, the threat of
military actions and criminal or terrorist activities; among other factors.

Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity or
achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.

The
accompanying unaudited interim consolidated financial statements as of August
31, 2008 and for the three month periods ended August 31, 2008 and August 31,
2007, include the accounts of the Company and its subsidiary and have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. These unaudited consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and the notes thereto included in the
Companys amended Form 10-K/A for the year ended May 31, 2008 to be filed with
the Securities and Exchange Commission (SEC) (the Amended Form 10-K/A).

Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although we
believe that the disclosures are adequate to make the information presented not
misleading. In our opinion, all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the information in the
following unaudited consolidated financial statements of the Company have been
included. The results of operations for interim periods are not necessarily
indicative of the results for the full year.

The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures 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.

3

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U.S. Precious Metals, Inc.
(An Exploration Stage Company)
Form 10-Q/A
Table of Contents

|                                                                                                                                                                                                                             |  |   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|Part I  Financial
Information                                                                                                                                                                                               |  |   
|                                                                                                                                                                                                                             |  |   
|Item 1. Consolidated
 Financial Statements                                                                                                                                                                                   |  |   
|                                                                                                                                                                                                                             |  |   
|Consolidated Balance
 Sheets at August 31, 2008 (unaudited) and at May 31, 2008 (audited).                                                                                                                                   |  | 5 
|Consolidated
 Statements of Operations (unaudited) for the three month periods ended August
 31, 2008 and August 31, 2007, and for the period January 21, 1998 (date of
 inception of Exploration Stage) to August 31, 2008. |  | 6 
|Consolidated
 Statements of Cash Flows (unaudited) for the three month periods ended August
 31, 2008 and August 31, 2007, and for the period January 21, 1998 (date of
 inception of Exploration Stage) to August 31, 2008. |  | 7 
|Notes to
 Consolidated Financial Statements (unaudited).                                                                                                                                                                     |  | 8 
|                                                                                                                                                                                                                             |  |   
|Item 2. Management
 Discussion and Analysis                                                                                                                                                                                  |  | 16
|                                                                                                                                                                                                                             |  |   
|Item 4. Controls and
 Procedures                                                                                                                                                                                             |  | 18
|                                                                                                                                                                                                                             |  |   
|Item 6. Exhibits                                                                                                                                                                                                             |  | 20
|                                                                                                                                                                                                                             |  |   
|Signature Page                                                                                                                                                                                                               |  | 21
|                                                                                                                                                                                                                             |  |   
|Index to Attached
 Exhibits                                                                                                                                                                                                  |  | 22
|                                                                                                                                                                                                                             |  |   
|Attached Exhibits                                                                                                                                                                                                            |  | 23

4

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PART I  FINANCIAL
INFORMATION

ITEM 1. CONSOLIDATED
FINANCIAL STATEMENTS

U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Restated)

|                                                                                                                                          |  |                                          |            |                         |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ---------- | ----------------------- | - | ---------- | -
|                                                                                                                                          |  | August 31, 2008
 (Unaudited)
 (Restated) |            | May 31, 2008
 (Audited) |  
|                                                                                                                                          |  |                                          |            |                         |  
|ASSETS                                                                                                                                    |  |                                          |            |                         |   |            |  
|Current Assets:                                                                                                                           |  |                                          |            |                         |   |            |  
|Cash                                                                                                                                      |  | $                                        | 658,971    |                         | $ | 623,017    |  
|Miscellaneous receivables                                                                                                                 |  |                                          | 41,356     |                         |   | 8,353      |  
|Prepaid expenses                                                                                                                          |  |                                          | 14,571     |                         |   | 22,153     |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Total current assets                                                                                                                      |  |                                          | 714,898    |                         |   | 653,523    |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Fixed Assets:                                                                                                                             |  |                                          |            |                         |   |            |  
|Vehicles                                                                                                                                  |  |                                          | 39,429     |                         |   | 39,429     |  
|Property, plant and equipment                                                                                                             |  |                                          | 87,259     |                         |   | 84,199     |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Total fixed assets                                                                                                                        |  |                                          | 126,688    |                         |   | 123,628    |  
|Less: accumulated depreciation                                                                                                            |  |                                          | (25,913    | )                       |   | (19,380    | )
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Net fixed assets                                                                                                                          |  |                                          | 100,775    |                         |   | 104,248    |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Other Assets:                                                                                                                             |  |                                          |            |                         |   |            |  
|Investment in mining rights                                                                                                               |  |                                          | 95,568     |                         |   | 82,730     |  
|Deposits                                                                                                                                  |  |                                          | 57,397     |                         |   | 57,180     |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Total other assets                                                                                                                        |  |                                          | 152,965    |                         |   | 139,910    |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Total Assets                                                                                                                              |  | $                                        | 968,638    |                         | $ | 897,681    |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|LIABILITIES AND
 STOCKHOLDERS EQUITY                                                                                                      |  |                                          |            |                         |   |            |  
|Current Liabilities:                                                                                                                      |  |                                          |            |                         |   |            |  
|Accounts payable                                                                                                                          |  | $                                        | 104,911    |                         | $ | 13,490     |  
|Accrued expenses                                                                                                                          |  |                                          | 62,207     |                         |   | 57,282     |  
|Accrued salaries                                                                                                                          |  |                                          | 7,897      |                         |   | 13,527     |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Total current liabilities                                                                                                                 |  |                                          | 175,015    |                         |   | 84,299     |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Stockholders Equity:                                                                                                                     |  |                                          |            |                         |   |            |  
|Preferred stock: authorized 10,000,000
 shares of $.00001 par value;no shares issued and outstanding                                      |  |                                          |           |                         |   |           |  
|Common stock: authorized 100,000,000 shares
 of $.00001 par value;issued and outstanding, 48,472,979 and 47,227,979
 shares, respectively |  |                                          | 484        |                         |   | 472        |  
|Capital in excess of par value                                                                                                            |  |                                          | 7,030,645  |                         |   | 6,757,710  |  
|Paid in capital  warrants                                                                                                                |  |                                          | 1,260,850  |                         |   | 1,017,650  |  
|Paid in capital  options                                                                                                                 |  |                                          | 770,000    |                         |   |           |  
|Deficit accumulated during exploration
 stage                                                                                             |  |                                          | (8,268,356 | )                       |   | (6,962,450 | )
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Total stockholders equity                                                                                                                |  |                                          | 793,623    |                         |   | 813,382    |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  
|Total Liabilities and Stockholders
Equity                                                                                                |  | $                                        | 968,638    |                         | $ | 897,681    |  
|                                                                                                                                          |  |                                          |            |                         |   |            |  

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

5

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U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|----------------------------------------- |  | ------------------------------------- | ---------- | ---- | - | ------------------------------------------------------------------------------------------- | - | - | ---------- | -
|                                          |  |                                       |            |      |   | January 21, 1998
 (Date of Inception
 of Exploration Stage)
 To August 31, 2008
 (Restated) |  
|                                          |  |                                       |            |      |   |                                                                                            
|                                          |  | Three Month Periods Ended August
 31, |            |     
|                                          |  | 2008                                  |            | 2007 |   |                                                                                            
|                                          |  | (Restated)                            |            |      |   |                                                                                            
|                                          |  |                                       |            |      |   |                                                                                             |  
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Revenues                                  |  | $                                     |           |      | $ |                                                                                            |   | $ |           |  
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Expenses                                  |  |                                       | 1,310,408  |      |   | 253,132                                                                                     |   |   | 8,297,639  |  
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Operating Loss                            |  |                                       | (1,310,408 | )    |   | (253,132                                                                                    | ) |   | (8,188,380 | )
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Other Income (Expense):                   |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Interest income                           |  |                                       | 3,915      |      |   | 160                                                                                         |   |   | 16,267     |  
|Interest expense                          |  |                                       |           |      |   |                                                                                            |   |   | (986       | )
|Remeasurement gain (loss)                 |  |                                       | 587        |      |   | (912                                                                                        | ) |   | 14,002     |  
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Loss accumulated during exploration stage |  | $                                     | (1,305,906 | )    | $ | (253,884                                                                                    | ) | $ | (8,268,356 | )
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Loss per share  basic and diluted        |  | $                                     | (.03       | )    | $ | (.01                                                                                        | ) |   |            |  
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Average number of shares outstanding      |  |                                       | 47.964.646 |      |   | 31.999.879                                                                                  |   |   |            |  
|                                          |  |                                       |            |      |   |                                                                                             |   |   |            |  

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

6

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U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|--------------------------------------------------------------------------- |  | ------------------------------------- | ---------- | ---- | - | ------------------------------------------------------------------------------------------- | - | - | ---------- | -
|                                                                            |  |                                       |            |      |   | January 21, 1998
 (Date of Inception
 of Exploration Stage)
 To August 31, 2008
 (Restated) |  
|                                                                            |  |                                       |            |      |   |                                                                                            
|                                                                            |  | Three Month Periods Ended August
 31, |            |     
|                                                                            |  | 2008                                  |            | 2007 |   |                                                                                            
|                                                                            |  | (Restated)                            |            |      |   |                                                                                            
|                                                                            |  |                                       |            |      |   |                                                                                             |  
|Cash Flows From Operations:                                                 |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Net Loss                                                                    |  | $                                     | (1,305,906 | )    | $ | (253,884                                                                                    | ) | $ | (8,268,356 | )
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Adjustments required to reconcile net loss
 to cash consumed by operations: |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Charges not requiring outlay of cash:                                       |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Depreciation                                                                |  |                                       | 6,531      |      |   | 1,554                                                                                       |   |   | 25,909     |  
|Common stock issued for services                                            |  |                                       | 6,150      |      |   | 48,000                                                                                      |   |   | 4,591,982  |  
|Stock options issued for services                                           |  |                                       | 770,000    |      |   |                                                                                            |   |   | 770,000    |  
|Bad debt                                                                    |  |                                       |            |      |   |                                                                                             |   |   | 109,259    |  
|Changes in assets and liabilities:                                          |  |                                       |            |      |   |                                                                                             |   |   |           |  
|Increase in accounts payable                                                |  |                                       | 91,420     |      |   | 7,997                                                                                       |   |   | 104,910    |  
|(Decrease) increase in accrued expenses                                     |  |                                       | (706       | )    |   | (18,046                                                                                     | ) |   | 70,104     |  
|Increase in miscellaneous receivables                                       |  |                                       | (33,003    | )    |   | (160                                                                                        | ) |   | (44,340    | )
|Decrease (increase) in prepaid expenses                                     |  |                                       | 7,582      |      |   |                                                                                            |   |   | (14,571    | )
|Increase in deposits                                                        |  |                                       | (217       | )    |   |                                                                                            |   |   | (57,397    | )
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Net Cash Consumed by Operating
Activities                                   |  |                                       | (458,149   | )    |   | (213,627                                                                                    | ) |   | (2,712,500 | )
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Cash
 Flows from Investing Activities:                                      |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Investment in mining rights                                                 |  |                                       | (12,837    | )    |   |                                                                                            |   |   | (80,567    | )
|Loans to affiliated company                                                 |  |                                       |           |      |   | (40,000                                                                                     | ) |   | (431,275   | )
|Repayment of loans by the affiliated
 company                               |  |                                       |           |      |   |                                                                                            |   |   | 325,000    |  
|Acquisitions of equipment                                                   |  |                                       | (3,060     | )    |   |                                                                                            |   |   | (126,687   | )
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Net cash Consumed by Investing
Activities                                   |  |                                       | (15,897    | )    |   | (40,000                                                                                     | ) |   | (313,529   | )
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Cash
 Flows From Financing Activities:                                      |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Proceeds from sales of common stock                                         |  |                                       | 400,000    |      |   |                                                                                            |   |   | 3,492,500  |  
|Proceeds from exercises of warrants                                         |  |                                       | 110,000    |      |   |                                                                                            |   |   | 192,500    |  
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Net Cash Provided by Financing
Activities                                   |  |                                       | 510,000    |      |   |                                                                                            |   |   | 3,685,000  |  
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Net increase (decrease) in cash balance                                     |  |                                       | 35,954     |      |   | (254,539                                                                                    | ) |   | 658,971    |  
|Cash balance, beginning of period                                           |  |                                       | 623,017    |      |   | 277,917                                                                                     |   |   |           |  
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  
|Cash balance, end of Period                                                 |  | $                                     | 658,971    |      | $ | 23,378                                                                                      |   | $ | 658,971    |  
|                                                                            |  |                                       |            |      |   |                                                                                             |   |   |            |  

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

7

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U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Unaudited)

|   |                      
|-- | ---------------------
|1. | BASIS OF PRESENTATION

The unaudited
interim consolidated financial statements of U.S. Precious Metals, Inc. and its
subsidiary (the Company) as of August 31, 2008 and for the three month period
ended August 31, 2008 and August 31, 2007, have been prepared in accordance
with U.S. generally accepted accounting principles. In the opinion of
management, such information contains all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
for such periods. The results of operations for the three month period ended
August 31, 2008 are not necessarily indicative of the results to be expected
for the full fiscal year ending May 31, 2009.

Certain
information and disclosures normally included in the notes to financial
statements have been condensed or omitted as permitted by the rules and
regulations of the Securities and Exchange Commission, although the Company
believes the disclosure is adequate to make the information presented not
misleading. The accompanying unaudited financial statements should be read in
conjunction with the financial statements contained in the Companys Amended
Form 10-K/A.

8

---



|   |             
|-- | ------------
|2. | RESTATEMENTS

Certain errors
affecting the financial statements for the quarter ended August 31, 2008 were
discovered during an internal review and analysis. Some of these corrections
resulted from the effects of changes made to the financial statements for May
31 2008 which were included in the Amended Form 10-K/A. Others principally
involved the accounting for mine development costs and the accounting for gains
on foreign currency remeasurement. Correcting these errors resulted in an
increase in the net loss for the three month period ended August 31, 2008 of
$17,911, and a decrease of $49,216 in total assets.

The financial
statements have been restated to correct these errors, as presented below.

|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|--------------------------------------------- |  | ------------------------------------------- | ---------- | ----------- | - | -------- | - | ------------ |  | - | ---------- | -
|                                              |  | Consolidated Balance Sheet
 August 31, 2008 |           
|                                             
|                                              |  | Previously
 Reported                        |            | Adjustments |   |          |   | As
 Restated | 
|                                              |  |                                             |            |             |   |          |   |              | 
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|Miscellaneous receivables                     |  | $                                           | 45,926     |             | $ | (4,570   | ) | (F)          |  | $ | 41,356     |  
|Prepaid expenses                              |  |                                             | 14,133     |             |   | 438      |   |              |  |   | 14,571     |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|Total current assets                          |  |                                             | 719,030    |             |   | (4,132   | ) |              |  |   | 714,898    |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|Property, plant and equipment                 |  |                                             | 89,975     |             |   | (2,716   | ) | (A)          |  |   | 87,259     |  
|Accumulated depreciation                      |  |                                             | (25,171    | )           |   | (742     | ) | (A)          |  |   | (25,913    | )
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|Net fixed assets                              |  |                                             | 104,233    |             |   | (3,458   | ) |              |  |   | 100,775    |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|Loan to affiliated company                    |  |                                             | 106,275    |             |   | (106,275 | ) | (F)          |  |   |           |  
|Investment in mining rights                   |  |                                             | 141,753    |             |   | (46,185  | ) | (B)          |  |   | 95,568     |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|Total Assets                                  |  | $                                           | 1,128,688  |             | $ | (160,050 | ) |              |  | $ | 968,038    |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|Accounts payable                              |  | $                                           | 105,116    |             | $ | (205     | ) |              |  | $ | 104,911    |  
|Accrued expenses                              |  |                                             | 58,137     |             |   | 4,070    |   | (A)          |  |   | 62,207     |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|Total current liabilities                     |  |                                             | 171,150    |             |   | 3,865    |   |              |  |   | 175,015    |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|Deficit accumulated during exploration
 stage |  |                                             | (8,093,237 | )           |   | (175,119 | ) | (C)          |  |   | (8,268,356 | )
|Accumulated other comprehensive (loss)        |  |                                             | (11,204    | )           |   | 11,204   |   | (E)          |  |   |           |  
|Total stockholders equity                    |  |                                             | 957,538    |             |   | (163,915 | ) |              |  |   | 793,623    |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  
|Total Liabilities and Stockholders Equity    |  | $                                           | 1,128,688  |             | $ | (160,050 | ) |              |  | $ | 968,638    |  
|                                              |  |                                             |            |             |   |          |   |              |  |   |            |  

9

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Unaudited)

Consolidated Statement of Operations for Three Months Ended
August 31, 2008

|                                          |  |                      |            |                      |   |         |   |              |  |   |            |  
|----------------------------------------- |  | -------------------- | ---------- | -------------------- | - | ------- | - | ------------ |  | - | ---------- | -
|                                          |  | Previously
 Reported |            | (Increase)
 Decrease |   |         |   | As
 Restated | 
|                                          |  |                      |            |                      |   |         |   |              | 
|                                          |  |                      |            |                      |   |         |   |              |  |   |            |  
|Expenses                                  |  | $                    | 1,291,910  |                      | $ | 18,498  |   | (D)          |  | $ | 1,310,408  |  
|                                          |  |                      |            |                      |   |         |   |              |  |   |            |  
|Operating Loss                            |  |                      | (1,291,910 | )                    |   | (18,498 | ) |              |  |   | (1,310,408 | )
|Interest income                           |  |                      | 5,490      |                      |   | (1,575  | ) | (F)          |  |   | 3,915      |  
|                                          |  |                      |            |                      |   |         |   |              |  |   |            |  
|Remeasurement gain                        |  |                      |           |                      |   | 587     |   | (E)          |  |   | 587        |  
|                                          |  |                      |            |                      |   |         |   |              |  |   |            |  
|                                          |  |                      |            |                      |   |         |   |              |  |   |            |  
|Loss accumulated during exploration stage |  |                      | (1,286,420 | )                    |   | (19,486 | ) |              |  |   | (1,305,906 | )
|                                          |  |                      |            |                      |   |         |   |              |  |   |            |  
|Other comprehensive income                |  |                      | 10,549     |                      |   | (10,549 | ) | (E)          |  |   |           |  
|                                          |  |                      |            |                      |   |         |   |              |  |   |            |  
|                                          |  |                      |            |                      |   |         |   |              |  |   |            |  
|Total Comprehensive Loss                  |  | $                    | (1,275,871 | )                    | $ | (30,035 | ) |              |  | $ | (1,305,906 | )
|                                          |  |                      |            |                      |   |         |   |              |  |   |            |  

Consolidated
Statement of Operations (CumulativeSince Inception of Exploration Stage) to August 31, 2008

|                                          |  |                      |            |             |   |          |   |              |  |   |            |  
|----------------------------------------- |  | -------------------- | ---------- | ----------- | - | -------- | - | ------------ |  | - | ---------- | -
|                                          |  | Previously
 Reported |            | Adjustments |   |          |   | As
 Restated | 
|                                          |  |                      |            |             |   |          |   |              | 
|                                          |  |                      |            |             |   |          |   |              |  |   |            |  
|Expenses                                  |  | $                    | 8,106,739  |             | $ | 190,900  |   | (F)          |  | $ | 8,297,639  |  
|                                          |  |                      |            |             |   |          |   |              |  |   |            |  
|Operating Loss                            |  |                      | (8,106,739 | )           |   | (190,900 | ) |              |  |   | (8,297,639 | )
|                                          |  |                      |            |             |   |          |   |              |  |   |            |  
|Rounding                                  |  |                      |            |             |   | 1        |   |              |  |   |            |  
|Interest income                           |  |                      | 16,346     |             |   | (79      | ) | (A)          |  |   | 16,267     |  
|Interest expense                          |  |                      | (2,843     | )           |   | 1,857    |   | (A)          |  |   | (986       | )
|Remeasurement gain                        |  |                      |           |             |   | 14,002   |   | (E)          |  |   | 14,002     |  
|                                          |  |                      |            |             |   |          |   |              |  |   |            |  
|                                          |  |                      |            |             |   |          |   |              |  |   |            |  
|Loss accumulated during exploration stage |  | $                    | (8,093,237 | )           | $ | (175,119 | ) |              |  | $ | (8,268,356 | )
|                                          |  |                      |            |             |   |          |   |              |  |   |            |  

10

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Unaudited)

Consolidated Statement of Cash Flows for Three Month Period
Ended August 31, 2008

|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  
|--------------------------------------------------------------------------- |  | -------------------- | ---------- | ----------- | - | ------- | - | ------------ |  | - | ---------- | -
|                                                                            |  | Previously
 Reported |            | Adjustments |   |         |   | As
 Restated | 
|                                                                            |  |                      |            |             |   |         |   |              | 
|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  
|Cash Flows From Operations                                                  |  |                      |            |             |   |         |   |              |  |   |            |  
|Net Loss                                                                    |  | $                    | (1,286,420 | )           | $ | (19,486 | ) |              |  | $ | (1,305,906 | )
|Adjustments required to reconcile net loss
 to cash consumed by operations: |  |                      |            |             |   |         |   |              |  |   |            |  
|Charges Not Requiring Outlay of Cash:                                       |  |                      |            |             |   |         |   |              |  |   |            |  
|Depreciation                                                                |  |                      | 5,121      |             |   | 1,410   |   |              |  |   | 6,531      |  
|Common stock issued for services                                            |  |                      | 6,147      |             |   | 3       |   |              |  |   | 6,150      |  
|Changes in Assets and Liabilities:                                          |  |                      |            |             |   |         |   |              |  |   |            |  
|Increase (decrease) in accounts payable                                     |  |                      | 91,632     |             |   | (212    | ) |              |  |   | 91,420     |  
|Decrease in accrued expenses                                                |  |                      | (336       | )           |   | (370    | ) |              |  |   | (706       | )
|(Increase) decrease in miscellaneous
 receivable                            |  |                      | (34,620    | )           |   | 1,317   |   | (F)          |  |   | (33,303    | )
|Decrease (increase) in prepaid expenses                                     |  |                      | 8,020      |             |   | (438    | ) |              |  |   | 7,582      |  
|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  
|Net Cash Consumed by Operating Activities                                   |  |                      | (440,673   | )           |   | (17,476 | ) |              |  |   | (458,149   | )
|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  
|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  
|Cash Flows from Investing Activities:                                       |  |                      |            |             |   |         |   |              |  |   |            |  
|Investment in mining rights                                                 |  |                      | (40,878    | )           |   | 28,041  |   | (D)          |  |   | (12,837    | )
|Acquisition of equipment                                                    |  |                      | (3,044     | )           |   | (17     | ) |              |  |   | (3,060     | )
|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  
|Net cash Consumed by Investing Activities                                   |  |                      | (43,922    | )           |   | 28,025  |   |              |  |   | (15,897    | )
|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  
|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  
|Effect of exchange rates on cash                                            |  |                      | 10,549     |             |   | (10,549 | ) | (E)          |  |   |           |  
|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  
|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  
|Net increase in cash balance                                                |  | $                    | 35,954     |             | $ | 0       |   |              |  | $ | 35,954     |  
|                                                                            |  |                      |            |             |   |         |   |              |  |   |            |  

11

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Restated)

Consolidated Statement of Cash Flows for the Cumulative
Period fromJanuary 21, 1998 (Date of Inception of Exploration stage) to August 31, 2008

|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    
|--------------------------------------------------------------------------- |  | -------------------- | ---------- | ----------- | - | -------- | - | ------------ |  | - | ---------- | ---
|                                                                            |  | Previously
 Reported |            | Adjustments |   |          |   | As
 Restated | 
|                                                                            |  |                      |            |             |   |          |   |              | 
|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    
|Cash Flows From Operations:                                                 |  |                      |            |             |   |          |   |              |  |   |            |    
|Net Loss                                                                    |  | $                    | (8,093,237 | )           | $ | (175,119 | ) |              |  | $ | (8,268,356 | )  
|Adjustments required to reconcile net loss
 to cash consumed by operations: |  |                      |            |             |   |          |   |              |  |   |            |    
|Charges Not Requiring Outlay of Cash:                                       |  |                      |            |             |   |          |   |              |  |   |            |    
|Depreciation                                                                |  |                      | 25,169     |             |   | 740      |   |              |  |   | 25,909     |    
|Common stock issued for services                                            |  |                      | 4,591,979  |             |   | 3        |   |              |  |   | 4,591,882  |    
|Bad debt expense                                                            |  |                      |           |             |   | 109,259  |   | (F)          |  |   | 109,259    | (F)
|Changes in Assets and Liabilities:                                          |  |                      |            |             |   |          |   |              |  |   |            |    
|Increase (decrease) in accounts payable                                     |  |                      | 105,116    |             |   | (206     | ) |              |  |   | 104,910    |    
|Increase in accrued expenses                                                |  |                      | 66,034     |             |   | 4,070    |   | (A)          |  |   | 70,104     |    
|Increase (decrease) in miscellaneous
 receivable                            |  |                      | (45,925    | )           |   | 1,585    |   | (F)          |  |   | (44,340    | )  
|(Decrease) in prepaid expenses                                              |  |                      | (14,132    | )           |   | (439     | ) |              |  |   | (14,571    | )  
|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    
|Net Cash Consumed by Operating Activities                                   |  |                      | (2,652,393 | )           |   | (60,107  | ) |              |  |   | (2,712,500 | )  
|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    
|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    
|Cash Flows from Investing Activities:                                       |  |                      |            |             |   |          |   |              |  |   |            |    
|Investment in mining rights                                                 |  |                      | (126,753   | )           |   | 46,186   |   | (B)          |  |   | (80,567    | )  
|Acquisition of equipment                                                    |  |                      | (129,404   | )           |   | 2,717    |   | (A)          |  |   | (126,687   | )  
|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    
|Net cash Consumed by Investing Activities                                   |  |                      | (362,432   | )           |   | 48,903   |   |              |  |   | (313,529   | )  
|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    
|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    
|Effect of exchange rates on cash                                            |  |                      | (11,204    | )           |   | 11,204   |   | (E)          |  |   |           |    
|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    
|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    
|Net increase (decrease) in cash balance                                     |  | $                    | 658,971    |             | $ |         |   |              |  | $ | 658,971    |    
|                                                                            |  |                      |            |             |   |          |   |              |  |   |            |    

(A) Principally the result of
corrections made to the May 31, 2008 financial statements.

(B) A Combination of corrections made to the May 31, 2008 financial
statements ($18,146) and a correction to expense of mine development costs
which had been capitalized during the quarter ended August 31, 2008 ($28,040).

(C) The Combined result of corrections made to the May 31, 2008
financial statements ($46,375) and corrections to the statement of operations
for the three month period ended August 31, 2008 ($17,911).

(D) Principally the result of correcting the accounting for mine
development costs. These costs were incorrectly capitalized and have now been
charged to expense.

(E) Gains and losses resulting from translation of assets, liability,
equity, and income and expense accounts which had previously been accounted for
as comprehensive income. Since the functional currency is the U.S. dollar they
are calculated differently and classified as remeasurement gain.

(F) Effects of writing off loan to affiliated company as of
May 31, 2008 and the related interest ($109,259). The interest income
previously recorded for the three-month period ended August 31, 2008 was
reversed.

12

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company) 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Restated)

|   |         
|-- | --------
|3. | EXPENSES

Included
within expenses are the following amounts:

|                                |  |                             |           |                 |   |         |  |                                                                                 |           | 
|------------------------------- |  | --------------------------- | --------- | --------------- | - | ------- |  | ------------------------------------------------------------------------------- | --------- | 
|                                |  |                             |           |                 |   |         |  | January 21, 1998
 (Date of Inception
 of Exploration Stage)
 To August 31, 2008 |          
|                                |  | Three Month Period Ended    |           |                
|Detail of
 Expenses by Category |  | August 31, 2008
 (Restated) |           | August 31, 2007 |   |        
|                                |  |                             |           |                 |   |         | 
|                                |  |                             |           |                 |   |         |  |                                                                                 |           | 
|Geology fees                    |  | $                           | 14,030    |                 | $ | 7,500   |  | $                                                                               | 156,124   | 
|Professional fees               |  |                             | 14,860    |                 |   | 30,667  |  |                                                                                 | 715,462   | 
|Salaries                        |  |                             | 112,346   |                 |   | 103,455 |  |                                                                                 | 637,362   | 
|Payroll taxes                   |  |                             | 32,191    |                 |   |        |  |                                                                                 | 72,570    | 
|Consulting fees                 |  |                             | 51,232    |                 |   | 58,000  |  |                                                                                 | 1,759,826 | 
|Employee awards                 |  |                             |          |                 |   |        |  |                                                                                 | 1,652,000 | 
|Bad debt expense                |  |                             |          |                 |   |        |  |                                                                                 | 109,259   | 
|Directors awards               |  |                             | 770,000   |                 |   |        |  |                                                                                 | 1,670,500 | 
|Drilling and excavation         |  |                             | 142,726   |                 |   |        |  |                                                                                 | 324,397   | 
|Assay expense                   |  |                             | 11,165    |                 |   |        |  |                                                                                 | 25,516    | 
|Licenses and permits            |  |                             | 106       |                 |   | 9,637   |  |                                                                                 | 45,835    | 
|Travel and entertainment        |  |                             | 52,671    |                 |   | 9,737   |  |                                                                                 | 217,540   | 
|Office expense                  |  |                             | 10,059    |                 |   | 1,699   |  |                                                                                 | 53,420    | 
|Auto rental                     |  |                             | 7,754     |                 |   | 7,754   |  |                                                                                 | 127,042   | 
|Office and warehouse rental     |  |                             | 20,505    |                 |   | 7,980   |  |                                                                                 | 80,227    | 
|Depreciation expense            |  |                             | 6,531     |                 |   |        |  |                                                                                 | 25,909    | 
|Insurance expense               |  |                             | 8,181     |                 |   | 6,194   |  |                                                                                 | 35,499    | 
|Other expenses                  |  |                             | 56,051    |                 |   | 10,509  |  |                                                                                 | 589,151   | 
|                                |  |                             |           |                 |   |         |  |                                                                                 |           | 
|Total expenses                  |  | $                           | 1,310,408 |                 | $ | 253,132 |  | $                                                                               | 8,297,639 | 
|                                |  |                             |           |                 |   |         |  |                                                                                 |           | 

13

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Unaudited)

|   |                                     
|-- | ------------------------------------
|4. | SUPPLEMENTARY CASH FLOWS INFORMATION

There was no
cash paid for income taxes during either of the periods presented. Similarly
there were no payments for interest during either of the periods presented.

During the
quarter ended August 31, 2008, 5,000 shares of common stock were issued for
services valued at $6,150.00.

During the
quarter ended August 31, 2007, 150,000 shares of common stock were issued for
services valued at $48,000.00.

During the
quarter ended August 31, 2008, 9,000,000 options to purchase common stock were
issued for services, valued at $770,000.

During the
quarter ended August 31, 2007, 150,000 shares of common stock were issued for
services valued at $48,000.00.

There were no
other non-cash investing or financing activities during either of the period
covered.

|   |             
|-- | ------------
|5. | COMMON STOCK

During the
quarter ended August 31, 2008, the Company issued 800,000 shares of common
stock and 400,000 warrants to purchase common stock for gross proceeds of
$400,000. The warrants are exercisable at $1.00 per share and expire one year
after issuance. During the quarter ended August 31, 2008, the Company also
issued 5,000 shares of common stock for services.

|   |         
|-- | --------
|6. | WARRANTS

As of August
31, 2008, there were 4,727,500 warrants outstanding of which 3,827,500 were
exercisable at $.25 per share and 900,000 shares were exercisable at $1.00 per
share. All warrants have an expiration date of one year after issuance.

The following
table summarizes warrant activity during the three month period ended August
31, 2008.

|                                                                        |  |  |           |  
|----------------------------------------------------------------------- |  |  | --------- | -
|Warrants
 outstanding May 31, 2008                                      |  |  | 4,767,500 |  
|                                                                        |  |  |           |  
|Warrants
 issued during the three month period ended August 31, 2008    |  |  | 400,000   |  
|Warrants
 exercised during the three month period ended August 31, 2008 |  |  | (440,000  | )
|                                                                        |  |  |           |  
|                                                                        |  |  |           |  
|Warrants
 outstanding August 31, 2008                                   |  |  | 4,727,500 |  
|                                                                        |  |  |           |  

14

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008
(Unaudited)

|   |                           
|-- | --------------------------
|7. | RELATED PARTY TRANSACTIONS

The Company
had the following transactions as it relates to its affiliates and officers:

During the
quarter ended August 31, 2008, the Company issued options to purchase 9,000,000
shares of common stock to its directors and officers for services, valued at
$770,000 based upon a Black Scholes valuation model. See Note 8 for further details.

No other
issuances to related parties took place during the periods presented.

|   |              
|-- | -------------
|8. | STOCK OPTIONS

During
December 2007, the Companys Board of Directors re-approved the 2007 Stock
Option Plan (the Plan) conditioned upon the approval by the shareholders by
December 31, 2008. Under this re-approved Plan, options to purchase up to
20,000,000 shares of Company common stock may be issued to officers, directors,
key employees and consultants. The Plan was approved by the shareholders in
August 2008. As of May 31, 2008, the Company had approved the grant of
9,000,000 options, subject to and pending shareholder approval of the Plan.
These 9,000,000 options were issued after fiscal year ended May 31, 2008
because shareholder approval occurred after that date and therefore the value
of the option grants is being reported in this first quarter ended August 31,
2008.

The following
shows the activity during the first quarter of fiscal year 2008:

|                                                          |  |              |           |                      |   |      | 
|--------------------------------------------------------- |  | ------------ | --------- | -------------------- | - | ---- | 
|                                                          |  | # of Options |           | Avg. Exercise
 Price |  
|                                                          |  |              |           |                     
|Options
 outstanding, May 31, 2008                        |  |              | -0-       |                      | $ | -0-  | 
|Options
 granted during the quarter ended August 31, 2008 |  |              | 9,000,000 |                      |   | 0.36 | 
|Options
 cancelled during quarter ended August 31, 2008   |  |              | -0-       |                      |   | -0-  | 
|                                                          |  |              |           |                      |   |      | 
|Options
 outstanding August 31, 2008                      |  |              | 9,000,000 |                      | $ | 0.36 | 
|                                                          |  |              |           |                      |   |      | 
|                                                         

15

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The following
assumptions were used in the valuation of options granted during the quarter
ended August 31, 2008:

|                                                      |  |   |        |  
|----------------------------------------------------- |  | - | ------ | -
|Dividend
 yield                                       |  |   | 0      | %
|Expected
 volatility                                  |  |   | 189.40 | %
|Risk free
 interest rate                              |  |   | 2.22   | %
|Expected
 term (in years)                             |  |   | 5      |  
|Weighted
 average fair value of stock options granted |  | $ | 0.09   |  

|   |              
|-- | -------------
|9. | GOING CONCERN

The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the financial statements, the
Company has experienced continuing losses and does not presently have
sufficient resources to accomplish its objectives during the next twelve
months. These factors raise substantial doubt about the ability of the Company
to continue as a going concern. The financial statements do not include
adjustments relating to the recoverability of assets and classification of
liabilities that might be necessary should the Company be unable to continue in
operation. The Companys present plans, the realization of which cannot be
assured, to overcome these difficulties include, but are not limited to, the
continuing effort to raise capital in the public and private markets.

ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

We were formed
as a mineral exploration company on January 21, 1998. We are an exploration
stage company. There is no assurance that commercially viable mineral deposits
exist in sufficient amounts in our areas of exploration to justify
exploitation. Further exploration will be required before a final evaluation as
to the economic and legal feasibility of the concessions can occur. Because we
are still in our exploration stage, we have no revenues and have had only
losses since our inception. Accordingly, a comparison of our financial
information for accounting periods would likely not be meaningful or helpful in
making an investment decision regarding our Company. Our plan of operations for
the next twelve months is to continue the drilling campaign as more fully
described in the Companys Current Report on Form 8-K filed on January 23,
2009, provided that we receive sufficient funding to do so. However, we have
made no commitments for capital expenditures over the next 12 months. Our
management estimates that approximately $1,335,000 will be required over the
next 12 months to maintain our current status. This amount does not include any
additional exploration. We estimate these expenses to include approximately
$350,000 for salaries, outsourced labor and consulting services, $600,000 for
professional services, including work undertaken by the independent accountant
and legal fees, $50,000 for rent, maintenance, and utilities, $130,000 for
permits and expenses required to maintain the concessions, $105,000 for taxes
and insurance, $80,000 for office expenses, and $20,000 for other miscellaneous
expenses, including marketing and investor relations expenses.

We may attempt
to interest an operating company to enter into a joint venture to undertake
exploration work on the Solidaridad Concessions (as defined in the Companys
Amended Form 10-K/A), or we may attempt to access the public or private debt or
equity markets to move toward the production phase, or even consider an outright
sale.

We do not
intend to hire any additional employees at this time. All of the work related
to our business will be conducted by our current employees and independent
contractors. To the extent we receive funding, this is likely to change.

All of the
Companys plans are predicated on the Companys ability to raise sufficient
capital to complete them which we can not assure you will occur in a timely
manner, on terms acceptable to the Company, or at all. If we are unable to
obtain additional funding, we will not be able to continue our drilling
campaign or execute our current plan of operation.

16

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During the
three month period ending August 31, 2008, we invested approximately $327,205
in our exploration drilling campaign and the development of our Mexican
operations. Michael Floersch, the CEO of Applied Minerals, Inc., was engaged in
February 2008 by the Company to advise us regarding our drilling program,
initiate and maintain the chain of custody procedure for the core samples from
the drill site to the assayer in Kellogg, Idaho and assume responsibility for
quality control in the drilling campaign. During the first fiscal quarter of
2009, we have continued to explore an area of about five acres of the 37,000
acre concessions, leaving approximately 99.9% of the holdings unexplored. If we
are able to raise sufficient financing to do so, the company expects to
continue to explore and develop the property over the next 12 months to
determine the proven and probable reserves on a more significant portion of the
property.

We previously
reported that we anticipated completion of an on-site metallurgical and
chemistry laboratory with operations to begin in 2009. General construction of
the lab has been completed; however the lab is not yet functional. The Company
has suspended additional improvements until such time as it receives sufficient
funding to move forward. Additionally, the lab is currently expected to
function as a support facility rather than a main processing facility under our
current business plan.

We must obtain
additional financing to continue our operations. There can be no guarantee that
we will be able to obtain additional funding on terms that are favorable to the
Company or at all. As an exploration stage company, the Company has no current
ability to generate revenue and no plans to do so in the foreseeable future.
Our assets consist of cash and cash equivalents, prepaid expenses, nominal
equipment and certain mineral property interests. There can be no assurance
that we will obtain sufficient funding to continue operations, or if we do
receive funding, to generate revenues in the future or to operate profitably in
the future. We have incurred net losses in each fiscal year since inception of
our operations.

The Company
had total assets in the amount of $968,638 with a cash balance of $658,971 as
of August 31, 2008, vs. $897,681 in total assets and a cash balance of $623,017
as of May 31, 2008.

Since we do
not anticipate generating any revenue for the foreseeable future, we will have
to continue to seek additional funding from outside sources. However, we are
facing declining and volatile financial markets that may make it difficult to
satisfy our need for additional capital to finance our plan of operations for
fiscal 2009 through either debt or equity. As a result, we continue to seek
appropriate opportunities that are likely to provide the Company with adequate
fiscal resources to execute its plan of operations in the current fiscal year
and beyond.

Because of the
exploratory nature of our current business plan, we anticipate incurring
operating losses for the foreseeable future. Our future financial results are
also uncertain due to a number of factors, some of which are outside our
control. These factors include, but are not limited to:

|      |                                                                                                                                                                                                                                                                                                
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i)   | our ability
 to raise sufficient additional funding;                                                                                                                                                                                                                                           
|      |                                                                                                                                                                                                                                                                                                
|(ii)  | the results
 of our proposed exploration programs on the mineral properties; and                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                
|(iii) | assuming
 significant mineral deposits, our ability to be successful in commercially
 producing mineral deposits, find joint venture partners for the development
 of our property interests or find a purchaser for the property interests or
 finding a purchaser for the property interests.

Results of Operations for the Three Month
Periods Ending August 31, 2008 and 2007.

We did not
earn any revenues and have had only losses since our inception, including
during the three month periods ending in August 31, 2008 and 2007.

We incurred
operating expenses in the amount of $1,310,408 during the three month period
ended August 31, 2008, $776,150 of which was a non-cash expense related to
stock and option grants to company directors, officers and consultants and
$6,531 of which was a non-cash expense related to depreciation. We incurred
cash operating expenses in the amount of $253,132 during the three month period
ended August 31, 2007.

17

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We granted options
and shares in lieu of compensation valued at $776,150 during the three month
period ended August 31, 2008 compared to no grants in the comparable period for
2007. We also paid $167,921 in geological expenses, up from $7,500 in the
comparable three month period. Our payroll and consulting cash expenses
increased by $34,014 over the comparable three month period. Additional office
expenses, depreciation, insurance, and other related expenses in Mexico caused
an increase of $79,191 over the expenses for the period ended August 31, 2007.

Off Balance Sheet Arrangements

We do not have
any off balance sheet arrangements that are reasonably likely to have a current
or future effect on our financial condition, revenues, and results of
operations, liquidity or capital expenditures.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls

We carried out
an evaluation required by Rule 13a-15 of the Securities Exchange Act of 1934
(the Exchange Act) under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures over financial reporting.

Disclosure
controls and procedures are designed with the objective of ensuring that (i)
information required to be disclosed in an issuers reports filed under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC rules and forms and (ii) information is
accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosures.

The evaluation
of our disclosure controls and procedures included a review of our objectives
and processes and effect on the information generated for use in this Report.
This type of evaluation is done quarterly so that the conclusions concerning
the effectiveness of these controls can be reported in our periodic reports
filed with the SEC. Based on their evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that as of the end of the period covered
by this quarterly report on Form 10-Q/A, our disclosure controls and procedures
were not sufficiently effective in timely alerting them to material information
which is required to be included in our periodic reports filed with the SEC.
This deficiency arose from changes at the subsidiary level and from a lack of
previous disclosure controls and procedures that resulted into certain errors
and transactions not being detected during the preparation of the fiscal year
end financial statements and the review process.

Managements Report on Internal Control Over
Financial Reporting

Our management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in the Exchange Act Rule 13a-15.
Under the supervision and with the participation of our management, including
our Principal Executive Officer and Principal Financial Officer, we conducted
an evaluation of the effectiveness of the design and operation of the Companys
internal control over financial reporting pursuant to the Exchange Act Rule
13a15 and based on the criteria set forth in Internal Control  Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on our evaluation under the criteria set forth in Internal
Control  Integrated Framework, our Chief Executive Officer and Chief Financial
Officer concluded that our internal controls and procedures over financial
reporting were not effective as of August 31, 2008 due to a lack of reporting
system from the subsidiary to the parent company and further weakness in the
parents internal control structure. The certifying officers have taken note of
the reasons for the deficiency and have taken additional measures to improve
the financial reporting of the subsidiary and the quarterly and year end review
process to minimize the potential of further misstatements or errors that may
render the financial information misleading or mistaken.

18

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However, a
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Management necessarily applied its judgment in assessing the benefits
of controls relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been
detected. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote. Because of the inherent
limitations in a control system, misstatements due to error or fraud may occur
and may not be detected.

19

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ITEM 6. EXHIBITS.

|             |   |                                                                                                                                                  
|------------ | - | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 31.1 | - | Certification
 Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a), Kugler*                                                     
|             |   |                                                                                                                                                  
|Exhibit 31.2 | - | Certification
 Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a),
 Oliveras*                                              
|             |   |                                                                                                                                                  
|Exhibit 32.1 | - | Certification
 Required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the
 Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, Kugler*  
|             |   |                                                                                                                                                  
|Exhibit 32.2 | - | Certification
 Required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the
 Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, Oliveras*

* Filed
herewith.

20

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SIGNATURES

In accordance
with Section 13 or 15(d) of the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

U.S. Precious Metals, Inc.

(Registrant)

|                                                                  |  | 
|----------------------------------------------------------------- |  | 
|/s/ Michael
 Jack Kugler                                          |  | 
|                                                                  |  | 
|Michael Jack
 Kugler                                              |  | 
|(Chief
 Executive Officer and Chairman of the Board of Directors) |  | 
|February 17,
 2009                                                |  | 
|                                                                  |  | 
|/s/ Jesus
 Oliveras                                               |  | 
|                                                                  |  | 
|Jesus
 Oliveras                                                   |  | 
|(Chief
 Financial Officer)                                        |  | 
|February 17,
 2009                                                |  | 

21

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INDEX TO ATTACHED EXHIBITS

|             |   |                                                                                                                                                 
|------------ | - | ------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 31.1 | - | Certification
 Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a),
 Kugler                                                
|             |   |                                                                                                                                                 
|Exhibit 31.2 | - | Certification
 Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a),
 Oliveras                                              
|             |   |                                                                                                                                                 
|Exhibit 32.1 | - | Certification
 Required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the
 Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, Kugler  
|             |   |                                                                                                                                                 
|Exhibit 32.2 | - | Certification
 Required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the
 Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, Oliveras

22

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