UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q/A
(Amendment No. 2)

(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:50,793,499 shares of common stock issued and outstanding as of May 10, 2009

---



EXPLANATORY NOTE

U.S.
Precious Metals, Inc. (the Company) is filing this Amendment No. 2 on
Form 10-Q/A (this Amendment No. 2) to amend our Quarterly
Report on Form 10-Q for the quarterly period ended August 31, 2008, which was
originally filed with the Securities and Exchange Commission (the SEC)
on October 20, 2008 (the Original First Quarter 2009 Form 10-Q), as
amended by Amendment No. 1 on Form 10-Q/A filed with the SEC on February 18,
2009 (Amendment
No. 1).

This
Amendment No. 2 is being filed to amend and restate Amendment No. 1 to correct
certain errors that were discovered in the August 31, 2008 Consolidated Balance
Sheet, and related Consolidated Statements of Operations and Cash Flows for the
three months then ended and related changes to the Notes to the Consolidated
Financial Statements.

Amendment
No. 1 contained an inaccurate calculation of the value of the options to
purchase common stock granted to officers and directors for services rendered.
The value of the options granted to the Companys officers and directors
reported in Amendment No. 1 was $770,000. Under the fair value based method of
accounting described in Statement of Financial Accounting Standards No. 123R (SFAS No.
123R), the accurate calculation should have been $2,770,000. The
effect is an understatement in value of $2,000,000. Amendment No. 1 also
calculated the investment in mining rights of $95,568 using the average
exchange rate. The investment in mining rights has been recalculated using the
actual exchange rate as of the date of the investment. Using the actual
exchange rate results in the investment of mining rights being $80,363. The effect
is an overstatement in value of $15,205. Amendment No. 1 also incorrectly
applied advances to employees for Company expenses of $41,356 as miscellaneous
receivables resulting in an overstatement of the Companys total assets by
$41,356. This Amendment No. 2 reduces the total current assets by the $41,356
to correct for the overstatement reported in Amendment No. 1.

The
net effect of these changes resulted in the Companys expenses and operating
loss to increase by $2,056,561, $2,000,000 of which is a result of the
recalculation in stock options granted to the Companys directors and officers
for services rendered, $15,205 of which is a result of the recalculation of
exchange rate for investments in mining rights, and $41,356 of which is the advances
to employees for Company expenses, all of which are non-cash adjustments.

This
Amendment No. 2 is being filed only to modify and update Part I, Item 1.
Consolidated Financial Statements, Part I, Item 2. Managements Discussion and
Analysis, and Part I, Item 4. Controls and Procedures. Except as otherwise
provided, this Amendment No. 2 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 No. 2 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 Annual Report on Form 10-K/A for the fiscal year
ended May 31, 2008, filed with the SEC on February 23, 2009 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 this earlier filing 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 filed with the
SEC on February 23, 2009 (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s Discussion and
 Analysis of Financial Condition and Results of Operations.                                                                                                                              |  | 17
|                                                                                                                                                                                                                             |  |   
|Item 4. Controls and Procedures.                                                                                                                                                                                             |  | 19
|                                                                                                                                                                                                                             |  |   
|Item 6. Exhibits.                                                                                                                                                                                                            |  | 20
|                                                                                                                                                                                                                             |  |   
|Signature Page                                                                                                                                                                                                               |  | 21
|                                                                                                                                                                                                                             |  |   
|Index to Attached Exhibits                                                                                                                                                                                                   |  | 22
|                                                                                                                                                                                                                             |  |   
|Attached Exhibits                                                                                                                                                                                                            |  |   

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)
 (See Note 2) |             | May 31, 2008
 (Audited) |  
|                                                                                                                                           |  |                                                        |             |                         |  
|ASSETS                                                                                                                                     |  |                                                        |             |                         |   |            |  
|Current Assets:                                                                                                                            |  |                                                        |             |                         |   |            |  
|Cash                                                                                                                                       |  | $                                                      | 658,971     |                         | $ | 623,017    |  
|Miscellaneous receivables                                                                                                                  |  |                                                        |            |                         |   | 8,353      |  
|Prepaid expenses                                                                                                                           |  |                                                        | 14,571      |                         |   | 22,153     |  
|                                                                                                                                           |  |                                                        |             |                         |   |            |  
|Total current assets                                                                                                                       |  |                                                        | 673,542     |                         |   | 653,523    |  
|                                                                                                                                           |  |                                                        |             |                         |   |            |  
|Fixed Assets:                                                                                                                              |  |                                                        |             |                         |   |            |  
|Vehicles                                                                                                                                   |  |                                                        | 39,429      |                         |   | 39,429     |  
|Machinery 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                                                                                                                |  |                                                        | 80,363      |                         |   | 82,730     |  
|Deposits                                                                                                                                   |  |                                                        | 57,397      |                         |   | 57,180     |  
|                                                                                                                                           |  |                                                        |             |                         |   |            |  
|Total other assets                                                                                                                         |  |                                                        | 137,760     |                         |   | 139,910    |  
|                                                                                                                                           |  |                                                        |             |                         |   |            |  
|Total Assets                                                                                                                               |  | $                                                      | 912,077     |                         | $ | 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        |  
|Additional paid-in-capital                                                                                                                 |  |                                                        | 11,061,495  |                         |   | 7,775,360  |  
|Deficit accumulated during exploration
 stage                                                                                              |  |                                                        | (10,324,917 | )                       |   | (6,962,450 | )
|                                                                                                                                           |  |                                                        |             |                         |   |            |  
|Total stockholders equity                                                                                                                 |  |                                                        | 737,062     |                         |   | 813,382    |  
|                                                                                                                                           |  |                                                        |             |                         |   |            |  
|Total Liabilities and Stockholders
Equity                                                                                                 |  | $                                                      | 912,077     |                         | $ | 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)
 (See Note 2) |  
|                                                 |  |                                      |           
|                                                 |  | Three Month Periods Ended August 31, |            |                                                                                                          
|                                                 |  |                                      |            |                                                                                                          
|                                                 |  | 2008
 (Restated)
 (See Note 2)       |            | 2007                                                                                                      |   |           
|                                                 |  |                                      |            |                                                                                                           |   |            |  
|                                                 |  |                                      |            |                                                                                                           |   |            |  
|Revenues                                         |  | $                                    |           |                                                                                                           | $ |           |   | $ |            |  
|                                                 |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|Expenses                                         |  |                                      | 3,366,382  |                                                                                                           |   | 254,044    |   |   | 10,340,198  |  
|                                                 |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|                                                 |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|Operating Loss                                   |  |                                      | (3,366,382 | )                                                                                                         |   | (254,044   | ) |   | (10,340,198 | )
|                                                 |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|Other Income (Expense):                          |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|Interest income                                  |  |                                      | 3,915      |                                                                                                           |   | 160        |   |   | 16,267      |  
|Interest expense                                 |  |                                      |           |                                                                                                           |   |           |   |   | (986        | )
|                                                 |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|                                                 |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|Loss accumulated during exploration stage        |  | $                                    | (3,362,467 | )                                                                                                         | $ | (253,884   | ) | $ | (10,324,917 | )
|                                                 |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|                                                 |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|Net Loss per Share                               |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|Basic and Diluted                                |  | $                                    | (0.07      | )                                                                                                         | $ | (0.01      | ) |   |             |  
|                                                 |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|                                                 |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|Weighted Average Number of Shares
 Outstanding - |  |                                      |            |                                                                                                           |   |            |   |   |             |  
|Basic and Diluted                                |  |                                      | 47,967,656 |                                                                                                           |   | 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)
 to August 31, 2008
 (Restated)
 (See Note 2)
|                                                                            |  | Three Month Periods Ended August 31, |            |                                                                                    
|                                                                            |  |                                      |            |                                                                                    
|                                                                            |  | 2008
 (Restated)
 (See Note 2)       |            | 2007                                                                                |   |         
|                                                                            |  |                                      |            |                                                                                     |   |          |  
|Cash Flows From Operations:                                                 |  |                                      |            |                                                                                     |   |          |   |   |             |  
|Net Loss                                                                    |  | $                                    | (3,362,467 | )                                                                                   | $ | (253,884 | ) | $ | (10,324,917 | )
|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                                           |  |                                      | 2,770,000  |                                                                                     |   |         |   |   | 2,770,000   |  
|Bad debt expense                                                            |  |                                      |           |                                                                                     |   |         |   |   | 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      |  
|Decrease (increase) in miscellaneous
 receivable                            |  |                                      | 8,353      |                                                                                     |   | (160     | ) |   | (2,984      | )
|Decrease (increase) in prepaid expenses                                     |  |                                      | 7,582      |                                                                                     |   |         |   |   | (14,571     | )
|Increase in deposits                                                        |  |                                      | (217       | )                                                                                   |   |         |   |   | (57,397     | )
|                                                                            |  |                                      |            |                                                                                     |   |          |   |   |             |  
|Net Cash Consumed by Operating
Activities                                   |  |                                      | (473,354   | )                                                                                   |   | (213,627 | ) |   | (2,727,705  | )
|                                                                            |  |                                      |            |                                                                                     |   |          |   |   |             |  
|                                                                            |  |                                      |            |                                                                                     |   |          |   |   |             |  
|Cash Flows from Investing Activities:                                       |  |                                      |            |                                                                                     |   |          |   |   |             |  
|Investment in mining rights                                                 |  |                                      | 2,368      |                                                                                     |   |         |   |   | (80,362     | )
|Loan to affiliated company                                                  |  |                                      |           |                                                                                     |   | (40,000  | ) |   | (431,275    | )
|Repayment of loan by the affiliated
company                                 |  |                                      |           |                                                                                     |   |         |   |   | 325,000     |  
|Acquisitions of machinery and equipment                                     |  |                                      | (3,060     | )                                                                                   |   |         |   |   | (126,687    | )
|                                                                            |  |                                      |            |                                                                                     |   |          |   |   |             |  
|Net Cash Consumed by Investing
Activities                                   |  |                                      | (692       | )                                                                                   |   | (40,000  | ) |   | (313,324    | )
|                                                                            |  |                                      |            |                                                                                     |   |          |   |   |             |  
|                                                                            |  |                                      |            |                                                                                     |   |          |   |   |             |  
|Cash Flows From Financing Activities:                                       |  |                                      |            |                                                                                     |   |          |   |   |             |  
|Proceeds from sale of common stock                                          |  |                                      | 400,000    |                                                                                     |   |         |   |   | 3,492,500   |  
|Proceeds from exercises of warrants                                         |  |                                      | 110,000    |                                                                                     |   |         |   |   | 207,500     |  
|                                                                            |  |                                      |            |                                                                                     |   |          |   |   |             |  
|Net Cash Provided by Financing
Activities                                   |  |                                      | 510,000    |                                                                                     |   |         |   |   | 3,700,000   |  
|                                                                            |  |                                      |            |                                                                                     |   |          |   |   |             |  
|                                                                            |  |                                      |            |                                                                                     |   |          |   |   |             |  
|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
periods 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 as filed with the Securities and Exchange Commission on February
23, 2009.

8

---



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

Amendment
No. 1 contained an inaccurate calculation of the value of the options to
purchase common stock granted to officers and directors for services rendered.
The value of the options granted to the Companys officers and directors
reported in Amendment No. 1 was $770,000. Under the fair value based method of
accounting described in Statement of Financial Accounting Standards No. 123R (SFAS No.
123R), the accurate calculation should have been $2,770,000. The
effect is an understatement in value of $2,000,000. Amendment No. 1 also
calculated the investment in mining rights of $95,568 using the average
exchange rate. The investment in mining rights has been recalculated using the
actual exchange rate as of the date of the investment. Using the actual
exchange rate results in the investment of mining rights being $80,363. The
effect is an overstatement in value of $15,205. Amendment No. 1 also
incorrectly applied advances to employees for Company expenses of $41,356 as
miscellaneous receivables resulting in an overstatement of the Companys total
assets by $41,356. This Amendment No. 2 reduces the total current assets by the
$41,356 to correct for the overstatement reported in Amendment No. 1.

The
net effect of these changes resulted in the Companys expenses and operating
loss to increase by $2,056,561, $2,000,000 of which is a result of the
recalculation in stock options granted to the Companys directors and officers
for services rendered, $15,205 of which is a result of the recalculation of
exchange rate for investments in mining rights, and $41,356 of which is the
advances to employees for Company expenses, all of which are non-cash
adjustments.

The financial
statements previously reported in Amendment No. 1 have been restated to correct
these errors, as presented below.

|                                              |  |                                             |            |             |   |              |   |   |             |  
|--------------------------------------------- |  | ------------------------------------------- | ---------- | ----------- | - | ------------ | - | - | ----------- | -
|                                              |  | Consolidated Balance Sheet
 August 31, 2008 |           
|                                              |  |                                             |           
|                                              |  | Previously
 Reported                        |            | Adjustments |   | As
 Restated |  
|                                              |  |                                             |            |             |   |              |  
|                                              |  |                                             |            |             |   |              |  
|Miscellaneous
 receivables                    |  | $                                           | 41,356     |             | $ | (41,356      | ) | $ |            |  
|Total
 current assets                         |  |                                             | 714,898    |             |   | (41,356      | ) |   | 673,542     |  
|                                              |  |                                             |            |             |   |              |   |   |             |  
|                                              |  |                                             |            |             |   |              |   |   |             |  
|Investment
 in mining rights                  |  |                                             | 95,568     |             |   | (15,205      | ) |   | 80,363      |  
|Total
 other assets                           |  |                                             | 152,965    |             |   | (15,205      | ) |   | 137,760     |  
|                                              |  |                                             |            |             |   |              |   |   |             |  
|Total
 Assets                                 |  |                                             | 968,638    |             |   | 56,561       |   |   | 912,077     |  
|                                              |  |                                             |            |             |   |              |   |   |             |  
|                                              |  |                                             |            |             |   |              |   |   |             |  
|Additional
 paid-in-capital                   |  |                                             | 9,061,495  |             |   | 2,000,000    |   |   | 11,061,495  |  
|Deficit
 accumulated during exploration stage |  |                                             | (8,268,356 | )           |   | (2,056,561   | ) |   | (10,324,917 | )
|Total
 stockholders equity                   |  |                                             | 793,624    |             |   | (56,561      | ) |   | 737,062     |  
|                                              |  |                                             |            |             |   |              |   |   |             |  
|Total
 Liabilities and Stockholders Equity   |  | $                                           | 968,638    |             | $ | (56,561      | ) | $ | 912,077     |  
|                                              |  |                                             |            |             |   |              |   |   |             |  

9

---



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

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

|                                          |  |                      |            |             |   |              |   |   |            |  
|----------------------------------------- |  | -------------------- | ---------- | ----------- | - | ------------ | - | - | ---------- | -
|                                          |  | Previously
 Reported |            | Adjustments |   | As
 Restated |  
|                                          |  |                      |            |             |   |              |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Expenses                                  |  | $                    | 1,309,821  |             | $ | 2,056,561    |   | $ | 3,366,382  |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Operating Loss                            |  |                      | (1,309,821 | )           |   | (2,056,561   | ) |   | (3,366,382 | )
|                                          |  |                      |            |             |   |              |   |   |            |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Loss accumulated during exploration stage |  | $                    | (1,305,906 | )           | $ | (2,056,561   | ) | $ | (3,362,467 | )
|                                          |  |                      |            |             |   |              |   |   |            |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Net loss per share                        |  |                      |            |             |   |              |   |   |            |  
|Basic and Diluted                         |  | $                    | (0.03      | )           |   |              |   | $ | (0.07      | )
|                                          |  |                      |            |             |   |              |   |   |            |  

Consolidated Statement of Operations (Cumulativesince inception of exploration stage) to August 31, 2008

|                                          |  |                      |            |             |   |              |   |   |             |  
|----------------------------------------- |  | -------------------- | ---------- | ----------- | - | ------------ | - | - | ----------- | -
|                                          |  | Previously
 Reported |            | Adjustments |   | As
 Restated |  
|                                          |  |                      |            |             |   |              |  
|                                          |  |                      |            |             |   |              |   |   |             |  
|Expenses                                  |  | $                    | 8,283,637  |             | $ | 2,056,561    |   | $ | 10,340,198  |  
|                                          |  |                      |            |             |   |              |   |   |             |  
|Operating Loss                            |  |                      | (8,283,637 | )           |   | (2,056,561   | ) |   | (10,340,198 | )
|                                          |  |                      |            |             |   |              |   |   |             |  
|                                          |  |                      |            |             |   |              |   |   |             |  
|Loss accumulated during exploration stage |  | $                    | (8,268,356 | )           | $ | (2,056,561   | ) | $ | (10,324,917 | )
|                                          |  |                      |            |             |   |              |   |   |             |  

10

---



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

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

|                                                                            |  |                      |            |             |   |              |   |   |            |  
|--------------------------------------------------------------------------- |  | -------------------- | ---------- | ----------- | - | ------------ | - | - | ---------- | -
|                                                                            |  | Previously
 Reported |            | Adjustments |   | As
 Restated |  
|                                                                            |  |                      |            |             |   |              |  
|                                                                            |  |                      |            |             |   |              |  
|Cash Flows From Operations                                                  |  | $                    | (1,305,906 | )           | $ | (2,056,561   | ) | $ | (3,362,467 | )
|Net Loss                                                                    |  |                      |            |             |   |              |   |   |            |  
|Adjustments required to reconcile net loss
 to cash consumed by operations: |  |                      |            |             |   |              |   |   |            |  
|Charges not requiring outlay of cash:                                       |  |                      |            |             |   |              |   |   |            |  
|Stock options issued for services                                           |  |                      | 770,000    |             |   | 2,000,000    |   |   | 2,770,000  |  
|Changes in Assets and Liabilities:                                          |  |                      |            |             |   |              |   |   |            |  
|Decrease (increase) in miscellaneous
 receivable                            |  |                      | (33,003    | )           |   | 41,356       |   |   | 8,353      |  
|                                                                            |  |                      |            |             |   |              |   |   |            |  
|Net Cash Consumed by Operating Activities                                   |  |                      | (458,149   | )           |   | (15,205      | ) |   | (473,354   | )
|                                                                            |  |                      |            |             |   |              |   |   |            |  
|                                                                            |  |                      |            |             |   |              |   |   |            |  
|Cash Flows from Investing Activities:                                       |  |                      |            |             |   |              |   |   |            |  
|Investment in mining rights                                                 |  |                      | (12,837    | )           |   | 15,205       |   |   | 2,368      |  
|                                                                            |  |                      |            |             |   |              |   |   |            |  
|Net Cash Consumed by Investing Activities                                   |  | $                    | (15,897    | )           | $ | 15,205       |   | $ | (692       | )
|                                                                            |  |                      |            |             |   |              |   |   |            |  

11

---



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

Consolidated Statement of Cash Flows (Cumulativesince inception of exploration stage) to August 31, 2008

|                                                                            |  |                      |            |             |   |              |   |   |             |  
|--------------------------------------------------------------------------- |  | -------------------- | ---------- | ----------- | - | ------------ | - | - | ----------- | -
|                                                                            |  | Previously
 Reported |            | Adjustments |   | As
 Restated |  
|                                                                            |  |                      |            |             |   |              |  
|                                                                            |  |                      |            |             |   |              |  
|Net Loss                                                                    |  | $                    | (8,268,356 | )           | $ | (2,056,561   | ) | $ | (10,324,917 | )
|                                                                            |  |                      |            |             |   |              |   |   |             |  
|Adjustments required to reconcile net loss
 to cash consumed by operations: |  |                      |            |             |   |              |   |   |             |  
|Charges not requiring outlay of cash:                                       |  |                      |            |             |   |              |   |   |             |  
|Stock options issued for services                                           |  |                      | 770,000    |             |   | 2,000,000    |   |   | 2,770,000   |  
|Changes in Assets and Liabilities:                                          |  |                      |            |             |   |              |   |   |             |  
|Decrease (increase) in miscellaneous
 receivable                            |  |                      | (44,340    | )           |   | 41,356       |   |   | (2,984      | )
|                                                                            |  |                      |            |             |   |              |   |   |             |  
|Net Cash Consumed by Operating Activities                                   |  |                      | (2,712,500 | )           |   | (15,205      | ) |   | (2,727,705  | )
|                                                                            |  |                      |            |             |   |              |   |   |             |  
|Cash Flows from Investing Activities:                                       |  |                      |            |             |   |              |   |   |             |  
|Investment in mining rights                                                 |  |                      | (80,567    | )           |   | (205         | ) |   | (80,362     | )
|                                                                            |  |                      |            |             |   |              |   |   |             |  
|Net Cash Consumed by Investing Activities                                   |  |                      | (313,529   | )           |   | (205         | ) |   | (313,324    | )
|                                                                            |  |                      |            |             |   |              |   |   |             |  
|Cash Flows from Financing Activities:                                       |  |                      |            |             |   |              |   |   |             |  
|Proceeds from exercises of warrants                                         |  |                      | 192,500    |             |   | 15,000       |   |   | 207,500     |  
|                                                                            |  |                      |            |             |   |              |   |   |             |  
|Net Cash Provided by Financing Activities                                   |  | $                    | 3,685,000  |             | $ | 15,000       |   | $ | 3,700,000   |  
|                                                                            |  |                      |            |             |   |              |   |   |             |  

12

---



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

3.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Exploration Stage Accounting

The Company is an
exploration stage company, as defined in Statement of Financial Accounting
Standards (SFAS) No. 7 and Industry Guide # 7 of the Securities and Exchange
Commission. Generally accepted accounting principles govern the recognition of
revenue by an exploration stage enterprise and the accounting for costs and
expenses. From inception to August 31, 2008, the Company has been in the
exploration stage and all its efforts have been devoted to acquiring mining
rights, drilling, mapping, and assaying. No revenue has been realized through
August 31, 2008.

Fixed Assets

Fixed assets are recorded at
cost. Depreciation is calculated on the straight line basis, based on the
useful or productive lives of assets, ranging from three years for computer
equipment to seven years for machinery and equipment.

Investments in Mining Rights

Mining rights held for
development are recorded at the cost of the rights, plus related acquisition
costs. These costs will be amortized when extraction begins.

Mine Development Costs

Mine development costs
include engineering and metallurgical studies, drilling and other related costs
to delineate an ore body, the removal of overburden to initially expose an ore
body at open pit surface mines and the building of access ways, shafts, lateral
access, drifts, ramps and other infrastructure at underground mines. Costs
incurred before mineralization are classified as proven and probable reserves
and expensed as mine development costs at the point the Company reaches its
operating stage (mineralization), such costs will be capitalized and will be
written off as depletion expense as the minerals are mined.

Net Loss per Share

The Company computes net
loss per common share in accordance with SFAS No. 128, Earnings Per Share and
SEC Staff Accounting Bulletin No. 98 (SAB 98).
Under the provisions of SFAS No. 128 and SAB 98, basic and diluted net loss per
common share are computed by dividing the net loss available to common
shareholders for the period by the weighted average number of shares of common
stock and common stock equivalents outstanding during the period.

At August 31, 2008, there
were warrants outstanding to purchase 4,727,500 shares of common stock and
options to purchase 9,000,000 shares of common stock. At August 31, 2007, there
were warrants outstanding to purchase 131,250 shares of common stock. The share
equivalents of these were not included in the calculation of average shares
outstanding because their effect would have been anti-dilutive because the
Company incurred a loss from operations.

Foreign Currency Translation

The assets of the Companys
Mexican Subsidiary are in Mexico. The Mexican Subsidiary depends on the
parents ability to raise cash and transfer it to the subsidiary to meet its
operating cash needs. Therefore, the Companys management has determined that
the functional currency is the US dollar. As such, the Company remeasures its
subsidiary financial statements into the US dollar functional currency. Any
gains or losses are reflected on the Statements of Operations.

13

---



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.

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

During the
quarter ended August 31, 2008, 9,000,000 options to purchase common stock were
issued for services, valued at $2,770,000.

New Accounting
Pronouncements

In September
2006, the Financial Accounting Standard Board (FASB) issued SFAS 157 Fair Value Measurement
 (SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. In February 2008, the FASB issued FASB Staff Positions
(FSP)
157-1, which amends SFAS 157 to remove leasing transactions accounted for under
SFAS 13, Accounting for Leases and FSP 157-2, which deferred the effective
date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities that
are recognized or disclosed at fair value in the financial statements on a
nonrecurring basis to fiscal years beginning after November 15, 2008. The
Company adopted SFAS 157 on June 1, 2008. The adoption of SFAS 157 for
financial assets and liabilities did not have a material impact on the
Companys consolidated financial statements because the Company does not
maintain investments or derivative instruments. The Company does not believe
the adoption of SFAS 157 for nonfinancial assets and liabilities, effective
June 1, 2009, will have a material impact on their consolidated financial
statements.

In February
2007, FASB issued SFAS 159, The Fair Value Option for Financial Assets and
Financial Liabilities, (SFAS 159), which amends the accounting for
assets and liabilities in financial statements in accordance with SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities. SFAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value that are not currently required to be measured at
fair value. This Statement does not affect any existing accounting literature
that requires certain assets and liabilities to be carried at fair value.
Entities that choose the fair value option will recognize unrealized gains and
losses on items for which the fair value option was elected in earnings at each
subsequent reporting date. The Company adopted SFAS 159 on June 1, 2008. The
Company has currently chosen not to elect the fair value option for any items
that are not already required to be measured at fair value in accordance with
accounting principles generally accepted in the United States.

The Company
does not anticipate the adoption of other recently issued accounting
pronouncements will have a significant effect on Companys results of
operations, financial position, or cash flows.

4.          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. In addition, during the quarter ended August 31, 2008, the
Company issued 440,000 shares of common stock for $110,000, upon exercise of a
warrant.

14

---



5.          WARRANTS

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 |  
|                                                                        |  |  |           |  

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.

6.          STOCK OPTIONS

In December
2007, the Companys Board of Directors approved the 2007 Stock Option Plan (the
Plan)
and in August 2008, the shareholders of the Company approved the Plan. Under
the Plan, options to purchase up to 20,000,000 shares of Company common stock
may be issued to officers, directors, key employees and consultants. 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. The value of the option grants of $2,770,000 was
charged to expense during August 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 | 
|                                                          |  |              |           |                      |   |      | 

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

|                                                      |  |   |           |  
|----------------------------------------------------- |  | - | --------- | -
|Dividend yield                                        |  |   | 0         | %
|Expected volatility                                   |  |   | 134  141 | %
|Risk free interest rate                               |  |   | 2.7  3.4 | %
|Expected term (in years)                              |  |   | 5         |  
|Weighted average fair value of stock
 options granted |  | $ | 0.36      |  

7.          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, has a deficit accumulated during the
exploration stage of $10,324,917, 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.

15

---



8.          SUBSEQUENT EVENTS

A.          Convertible
Promissory Notes Payable.

As of February
2009, the Companys Board of Directors issued $500,000 in convertible
promissory notes bearing simple interest at an annual rate of 16%. The notes
may be converted into the common stock of the Company at the option of the
holder or automatically, each under certain circumstances as described below:

Any holder of
the notes has the option to convert the principal and outstanding interest
under such holders notes into shares of the Companys common stock at an
exercise price of $0.30 per share at any time after June 30, 2009, subject to
certain restrictions if the holder has been advised that (a) the Company is
actively negotiating its next financing or (b) the Company has entered into a
definitive agreement providing for a change of control.

The notes will
automatically convert into shares of the Companys common stock at a conversion
price of $0.30 per share if the Company completes any financing that results in
proceeds of at least $10,000,000 to the Company, or upon the occurrence of a
change in control of the Company.

The notes
mature on the earliest of (a) the date of an automatic conversion or (b)
December 31, 2010.

In February
2009, the Companys Board of Directors approved the issuance of up to
$1,500,000 in convertible promissory notes on the same terms as those described
above. As of May 11, 2009, the Company had issued convertible promissory notes
with an aggregate principal amount of $180,000 to three accredited investors.

B.          Common
Stock Issuances.

During the
quarter ended November 30, 2008, the Companys Board of Directors approved the
issuance in the first calendar quarter of 2009 of shares of common stock in lieu
of cash compensation to directors and officers for services previously
performed. Subsequent to the Board action taken during the quarter ended
November 30, 2008 that approved issuing 250,000 shares of common stock to each
of the board members in lieu of cash compensation, certain facts came to the
attention of the Board that indicated certain of the board members had failed
to provide the services to the Company for which those compensatory shares were
approved. In light of those facts, the approval to issue those 500,000
compensatory shares to those board members were rescinded. The related expense
for these services will be reversed in the fourth quarter. The remaining shares
of common stock approved for issuance in lieu of cash compensation for services
performed were issued in the first calendar quarter of 2009.

C.          Shareholder
Rights Plan.

In December
2005, the Board of Directors implemented a stockholder rights plan by issuing
preferred stock to certain board members that would be convertible into common
stock at ten common shares for one preferred share if a possible takeover
occurred. A Certificate of Designation setting forth the rights, preferences,
and privileges of the preferred stock however was never filed with the
Secretary of State of the State of Delaware. At a Board Meeting held in
February 2009, the Board of Directors approved terminating this stockholder
rights plan.

On March 19,
2009, the Board of Directors adopted a new stockholder rights plan under which
its stockholders will receive a dividend in the form of preferred stock
purchase rights. The Certificate of Designation setting forth the rights,
preferences and privileges of the preferred stock was filed with the Secretary
of State of the State of Delaware on March 18, 2009. Under the Rights Agreement
entered into on March 17, 2009, the rights will be distributed at the rate of
one right for each share of common stock owned by stockholders of record as of
the close of business on April 10, 2009. Each right will allow the holder to
purchase one one-thousandth of a share of Series A Preferred Stock at an
initial purchase price of $10.00, upon the occurrence of certain triggering
events described below. The purchase price and the number of shares of
preferred stock are subject to adjustment. The rights will expire at the close
of business on March 17, 2010 unless earlier redeemed or exchanged. The holder
of a right will have no additional rights as a stockholder of the Company,
including the right to vote or to receive dividends, unless that right is
exercised.

16

---



The rights are
not immediately exercisable. Subject to the terms and conditions of the Rights
Agreement, they will become exercisable ten business days after a person or
group acquires, or commences a tender or exchange offer which would lead to the
acquisition of beneficial ownership of, 15% or more of the outstanding common
stock, subject to prior redemption or exchange. Once a group or person acquires
beneficial ownership of 15% or more of the outstanding common stock, subject to
the terms and conditions of the Rights Agreement, each right not owned by that
person or group or certain related parties will entitle its holder to purchase,
at the rights then-current purchase price, units of Series A Preferred Stock,
or at the option of the Company, shares of common stock or cash, property or
other securities of the Company having a market value of two times the purchase
price.

Stockholders
are not required to take any action to receive the rights distribution. Until
the rights become exercisable, outstanding stock certificates will represent
both shares of common stock and the rights, and the rights will trade only with
the shares.

The foregoing
description of the Rights Agreement does not purport to be complete and is qualified
in its entirety by reference to the full text of the Rights Agreement, which is
contained in the Registration Statement on Form 8-A that was filed with the
Securities and Exchange Commission on March 19, 2009.

D.          Miscellaneous

It came to the
attention of certain officers of the Company that there may have been some
accounting or cash management improprieties related to operations of the
Companys Mexican subsidiary. After a review of the facts and some
investigation into the matter, the Company determined that approximately $7,800
in cash had been improperly diverted from the Companys bank accounts. The
Company made adjustments to correct this error as of November 30, 2008. The
Company is continuing its review of the internal controls of the Mexican
subsidiary. Consequently, the Company may determine that additional amounts may
require one or more adjustments to the loss or gain of the Company. These
amounts, to the extent they exist, have not yet been determined and may or may
not be material.

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 Amended Form 10-K/A filed with the SEC on
February 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 concessions owned by us, 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.

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All of the
Companys plans are predicated on the Companys ability to raise sufficient
capital to complete them which we cannot 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.

During the
three month period ending August 31, 2008, we invested approximately $306,925
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. These conditions raise substantial doubt about our ability to
continue as a going concern.

The Company
had total assets in the amount of $912,077 with a cash balance of $658,971 as
of August 31, 2008, as compared to $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.

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We incurred
operating expenses in the amount of $3,366,382 and $254,044 during the quarters
ended August 31, 2008 and 2007, respectively. We granted options and stock in
lieu of compensation valued at $2,776,150 during the quarter ended August 31,
2008 compared to none in the comparable period for 2007. Geological expenses
and salaries paid to consultants increased by $160,421 and $12,357,
respectively during the quarter ended August 31, 2008 compared to the
comparable period for 2007. Additional office expenses, depreciation, insurance
and other expenses in Mexico increased by $163,410 during the quarter ended
August 31, 2008 compared to the comparable period in 2007 due to the general
construction of the metallurgical laboratory.

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 as of August
31, 2008.

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, our controls design was adequate for
financial disclosures required for the preparation of the Form 10-Q filing.
However, due to a lack of reporting system from the subsidiary to the parent
company and weakness in the parents internal controls around the accounting
for share-based compensation, the controls were not operating effectively. The
certifying officers have taken note of the reasons for the material weaknesses.
The certifying officers have also taken additional measures to improve the
financial reporting and oversight of the subsidiary as well as the preparation
and review of share-based compensation in accordance with SFAS No. 123R.

Changes in Internal
Control over Financial Reporting

There were no changes in our
internal control over financial reporting during the first quarter of fiscal
year 2009 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

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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/ M. Jack
 Kugler                                             | 
|                                                                | 
|M. Jack
 Kugler                                                 | 
|Chief
 Executive Officer and Chairman of the Board of Directors | 
|May 14, 2009                                                    | 
|                                                                | 
|/s/ Jesus Oliveras                                              | 
|                                                                | 
|Jesus Oliveras                                                  | 
|Chief Financial Officer                                         | 
|May 14, 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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