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

FORM 10-Q

(Mark One)

|  |                                                                                          
|- | -----------------------------------------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT
  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February
28, 2009

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 oNo 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 April 3,
2009

---



NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report
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 as filed with the U.S. Securities and Exchange Commission
(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 February
28, 2009, and for the three and nine month periods ended February 28, 2009 and
February 29, 2008, 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 our
amended Form 10-K/A for the fiscal 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.

2

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U.S. Precious Metals, Inc.
Form 10-Q

Table of Contents

Part I  Financial Information

|                                                                                                                                                                                                                                      |   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --
|Item 1. Consolidated Financial Statements                                                                                                                                                                                             |   
|                                                                                                                                                                                                                                      |   
|Consolidated Balance Sheets at February 28, 2009
  (unaudited) and at May 31, 2008 (audited).                                                                                                                                         | 4 
|                                                                                                                                                                                                                                      |   
|Consolidated Statements of Operations (unaudited) for
  the three month periods ended February 28, 2009 and February 29, 2008, and
  for the period January 21, 1998 (date of inception of exploration stage) to
  February 28, 2009. | 5 
|Consolidated Statements of Operations (unaudited) for
  the nine month periods ended February 28, 2009 and February 29, 2008, and for
  the period January 21, 1998 (date of inception of exploration stage) to
  February 28, 2009.  | 6 
|Consolidated Statements of Cash Flows (unaudited) for
  the nine month periods ended February 28, 2009 and February 29, 2008 and for
  the period January 21, 1998 (date of inception of exploration stage) to
  February 28, 2009.   | 7 
|Notes to Financial Statements
(unaudited).                                                                                                                                                                                            | 8 
|                                                                                                                                                                                                                                      |   
|Item 2. Managements Discussion and
  Analysis of Financial Condition and Results of Operations                                                                                                                                       | 13
|                                                                                                                                                                                                                                      |   
|Item 3. Quantitative and Qualitative
  Disclosures About Market Risk                                                                                                                                                                  | 16
|                                                                                                                                                                                                                                      |   
|Item 4. Controls and Procedures                                                                                                                                                                                                       | 16
|                                                                                                                                                                                                                                      |   
|Part II  Other
Information                                                                                                                                                                                                           |   
|                                                                                                                                                                                                                                      |   
|Item 1. Legal Proceedings                                                                                                                                                                                                             | 17
|                                                                                                                                                                                                                                      |   
|Item 1A. Risk Factors                                                                                                                                                                                                                 | 17
|                                                                                                                                                                                                                                      |   
|Item 2. Unregistered Sales of Equity
  Securities and use of Proceeds                                                                                                                                                                 | 17
|                                                                                                                                                                                                                                      |   
|Item 3. Defaults Upon Senior
  Securities                                                                                                                                                                                             | 18
|                                                                                                                                                                                                                                      |   
|Item 4. Submission of Matters to a
  Vote of Security Holders                                                                                                                                                                         | 18
|                                                                                                                                                                                                                                      |   
|Item 5. Other Information                                                                                                                                                                                                             | 18
|                                                                                                                                                                                                                                      |   
|Item 6. Exhibits                                                                                                                                                                                                                      | 19
|                                                                                                                                                                                                                                      |   
|Signature Page                                                                                                                                                                                                                        | 20

3

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

|                                                                        |  |                   |             |              |   |            |  
|----------------------------------------------------------------------- |  | ----------------- | ----------- | ------------ | - | ---------- | -
|                                                                        |  | February 28, 2009 |             | May 31, 2008 |  
|ASSETS                                                                  |  | (Unaudited)       |             | (Audited)    |  
|                                                                        |  |                   |             |              |  
|Current Assets:                                                         |  |                   |             |              |   |            |  
|Cash                                                                    |  | $                 | 141,202     |              | $ | 623,017    |  
|Miscellaneous receivables                                               |  |                   |            |              |   | 8,353      |  
|Prepaid expenses                                                        |  |                   | 22,823      |              |   | 22,153     |  
|                                                                        |  |                   |             |              |   |            |  
|Total current assets                                                    |  |                   | 164,025     |              |   | 653,523    |  
|                                                                        |  |                   |             |              |   |            |  
|                                                                        |  |                   |             |              |   |            |  
|Fixed Assets:                                                           |  |                   |             |              |   |            |  
|Vehicles                                                                |  |                   | 39,429      |              |   | 39,429     |  
|Machinery and equipment                                                 |  |                   | 91,840      |              |   | 84,199     |  
|                                                                        |  |                   |             |              |   |            |  
|Total fixed assets                                                      |  |                   | 131,269     |              |   | 123,628    |  
|Less: accumulated depreciation                                          |  |                   | (31,352     | )            |   | (19,380    | )
|                                                                        |  |                   |             |              |   |            |  
|Net fixed assets                                                        |  |                   | 99,917      |              |   | 104,248    |  
|                                                                        |  |                   |             |              |   |            |  
|                                                                        |  |                   |             |              |   |            |  
|Other Assets:                                                           |  |                   |             |              |   |            |  
|Investment in mining rights                                             |  |                   | 213,284     |              |   | 82,730     |  
|Deposits                                                                |  |                   | 5,160       |              |   | 57,180     |  
|Total other assets                                                      |  |                   | 218,444     |              |   | 139,910    |  
|Total Assets                                                            |  | $                 | 482,386     |              | $ | 897,681    |  
|                                                                        |  |                   |             |              |   |            |  
|LIABILITIES AND
  STOCKHOLDERS EQUITY (DEFICIENCY)                     |  |                   |             |              |   |            |  
|Current Liabilities:                                                    |  |                   |             |              |   |            |  
|Accounts payable                                                        |  | $                 | 690,736     |              | $ | 13,490     |  
|Accrued expenses                                                        |  |                   | 178,791     |              |   | 57,282     |  
|Accrued salaries                                                        |  |                   | 5,797       |              |   | 13,527     |  
|                                                                        |  |                   |             |              |   |            |  
|Total current liabilities                                               |  |                   | 875,324     |              |   | 84,299     |  
|                                                                        |  |                   |             |              |   |            |  
|                                                                        |  |                   |             |              |   |            |  
|Other Liabilities:                                                      |  |                   |             |              |   |            |  
|Convertible notes payable                                               |  |                   | 508,866     |              |   |           |  
|                                                                        |  |                   |             |              |   |            |  
|Total other liabilities                                                 |  |                   | 508,866     |              |   |           |  
|                                                                        |  |                   |             |              |   |            |  
|                                                                        |  |                   |             |              |   |            |  
|Stockholders Equity (Deficiency)                                       |  |                   |             |              |   |            |  
|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 51,105,979 and
  47,227,979 shares, respectively |  |                   | 511         |              |   | 472        |  
|Additional paid in capital                                              |  |                   | 12,419,619  |              |   | 7,775,360  |  
|Deficit accumulated during exploration
  stage                          |  |                   | (13,321,934 | )            |   | (6,962,450 | )
|                                                                        |  |                   |             |              |   |            |  
|Total stockholders equity
(deficiency)                                 |  |                   | (901,804    | )            |   | 813,382    |  
|                                                                        |  |                   |             |              |   |            |  
|Total Liabilities and Stockholders Equity
  (Deficiency)               |  | $                 | 482,386     |              | $ | 897,681    |  
|                                                                        |  |                   |             |              |   |            |  

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

4

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING EXPLORATION STAGE
(Unaudited)

|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|------------------------------------------------------------------ |  | ------------------------- | ---------- | -------------------- | - | --------------------- | - | ------------------ | ----------- | -
|                                                                   |  |                           |            |                      |   |                       |   | January 21, 1998   |            
|                                                                   |  |                           |            |                      |   |                       |   | (Date of Inception |            
|                                                                   |  | Three Month Periods Ended |            | of Exploration Stage |  
|                                                                   |  | February 28, 2009         |            | February 29, 2008    |   | to February 28, 2009) |  
|                                                                   |  |                           |            |                      |   |                       |  
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|Revenues                                                           |  | $                         |           |                      | $ |                      |   | $                  |            |  
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|Expenses                                                           |  |                           | 736,695    |                      |   | 3,016,487             |   |                    | 13,329,925  |  
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|Operating
  Loss                                                   |  |                           | (736,695   | )                    |   | (3,016,487            | ) |                    | (13,329,925 | )
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|Other
  Income (Expense):                                          |  |                           |            |                      |   |                       |   |                    |             |  
|Interest income                                                    |  |                           | 137        |                      |   | 1,807                 |   |                    | 17,843      |  
|Interest expense                                                   |  |                           | (8,866     | )                    |   |                      |   |                    | (9,852      | )
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|Loss
  accumulated during exploration
  stage                      |  | $                         | (745,424   | )                    | $ | (3,014,680            | ) | $                  | (13,321,934 | )
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|Net
  Loss per Share Basic and Diluted                             |  | $                         | (0.01      | )                    | $ | (0.08                 | ) |                    |             |  
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  
|Weighted
  Average Number of Shares Outstanding -Basic and Diluted |  |                           | 51,090,423 |                      |   | 36,007,118            |   |                    |             |  
|                                                                   |  |                           |            |                      |   |                       |   |                    |             |  

The accompanying notes are an integral part of these financial
statements

5

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATION AND DEFICIT
ACCUMULATED DURING EXPLORATION STAGE
(Unaudited)

|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|------------------------------------------------------------------ |  | ------------------------ | ---------- | -------------------- | - | --------------------- | - | ------------------ | ----------- | -
|                                                                   |  |                          |            |                      |   |                       |   | January 21, 1998   |            
|                                                                   |  |                          |            |                      |   |                       |   | (Date of Inception |            
|                                                                   |  | Nine Month Periods Ended |            | of Exploration Stage |  
|                                                                   |  | February 28, 2009        |            | February 29, 2008    |   | to February 28, 2009) |  
|                                                                   |  |                          |            |                      |   |                       |  
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|Revenues                                                           |  | $                        |           |                      | $ |                      |   | $                  |            |  
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|Expenses                                                           |  |                          | 6,356,109  |                      |   | 3,314,709             |   |                    | 13,329,925  |  
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|Operating
  Loss                                                   |  |                          | (6,356,109 | )                    |   | (3,314,709            | ) |                    | (13,329,925 | )
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|Other
  Income (Expense):                                          |  |                          |            |                      |   |                       |   |                    |             |  
|Interest income                                                    |  |                          | 5,491      |                      |   | 2,567                 |   |                    | 17,843      |  
|Interest expense                                                   |  |                          | (8,866     | )                    |   |                      |   |                    | (9,852      | )
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|Loss
  accumulated during exploration
  stage                      |  | $                        | (6,359,484 | )                    | $ | (3,312,142            | ) | $                  | (13,321,934 | )
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|Net
  Loss per ShareBasic and Diluted                              |  | $                        | (0.13      | )                    | $ | (0.10                 | ) |                    |             |  
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  
|Weighted
  Average Number of Shares Outstanding -Basic and Diluted |  |                          | 49,483,559 |                      |   | 33,321,945            |   |                    |             |  
|                                                                   |  |                          |            |                      |   |                       |   |                    |             |  

The accompanying notes are an integral part of these financial
statements

6

---



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

|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|-------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ------------------ | - | --------------------- | - | --------------------- | ----------- | -
|                                                                                 |  |                          |            |                    |   |                       |   | January 21, 1998      |            
|                                                                                 |  |                          |            |                    |   |                       |   | (Date of Inception of |            
|                                                                                 |  | Nine Month Periods Ended |            | Exploration Stage) |  
|                                                                                 |  | February 28, 2009        |            | February 29, 2008  |   | to February 28, 2009) |  
|                                                                                 |  |                          |            |                    |   |                       |  
|Cash Flows From Operations                                                       |  |                          |            |                    |   |                       |   |                       |             |  
|Net Loss                                                                         |  | $                        | (6,359,484 | )                  | $ | (3,312,142            | ) | $                     | (13,321,934 | )
|Adjustments required to reconcile net loss
  to net cash consumed by operations: |  |                          |            |                    |   |                       |   |                       |             |  
|Charges not requiring outlay of cash:                                            |  |                          |            |                    |   |                       |   |                       |             |  
|Depreciation                                                                     |  |                          | 11,972     |                    |   | 4,419                 |   |                       | 31,352      |  
|Common stock issued for services                                                 |  |                          | 1,289,300  |                    |   | 2,846,400             |   |                       | 5,875,132   |  
|Stock options issued for services                                                |  |                          | 2,770,000  |                    |   |                      |   |                       | 2,770,000   |  
|Bad debt write off                                                               |  |                          |           |                    |   |                      |   |                       | 109,259     |  
|Accrued interest on convertible loans                                            |  |                          | 8,866      |                    |   |                      |   |                       | 8,866       |  
|Changes in assets and liabilities:                                               |  |                          |            |                    |   |                       |   |                       |             |  
|Increase in accounts payable                                                     |  |                          | 677,246    |                    |   | 44,993                |   |                       | 690,736     |  
|Increase in accrued expenses                                                     |  |                          | 113,777    |                    |   | 17,902                |   |                       | 184,587     |  
|Decrease (Increase) in miscellaneous
  receivable                                |  |                          | 8,353      |                    |   | (4,851                | ) |                       | (2,985      | )
|(Increase) in prepaid expenses                                                   |  |                          | (670       | )                  |   | (28,380               | ) |                       | (22,823     | )
|(Increase) decrease in deposits                                                  |  |                          | 52,020     |                    |   |                      |   |                       | (5,160      | )
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|Net Cash Consumed by
  Operating Activities                                      |  |                          | (1,428,620 | )                  |   | (431,659              | ) |                       | (3,682,970  | )
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|Cash Flows from Investing
  Activities:                                          |  |                          |            |                    |   |                       |   |                       |             |  
|Investment in mining rights                                                      |  |                          | (130,554   | )                  |   | (25,501               | ) |                       | (213,284    | )
|Loan to affiliated company                                                       |  |                          |           |                    |   | (40,000               | ) |                       | (431,275    | )
|Repayment of loan by the affiliated
company                                      |  |                          |           |                    |   |                      |   |                       | 325,000     |  
|Acquisition of machinery and equipment                                           |  |                          | (7,641     | )                  |   | (68,411               | ) |                       | (131,269    | )
|Other deposits                                                                   |  |                          |           |                    |   | (360                  | ) |                       |            |  
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|Net Cash Consumed by
  Investing Activities                                      |  |                          | (138,195   | )                  |   | (134,272              | ) |                       | (450,828    | )
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|Cash Flows From Financing
  Activities:                                          |  |                          |            |                    |   |                       |   |                       |             |  
|Proceeds from sale of common stock                                               |  |                          | 400,000    |                    |   | 1,417,500             |   |                       | 3,492,500   |  
|Proceeds from convertible notes                                                  |  |                          | 500,000    |                    |   |                      |   |                       | 500,000     |  
|Proceeds from exercise of warrants                                               |  |                          | 185,000    |                    |   | 20,000                |   |                       | 282,500     |  
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|Net Cash Provided by
  Financing Activities                                      |  |                          | 1,085,000  |                    |   | 1,437,500             |   |                       | 4,275,000   |  
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|Net increase (decrease) in cash balance                                          |  |                          | (481,815   | )                  |   | 871,569               |   |                       | 141,202     |  
|Cash balance, beginning of period                                                |  |                          | 623,017    |                    |   | 277,917               |   |                       |            |  
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  
|Cash balance, end of period                                                      |  | $                        | 141,202    |                    | $ | 1,149,486             |   | $                     | 141,202     |  
|                                                                                 |  |                          |            |                    |   |                       |   |                       |             |  

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

7

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2009
(Unaudited)

1. BASIS OF PRESENTATION

The unaudited
interim consolidated financial statements of U.S. Precious Metals, Inc. and its
subsidiary (the Company) as of
February 28, 2009 and May 31, 2008, and for the three and nine month periods
ended February 28, 2009 and February 29, 2008, 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 comparable periods. The results of operations for the nine month
period ended February 28, 2009 are not necessarily indicative of the results to
be expected for the full fiscal year ending May 31, 2009.

The results
for the three and nine month period ended February 28, 2009 are not necessarily
indicative of the results of operations for the full year. 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

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U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2009
(Unaudited)

2. 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 February 28, 2009, 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
February 28, 2009.

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 February 28, 2009, there
were warrants outstanding to purchase 4,427,500 shares of common stock, options
to purchase 8,000,000 shares of common stock and $500,000 of convertible notes,
convertible at $0.30 per share. At February 29, 2008, there were warrants
outstanding to purchase 4,907,500 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.

9

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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.

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 three month
period ended November 30, 2008, the Companys Board of Directors approved the
issuance in the first calendar quarter of 2009 of 2,300,000 shares of its
common stock to officers, directors, and former directors as compensation for
services; these shares were valued at $1,265,000 and recorded in the Companys
second fiscal quarter. As of February 28, 2009, the shares have not been
issued; however, the value of the shares has been included as part of
stockholders deficiency.

During the quarter ended
February 29, 2008, the Company issued 3,498,000 shares for services valued at
$2,798,400.

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.

3. CONVERTIBLE NOTES PAYABLE

During the
three month period ending February 28, 2009, the Company 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:

10

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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.

Interest
expense of $8,866 has been accrued as of February 28, 2009 and included with
the Notes and is payable upon maturity.

4. COMMON STOCK

During the
quarter and nine months ended February 28, 2009, the Company issued 100,000,
and 740,000, respectively, shares of common stock for $25,000, and $185,000,
respectively, upon exercise of a warrant.

5.
WARRANTS

The following
table summarizes warrant activity during the nine month period ended February
28, 2009.

|                                                                          |  |  |           |  
|------------------------------------------------------------------------- |  |  | --------- | -
|Warrants
  outstanding May 31, 2008                                       |  |  | 4,767,500 |  
|                                                                          |  |  |           |  
|Warrants
  Issued during the nine month period ended February 28, 2009    |  |  | 400,000   |  
|Warrants
  exercised during the nine month period ended February 28, 2009 |  |  | (740,000  | )
|Warrants
  expired during the nine month period ended February 28, 2009   |  |  |          |  
|                                                                          |  |  |           |  
|Warrants
  outstanding February 28, 2009                                  |  |  | 4,427,500 |  
|                                                                          |  |  |           |  

As of February
28, 2009, there were warrants to purchase 4,427,500 shares of common stock
outstanding. These warrants are exercisable in the aggregate for 3,627,500
shares of common stock at $0.25 per share and 900,000 shares of common stock at
$1.00 per share. All warrants expire by their terms one year from the date of
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. However, the Companys Quarterly Report on Form 10-Q for
the quarter ended August 31, 2008 (the August
2008 Form 10-Q) reflects a charge to expense of $770,000. This
change is being evaluated by the Companys current and previous accounting
firms and the Company will make a determination as to whether a restatement of
the August 2008 Form 10-Q and subsequent Quarterly Reports on Form 10-Q will be
required to reflect this change.

11

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The following
shows the activity of Company options during the nine month period ended
February 28, 2009:

|                                                                         |  |                |            |                                   |   |      | 
|------------------------------------------------------------------------ |  | -------------- | ---------- | --------------------------------- | - | ---- | 
|                                                                         |  | #
  of Options |            | Weighted-Average
  Exercise Price |  
|                                                                        
|Options outstanding May 31,
  2008                                       |  |                |           |                                   |   |     | 
|Options granted during the
  nine month period ended February 28, 2009   |  |                | 9,000,000  |                                   | $ | 0.36 | 
|Options cancelled during
  the nine month period ended February 28, 2009 |  |                | (1,000,000 | )                                 | $ | 0.21 | 
|                                                                         |  |                |            |                                   |   |      | 
|Options outstanding as of
  February 28, 2009                            |  |                | 8,000,000  |                                   | $ | 0.38 | 
|                                                                         |  |                |            |                                   |   |      | 

7. RELATED PARTY TRANSACTIONS

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. As of February 28, 2009, these shares had not yet been issued. The
following schedule shows the detail.

|                      |  |                     |  |                |  |          
|--------------------- |  | ------------------- |  | -------------- |  | ---------
|Last Name, First Name |  | Title               |  | Date
  Granted |  | Shares   
|                     
|                      |  |                     |  |                |  |          
|Astore, Robert        |  | Former Board Member |  | 10/31/2008     |  | 250,000  
|Baer, Sheldon         |  | Board Member        |  | 10/31/2008     |  | 250,000  
|Burney, David         |  | President & Officer |  | 10/31/2008     |  | 200,000  
|Garcia, Jose          |  | Board Member        |  | 10/31/2008     |  | 250,000  
|Kugler, Michael Jack  |  | Board Member        |  | 10/31/2008     |  | 250,000  
|Oliveras, Jesus       |  | CFO & Officer       |  | 10/31/2008     |  | 100,000  
|Pane, Jerry           |  | Board Member        |  | 10/31/2008     |  | 250,000  
|Russell, Brian        |  | Board Member        |  | 10/31/2008     |  | 250,000  
|Toscano, Peter        |  | Board Member        |  | 10/31/2008     |  | 250,000  
|Wagenti, Jack         |  | Former Board Member |  | 10/31/2008     |  | 250,000  
|                      |  |                     |  |                |  |          
|                      |  |                     |  |                |  | 2,300,000
|                      |  |                     |  |                |  |          

No related
party transactions occurred in the comparable period of 2007.

8. 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 $13,321,934, 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.

9. SUBSEQUENT EVENTS

A. Convertible
Notes.

In February
2009, the Companys Board of Directors approved the issuance of up to
$1,500,000 in convertible notes on the same terms as those described in Note 3.

As of April
10, 2009, the Company had issued convertible notes with an aggregate principal
amount of $145,000 to two accredited investors.

B. Common
Stock Issuances.

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.

12

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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.

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.

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,
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.

13

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

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

During the
nine month period ending February 28, 2009, we invested approximately $928,126
in our exploration drilling campaign and the development of our Mexican
operations. The Company commissioned and received an NI 43-101 Compliant Ore
Reserve Report (the 43-101 Report) from Applied Minerals, Inc. 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. The proven and probable reserves reflected in the 43-101
Report relate to and have been developed from core samples retrieved from ten
holes located on less a five acre area of the 37,000 acre concessions, leaving
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.

Data available
to the Company from the 43-101 Report dated as of October 30, 2008 shows the following
estimated reserves and related values using market pricing on April 9, 2009:

|                   |  |                       |           |                |   |                              |  |   |             | 
|------------------ |  | --------------------- | --------- | -------------- | - | ---------------------------- |  | - | ----------- | 
|                   |  | As
  of April 9, 2009 |          
|                   |  |                       |          
|Proven Reserves:   |  | Amount                |           | Market
  Price |   | Total
  Value of 
  Reserves | 
|                   |  |                       |           |                |   |                              | 
|Gold (Au) (oz.)    |  |                       | 57,432    |                | $ | 883.00                       |  | $ | 50,712,456  | 
|Silver (Ag) (oz.)  |  |                       | 403,532   |                | $ | 12.18                        |  | $ | 4,915,019   | 
|Copper (Cu) (tons) |  |                       | 3,057     |                | $ | 4,140.00                     |  | $ | 12,655,980  | 
|                   |  |                       |           |                |   |                              |  |   |             | 
|Total              |  |                       |           |                |   |                              |  | $ | 68,283,455  | 
|                   |  |                       |           |                |   |                              |  |   |             | 
|                   |  |                       |           |                |   |                              |  |   |             | 
|                   |  |                       |           |                |   |                              |  |   |             | 
|Probable Reserves: |  | Amount                |           | Market
  Price |   | Total
  Value of Reserves    | 
|                   |  |                       |           |                |   |                              | 
|Gold (Au) (oz.)    |  |                       | 156,288   |                | $ | 883.00                       |  | $ | 138,002,304 | 
|Silver (Ag) (oz.)  |  |                       | 1,295,857 |                | $ | 12.18                        |  | $ | 15,783,538  | 
|Copper (Cu) (tons) |  |                       | 8,922     |                | $ | 4,140.00                     |  | $ | 36,937,080  | 
|                   |  |                       |           |                |   |                              |  |   |             | 
|Total              |  |                       |           |                |   |                              |  | $ | 190,722,922 | 
|                   |  |                       |           |                |   |                              |  |   |             | 

The value of
the reserves is subject to price fluctuations in the commodities market. A low
demand for copper due to the current global economic crisis has pushed the
value of this metal down in previous months, while the recessionary trends have
pushed the value of gold and silver slightly higher. As more exploratory
drilling is completed, we expect the amount of proven and probable reserves to
fluctuate.

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.

During the
quarter ended February 28, 2009, we raised $500,000 in convertible promissory
notes which can be converted into shares of common stock of the Company at the
option of the holder or automatically under certain circumstances as defined in
the note and described above in Note 3 to the Consolidated Financial
Statements.
Additionally, in February 2009, the Companys Board of Directors approved the
issuance of up to an additional $1,500,000 in convertible promissory notes on
similar terms, and as of April 10, 2009, the Company has issued convertible
promissory notes of $145,000.

14

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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 expectations that we will 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 $482,386 with a cash balance of $141,202 as
of February 28, 2009, 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 also
are 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 and Nine
Month Periods Ending February 28, 2009 and February 29, 2008.

We did not
earn any revenues and have had only losses since our inception, including
during the nine month periods ended on February 28, 2009 and February 29, 2008.

We incurred
operating expenses in the amount of $736,695 and $3,016,487 for the quarters
ended February 28, 2009 and February 29, 2008, respectively. We granted options
and shares in lieu of compensation valued at $2,140,000 during the quarter
ended February 29, 2008 compared to none in the comparable period for 2009.
Geological expenses and salaries paid to consultants was reduced by $95,204 and
$75,154, respectively during the quarter ended February 28, 2009 compared to
the comparable period for 2008 because of a decrease in exploration activities
performed during the quarter ended February 28, 2009. Additional office
expenses, depreciation, insurance and other related expenses in Mexico
increased by $30,566 during the quarter ended February 28, 2009 compared to the
comparable period in 2008 due to the general construction of the metallurgical
laboratory.

We incurred
operating expenses in the amount of $6,356,109 and $3,314,709 for the nine
month period ended February 28, 2009 and February 29, 2008 respectively. We
granted options and shares in lieu of compensation valued at $4,035,300 during
the nine month period ended February 28, 2009 compared to $2,140,000 in the
comparable period for 2008. Geological expenses increased by $390,065
for the nine months ended February 28, 2009 compared to the comparable nine month period. We hired additional staff at
the corporate office and staff and consultants in connection with the
subsidiarys operations. These actions resulted in an increase in payroll and
consulting expenses of $417,665 over the comparable nine month period.
Additional office expenses, depreciation, insurance, and other related expenses
in Mexico caused an increase of $338,670 over the expenses for the period ended
February 29, 2008.

15

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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 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this item.

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 February 28, 2009.

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
further weakness in the parents internal control structure the controls were not
operating effectively. The certifying
officers have taken note of the reasons for the deficiency and have taken
additional measures to improve the financial reporting of the subsidiary and
the quarterly and year end review process.

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Changes in Internal Control over Financial
Reporting

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

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS

We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS

We recorded
the following unregistered sales or issuances of equity securities during the
quarter ended February 28, 2009:

We issued
100,000 shares of common stock upon exercise of a warrant to one accredited
investor for $25,000 in cash.

These shares
were issued in reliance upon exemptions from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended.

We also issued
convertible notes with an aggregate principal amount of $500,000 to four
individuals. Michael J. Kugler, Chairman of the Board and Chief Executive
Officer of the Company purchased notes with an aggregate principal amount of
$25,000 and three other accredited investors purchased notes with an aggregate
principal amount of $475,000. The convertible notes bear 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
would 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.

The Notes have
not been (and will not be) registered under the Securities Act of 1933 and may
not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements.

On February
19, 2008, the Companys Board of Directors approved the issuance of up to an
additional $1,500,000 in convertible notes on the same terms as described
above.

We used the
proceeds from all of the sales of securities for general working capital
purposes.

17

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ITEM 3. DEFAULT UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

18

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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.

19

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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
|April 15,
  2009                                                
|                                                                
|/s/ Jesus Oliveras                                               | 
|                                                                 | 
|Jesus Oliveras                                                  
|Chief Financial Officer                                         
|April 15, 2009                                                  

20

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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

21

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