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

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

|  |                                                                                          
|- | -----------------------------------------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT
 TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|  | For
 the quarterly period ended November 30, 2008                                        
|  |                                                                                          
|  | or                                                                                       
|  |                                                                                          
|o | TRANSITION REPORT PURSUANT
 TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  | For
 the transition period from _________ to _________                                   

Commission File Number: 000-50703

| |                                                         | 
| | ------------------------------------------------------- | 
| | U.S. PRECIOUS METALS, INC.                              | 
| |                                                         | 
| | (Exact
 Name of Registrant as Specified in its Charter) | 

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

| |                                                                                     | 
| | ----------------------------------------------------------------------------------- | 
| | (407) 566-9310                                                                      | 
| |                                                                                     | 
| | (Registrants
 telephone number, including area code)                               | 
| |                                                                                     | 
| | N/A                                                                                 | 
| |                                                                                     | 
| | (Former
 name, former address and former fiscal year, if changed since last report) | 

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

Yes x   No o

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

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

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


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

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


APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date:

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

---



EXPLANATORY NOTE

U.S.
Precious Metals, Inc. (the Company) is filing this Amendment No. 1 on Form 10-Q/A (the Amendment) to amend our Quarterly Report on Form 10-Q
for the quarterly period ended November 30, 2008, which was filed with the
Securities and Exchange Commission (the SEC) on February 18, 2009 (the November 30, 2008 Form 10-Q).

This
Amendment is being filed to amend and restate the November 30, 2008 Form 10-Q
to correct certain errors that were discovered in the November 30, 2008
Consolidated Balance Sheet and related Consolidated Statements of Operations
and Cash Flows for the three and six months then ended and related changes to
the Notes to the Consolidated Financial Statements.

The
November 30, 2008 Form 10-Q contained an inaccurate calculation of the value of
the options to purchase common stock granted to officers and directors for
services rendered. The value of the options granted to the Companys officers
and directors reported in the November 30, 2008 Form 10-Q was $770,000. Under
the fair value based method of accounting described in Statement of Financial
Accounting Standards No. 123R (SFAS No. 123R), the accurate calculation should have been
$2,770,000. The effect is an understatement in value of $2,000,000. The
November 30, 2008 Form 10-Q also calculated the investment in mining rights of
$204,532 using the average exchange rate. The investment in mining rights has
been recalculated using the actual exchange rate as of the date of the
investment. Using the actual exchange rate results in the investment of mining
rights being $197,344. The effect is an overstatement in value of $7,188. The
November 30, 2008 Form 10-Q also incorrectly applied advances to employees for
Company expenses of $12,423 as miscellaneous receivables resulting in an
overstatement of the Companys total assets by $12,423. This Amendment reduces
the total current assets by the $12,423 to correct for the overstatement
reported in the November 30, 2008 Form 10-Q.

The net
effect of these changes resulted in the Companys expenses and operating loss
to increase by $2,019,611, $2,000,000 of which is a result of the recalculation
in stock options granted to the Companys directors and officers for services
rendered, $7,188 of which is a result of the recalculation of exchange rate for
investments in mining rights, and $12,423 of which is the advances to employees
for Company expenses, all of which are non-cash adjustments.

This
Amendment is being filed only to modify and update Part I, Item 1. Consolidated
Financial Statements, Part I, Item 2. Managements Discussion and Analysis, and
Part I, Item 4. Controls and Procedures. Except as otherwise provided, this
Amendment does not modify or update the disclosures made in the November 30,
2008 Form 10-Q in any way.

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

2

---



NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Amendment
contains certain forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. When used in this document,
the words anticipate, believe, estimate, intend, and expect and
similar expressions, are intended to identify forward-looking statements. Such
statements relate to future events or our future financial performance that are
based on the beliefs and assumptions made by the Companys management as well
as information currently available to management and are subject to certain
risks, uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, intended or expected. In addition to the other information
set forth in this report, certain of these risks and uncertainties are
discussed in the Companys Annual Report on Form 10-K/A for the fiscal year
ended May 31, 2008, filed with the SEC on February 23, 2009 under the caption Risk Factors
and should be carefully considered as these risk factors could materially
affect our business, financial condition or future results. The risks described
in this earlier filing are not the only risks facing us. Additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial
may also adversely affect our business, financial condition and/or operating
results. In general you should be aware that certain risks exist with respect
to the Company and its business, which risks include: its limited assets, lack
of revenues and only losses since inception, industry risks, limited geological
work conducted on existing concessions, the need for additional capital,
environmental risks, risks inherent in having its operations outside the United
States such as political and economic unrest and instability, currency
fluctuations, the threat of military actions and criminal or terrorist
activities; among other factors.

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

The
accompanying unaudited interim consolidated financial statements as of November
30, 2008, and for the three and six month periods ended November 30, 2008 and
November 30, 2007, include the accounts of the Company and its subsidiary and
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. These unaudited
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and the notes thereto included in 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.

3

---



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

Table of Contents

Part I  Financial Information

|                                                                                                                                                                                                                                   |   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --
|Item 1. Consolidated Financial Statements                                                                                                                                                                                          |   
|                                                                                                                                                                                                                                   |   
|Consolidated Balance Sheets at November 30, 2008
 (unaudited) and at May 31, 2008 (audited).                                                                                                                                       | 5 
|                                                                                                                                                                                                                                   |   
|Consolidated Statements of Operations (unaudited) for
 the three month periods ended November 30, 2008 and November 30, 2007, and
 for the period January 21, 1998 (date of inception of exploration stage) to
 November 30, 2008. | 6 
|Consolidated Statements of Operations (unaudited) for
 the six month periods ended November 30, 2008 and November 30, 2007, and for
 the period January 21, 1998 (date of inception of exploration stage) to
 November 30, 2008.   | 7 
|Consolidated Statements of Cash Flows (unaudited) for
 the six month periods ended November 30, 2008 and November 30, 2007 and for
 the period January 21, 1998 (date of inception of exploration stage) to
 November 30, 2008.    | 8 
|Notes to Consolidated Financial Statements
 (unaudited).                                                                                                                                                                           | 9 
|                                                                                                                                                                                                                                   |   
|Item 2. Managements Discussion and
 Analysis of Financial Condition and Results of Operations                                                                                                                                     | 20
|                                                                                                                                                                                                                                   |   
|Item 4. Controls and Procedures                                                                                                                                                                                                    | 22
|                                                                                                                                                                                                                                   |   
|Item 6. Exhibits                                                                                                                                                                                                                   | 24
|                                                                                                                                                                                                                                   |   
|Signature Page                                                                                                                                                                                                                     | 25

4

---



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

|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------- | ----------- | ----------------------- | - | ---------- | -
|                                                                                                                                          |  | November 30, 2008
 (Unaudited) 
 (Restated)
 (See Note 2) |             | May 31, 2008
 (Audited) |  
|                                                                                                                                          |  |                                                           |             |                         |  
|ASSETS                                                                                                                                    |  |                                                           |             |                         |   |            |  
|Current Assets:                                                                                                                           |  |                                                           |             |                         |   |            |  
|Cash                                                                                                                                      |  | $                                                         | 52,093      |                         | $ | 623,017    |  
|Miscellaneous
 receivables                                                                                                                |  |                                                           |            |                         |   | 8,353      |  
|Prepaid
 expenses                                                                                                                         |  |                                                           | 6,124       |                         |   | 22,153     |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|Total
 current assets                                                                                                                     |  |                                                           | 58,217      |                         |   | 653,523    |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|Fixed Assets:                                                                                                                             |  |                                                           |             |                         |   |            |  
|Vehicles                                                                                                                                  |  |                                                           | 39,429      |                         |   | 39,429     |  
|Machinery
 and equipment                                                                                                                  |  |                                                           | 92,075      |                         |   | 84,199     |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|Total fixed
 assets                                                                                                                       |  |                                                           | 131,504     |                         |   | 123,628    |  
|Less:
 accumulated depreciation                                                                                                           |  |                                                           | (29,422     | )                       |   | (19,380    | )
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|Net fixed
 assets                                                                                                                         |  |                                                           | 102,082     |                         |   | 104,248    |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|Other Assets:                                                                                                                             |  |                                                           |             |                         |   |            |  
|Investment
 in mining rights                                                                                                              |  |                                                           | 197,344     |                         |   | 82,730     |  
|Deposits                                                                                                                                  |  |                                                           | 5,892       |                         |   | 57,180     |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|Total other
 assets                                                                                                                       |  |                                                           | 203,236     |                         |   | 139,910    |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|Total
 Assets                                                                                                                             |  | $                                                         | 363,535     |                         | $ | 897,681    |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|LIABILITIES AND
 STOCKHOLDERS EQUITY (DEFICIENCY)                                                                                        |  |                                                           |             |                         |   |            |  
|Current Liabilities:                                                                                                                      |  |                                                           |             |                         |   |            |  
|Accounts
 payable                                                                                                                         |  | $                                                         | 272,511     |                         | $ | 13,490     |  
|Accrued
 expenses                                                                                                                         |  |                                                           | 256,609     |                         |   | 57,282     |  
|Accrued
 salaries                                                                                                                         |  |                                                           | 15,795      |                         |   | 13,527     |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|Total
 current liabilities                                                                                                                |  |                                                           | 544,915     |                         |   | 84,299     |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|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 51,005,979 and 47,227,979 shares, respectively |  |                                                           | 510         |                         |   | 472        |  
|Additional
 paid in capital                                                                                                               |  |                                                           | 12,394,620  |                         |   | 7,775,360  |  
|Deficit
 accumulated during exploration stage                                                                                             |  |                                                           | (12,576,510 | )                       |   | (6,962,450 | )
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|Total
 stockholders equity (deficiency)                                                                                                  |  |                                                           | (181,380    | )                       |   | 813,382    |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  
|Total
 Liabilities and Stockholders Equity (Deficiency)                                                                                  |  | $                                                         | 363,535     |                         | $ | 897,681    |  
|                                                                                                                                          |  |                                                           |             |                         |   |            |  

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

5

---



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

|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|------------------------------------------------ |  | --------------------------------------- | ---------- | ----------------------------------------------------------------------------------------------------------- | - | ---------- | - | - | ----------- | -
|                                                 |  |                                         |            | January 21, 1998
 (Date of Inception
 of Exploration Stage
 to November 30, 2008)
 (Restated)
 (See Note 2) |  
|                                                 |  |                                         |            |                                                                                                            
|                                                 |  | Three Month
 Periods Ended November 30, |            |                                                                                                            
|                                                 |  | 2008 
 (Restated)
 (See Note 2)         |            | 2007                                                                                                        |   |           
|                                                 |  |                                         |            |                                                                                                             |   |            |  
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|Revenues                                         |  | $                                       |           |                                                                                                             | $ |           |   | $ |            |  
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|Expenses                                         |  |                                         | 2,253,032  |                                                                                                             |   | 43,201     |   |   | 12,593,230  |  
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|Operating
 Loss                                  |  |                                         | (2,253,032 | )                                                                                                           |   | (43,201    | ) |   | (12,593,230 | )
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|Other
 Income (Expense):                         |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|Interest
 income                                 |  |                                         | 1,439      |                                                                                                             |   | 600        |   |   | 17,706      |  
|Interest
 expense                                |  |                                         |           |                                                                                                             |   |           |   |   | (986        | )
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|Loss
 accumulated during exploration stage       |  | $                                       | (2,251,593 | )                                                                                                           | $ | (42,601    | ) | $ | (12,576,510 | )
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|Net Loss
 per Share                              |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|Basic and Diluted                                |  | $                                       | (0.05      | )                                                                                                           | $ | (0.00      | ) |   |             |  
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|Weighted
 Average Number of Shares Outstanding - |  |                                         |            |                                                                                                             |   |            |   |   |             |  
|Basic and Diluted                                |  |                                         | 49,443,572 |                                                                                                             |   | 32,274,979 |   |   |             |  
|                                                 |  |                                         |            |                                                                                                             |   |            |   |   |             |  

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

6

---



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

|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|------------------------------------------------ |  | ------------------------------------- | ---------- | ----------------------------------------------------------------------------------------------------------- | - | ---------- | - | - | ----------- | -
|                                                 |  |                                       |            | January 21, 1998
 (Date of Inception
 of Exploration Stage
 to November 30, 2008)
 (Restated)
 (See Note 2) |  
|                                                 |  |                                       |            |                                                                                                            
|                                                 |  | Six Month Periods
 Ended November 30, |            |                                                                                                            
|                                                 |  | 2008 
 (Restated)
 (See Note 2)       |            | 2007                                                                                                        |   |           
|                                                 |  |                                       |            |                                                                                                             |   |            |  
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|Revenues                                         |  | $                                     |           |                                                                                                             | $ |           |   | $ |            |  
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|Expenses                                         |  |                                       | 5,619,414  |                                                                                                             |   | 297,245    |   |   | 12,593,230  |  
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|Operating Loss                                   |  |                                       | (5,619,414 | )                                                                                                           |   | (297,245   | ) |   | (12,593,230 | )
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|Other Income (Expense):                          |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|Interest
 income                                 |  |                                       | 5,354      |                                                                                                             |   | 760        |   |   | 17,706      |  
|Interest
 expense                                |  |                                       |           |                                                                                                             |   |           |   |   | (986        | )
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|Loss
 accumulated during exploration stage       |  | $                                     | (5,614,060 | )                                                                                                           | $ | (296,485   | ) | $ | (12,576,510 | )
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|Net Loss per Share                               |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|Basic and Diluted                                |  | $                                     | (0.12      | )                                                                                                           | $ | (0.01      | ) |   |             |  
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|Weighted
 Average Number of Shares Outstanding - |  |                                       |            |                                                                                                             |   |            |   |   |             |  
|Basic and Diluted                                |  |                                       | 48,697,593 |                                                                                                             |   | 32,247,979 |   |   |             |  
|                                                 |  |                                       |            |                                                                                                             |   |            |   |   |             |  

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

7

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

|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|--------------------------------------------------------------------------- |  | ------------------------------------- | ---------- | ------------------------------------------------------------------------------------------------------------ | - | -------- | - | - | ----------- | -
|                                                                            |  |                                       |            | January 21, 1998
 (Date of Inception of 
 Exploration Stage
 to November 30, 2008)
 (Restated)
 (See Note 2) |  
|                                                                            |  |                                       |            |                                                                                                             
|                                                                            |  | Six Month Periods
 Ended November 30, |            |                                                                                                             
|                                                                            |  | 2008  (Restated) 
 (See Note 2)       |            | 2007                                                                                                         |   |         
|                                                                            |  |                                       |            |                                                                                                              |   |          |  
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Cash Flows From
 Operations                                                 |  | $                                     | (5,614,060 | )                                                                                                            | $ | (296,485 | ) | $ | (12,576,510 | )
|Net Loss                                                                    |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Adjustments
 required to reconcile net loss to cash consumed by operations: |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Charges not
 requiring outlay of cash:                                      |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Depreciation                                                                |  |                                       | 10,041     |                                                                                                              |   | 2,940    |   |   | 29,419      |  
|Common
 stock issued for services                                           |  |                                       | 1,289,300  |                                                                                                              |   | 48,000   |   |   | 5,875,132   |  
|Stock
 options issued for services                                          |  |                                       | 2,770,000  |                                                                                                              |   |         |   |   | 2,770,000   |  
|Bad debt
 expense                                                           |  |                                       |           |                                                                                                              |   |         |   |   | 109,259     |  
|Changes in
 assets and liabilities:                                         |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Increase in
 accounts payable                                               |  |                                       | 259,020    |                                                                                                              |   | 405      |   |   | 272,510     |  
|Increase in
 accrued expenses                                               |  |                                       | 201,594    |                                                                                                              |   | 19,021   |   |   | 272,404     |  
|Decrease
 (increase) in miscellaneous receivable                            |  |                                       | 8,353      |                                                                                                              |   | (3,552   | ) |   | (2,985      | )
|Decrease
 (increase) in prepaid expenses                                    |  |                                       | 16,029     |                                                                                                              |   |         |   |   | (6,124      | )
|Decrease
 (increase) in deposits                                            |  |                                       | 51,289     |                                                                                                              |   | (12,843  | ) |   | (5,892      | )
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Net Cash Consumed by
 Operating Activities                                  |  |                                       | (1,008,434 | )                                                                                                            |   | (242,514 | ) |   | (3,262,787  | )
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Cash Flows from
 Investing Activities:                                      |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Investment
 in mining rights                                                |  |                                       | (114,614   | )                                                                                                            |   | (13,859  | ) |   | (197,344    | )
|Loan to
 affiliated company                                                 |  |                                       |           |                                                                                                              |   | (40,000  | ) |   | (431,275    | )
|Repayment
 of loan by the affiliated company                                |  |                                       |           |                                                                                                              |   |         |   |   | 325,000     |  
|Acquisition
 of machinery and equipment                                     |  |                                       | (7,876     | )                                                                                                            |   |         |   |   | (131,502    | )
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Net Cash Consumed by
 Investing Activities                                  |  |                                       | (122,490   | )                                                                                                            |   | (53,859  | ) |   | (435,121    | )
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Cash Flows From
 Financing Activities:                                      |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Proceeds
 from sale of common stock                                         |  |                                       | 400,000    |                                                                                                              |   | 20,000   |   |   | 3,492,500   |  
|Proceeds
 from exercise of warrants                                         |  |                                       | 160,000    |                                                                                                              |   |         |   |   | 257,500     |  
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Net Cash Provided by
 Financing Activities                                  |  |                                       | 560,000    |                                                                                                              |   | 20,000   |   |   | 3,750,000   |  
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Net
 increase (decrease) in cash balance                                    |  |                                       | (570,924   | )                                                                                                            |   | (276,373 | ) |   | 52,093      |  
|Cash
 balance, beginning of period                                          |  |                                       | 623,017    |                                                                                                              |   | 277,917  |   |   |            |  
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  
|Cash
 balance, ending of period                                             |  | $                                     | 52,093     |                                                                                                              | $ | 1,544    |   | $ | 52,093      |  
|                                                                            |  |                                       |            |                                                                                                              |   |          |   |   |             |  

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

8

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2008
(Unaudited)

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

The unaudited
interim consolidated financial statements of U.S. Precious Metals, Inc. and its
subsidiary (the Company) as of November 30, 2008 and May 31, 2008, and for
the three and six month periods ended November 30, 2008 and November 30, 2007,
have been prepared in accordance with U.S. generally accepted accounting
principles. In the opinion of management, such information contains all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for such comparable periods. The results of
operations for the six month period ended November 30, 2008 are not necessarily
indicative of the results to be expected for the full fiscal year ending May
31, 2009.

Certain
information and disclosures normally included in the notes to financial statements
have been condensed or omitted as permitted by the rules and regulations of the
Securities and Exchange Commission, although the Company believes the
disclosure is adequate to make the information presented not misleading. The
accompanying unaudited financial statements should be read in conjunction with
the financial statements contained in the Companys Amended Form 10-K/A as
filed with the Securities and Exchange Commission on February 23, 2009.

9

---



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

The
November 30, 2008 Form 10-Q filed on February 18, 2009 contained an inaccurate
calculation of the value of the options to purchase common stock granted to
officers and directors for services rendered. The value of the options granted
to the Companys officers and directors reported in the November 30, 2008 Form
10-Q was $770,000. Under the fair value based method of accounting described in
Statement of Financial Accounting Standards No. 123R (SFAS No.
123R), the accurate
calculation should have been $2,770,000. The effect is an understatement in
value of $2,000,000. The November 30, 2008 Form 10-Q also calculated the
investment in mining rights of $204,532 using the average exchange rate. The
investment in mining rights has been recalculated using the actual exchange rate
as of the date of the investment. Using the actual exchange rate results in the
investment of mining rights being $197,344. The effect is an overstatement in
value of $7,188. The November 30, 2008 Form 10-Q also incorrectly applied
advances to employees for Company expenses of $12,423 as miscellaneous
receivables resulting in an overstatement of the Companys total assets by
$12,423. This Amendment reduces the total current assets by the $12,423 to
correct for the overstatement reported in the November 30, 2008 Form 10-Q.

The net
effect of these changes resulted in the Companys expenses and operating loss
to increase by $2,019,611, $2,000,000 of which is a result of the recalculation
in stock options granted to the Companys directors and officers for services
rendered, $7,188 of which is a result of the recalculation of exchange rate for
investments in mining rights, and $12,423 of which is the advances to employees
for Company expenses, all of which are non-cash adjustments.

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

|                                                         |  |                                               |             |             |   |              |   |   |             |  
|-------------------------------------------------------- |  | --------------------------------------------- | ----------- | ----------- | - | ------------ | - | - | ----------- | -
|                                                         |  | Consolidated
 Balance Sheet November 30, 2008 |            
|                                                        
|                                                         |  | Previously
 Reported                          |             | Adjustments |   | As
 Restated |  
|                                                         |  |                                               |             |             |   |              |  
|                                                         |  |                                               |             |             |   |              |   |   |             |  
|Miscellaneous
 receivables                               |  | $                                             | 12,423      |             | $ | (12,423      | ) | $ |            |  
|                                                         |  |                                               |             |             |   |              |   |   |             |  
|Total
 current assets                                    |  |                                               | 70,640      |             |   | (12,423      | ) |   | 58,217      |  
|                                                         |  |                                               |             |             |   |              |   |   |             |  
|                                                         |  |                                               |             |             |   |              |   |   |             |  
|Investment
 in mining rights                             |  |                                               | 204,532     |             |   | (7,188       | ) |   | 197,344     |  
|Total other
 assets                                      |  |                                               | 210,424     |             |   | (7,188       | ) |   | 203,236     |  
|                                                         |  |                                               |             |             |   |              |   |   |             |  
|Total Assets                                             |  | $                                             | 383,146     |             | $ | (19,611      | ) | $ | 363,535     |  
|                                                         |  |                                               |             |             |   |              |   |   |             |  
|                                                         |  |                                               |             |             |   |              |   |   |             |  
|Additional
 paid-in-capital                              |  |                                               | 10,394,620  |             |   | 2,000,000    |   |   | 12,394,620  |  
|Deficit
 accumulated during exploration stage            |  |                                               | (10,556,899 | )           |   | (2,019,611   | ) |   | (12,576,510 | )
|                                                         |  |                                               |             |             |   |              |   |   |             |  
|Total
 stockholders equity (deficiency)                 |  |                                               | (161,769    | )           |   | (19,611      | ) |   | (181,380    | )
|                                                         |  |                                               |             |             |   |              |   |   |             |  
|Total
 Liabilities and Stockholders Equity (Deficiency) |  | $                                             | 383,146     |             | $ | (19,611      | ) | $ | 363,535     |  
|                                                         |  |                                               |             |             |   |              |   |   |             |  

10

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2008
(Unaudited)

Consolidated Statement of Operations for Three Months Ended November 30,
2008

|                                          |  |                      |            |             |   |              |   |   |            |  
|----------------------------------------- |  | -------------------- | ---------- | ----------- | - | ------------ | - | - | ---------- | -
|                                          |  | Previously
 Reported |            | Adjustments |   | As
 Restated |  
|                                          |  |                      |            |             |   |              |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Expenses                                  |  | $                    | 2,289,982  |             | $ | 36,950       |   | $ | 2,253,032  |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Operating Loss                            |  |                      | (2,289,982 | )           |   | (36,950      | ) |   | (2,253,032 | )
|                                          |  |                      |            |             |   |              |   |   |            |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Loss accumulated during exploration stage |  | $                    | (2,288,543 | )           | $ | 36,950       |   | $ | (2,251,593 | )
|                                          |  |                      |            |             |   |              |   |   |            |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Net loss per share                        |  |                      |            |             |   |              |   |   |            |  
|Basic and Diluted                         |  | $                    | (0.05      | )           |   |              |   | $ | (0.05      | )
|                                          |  |                      |            |             |   |              |   |   |            |  

Consolidated
Statement of Operations for Six Months Ended November 30, 2008

|                                          |  |                      |            |             |   |              |   |   |            |  
|----------------------------------------- |  | -------------------- | ---------- | ----------- | - | ------------ | - | - | ---------- | -
|                                          |  | Previously
 Reported |            | Adjustments |   | As
 Restated |  
|                                          |  |                      |            |             |   |              |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Expenses                                  |  | $                    | 3,599,803  |             | $ | 2,019,611    |   | $ | 5,619,414  |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Operating Loss                            |  |                      | (3,599,803 |             |   | (2,019,611   | ) |   | (5,619,414 | )
|                                          |  |                      |            |             |   |              |   |   |            |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Loss accumulated during exploration stage |  | $                    | (3,594,449 | )           | $ | (2,019,611   | ) | $ | (5,614,060 | )
|                                          |  |                      |            |             |   |              |   |   |            |  
|                                          |  |                      |            |             |   |              |   |   |            |  
|Net loss per share                        |  |                      |            |             |   |              |   |   |            |  
|Basic and Diluted                         |  | $                    | (0.07      | )           |   |              |   | $ | (0.12      | )
|                                          |  |                      |            |             |   |              |   |   |            |  

11

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2008
(Unaudited)

Consolidated Statement of Operations (Cumulative since inception of
exploration stage) to November 30, 2008

|                                          |  |                      |             |             |   |              |   |   |             |  
|----------------------------------------- |  | -------------------- | ----------- | ----------- | - | ------------ | - | - | ----------- | -
|                                          |  | Previously
 Reported |             | Adjustments |   | As
 Restated |  
|                                          |  |                      |             |             |   |              |  
|                                          |  |                      |             |             |   |              |   |   |             |  
|Expenses                                  |  | $                    | 10,573,619  |             | $ | 2,019,611    |   | $ | 12,593,230  |  
|                                          |  |                      |             |             |   |              |   |   |             |  
|Operating Loss                            |  |                      | (10,573,619 | )           |   | (2,019,611   | ) |   | (12,593,230 | )
|                                          |  |                      |             |             |   |              |   |   |             |  
|                                          |  |                      |             |             |   |              |   |   |             |  
|Loss accumulated during exploration stage |  | $                    | (10,556,899 | )           | $ | (2,019,611   | ) | $ | (12,576,510 | )
|                                          |  |                      |             |             |   |              |   |   |             |  

Consolidated
Statement of Cash Flows for Six Months Ended November 30, 2008

|                                                                            |  |                      |            |             |   |              |   |   |            |  
|--------------------------------------------------------------------------- |  | -------------------- | ---------- | ----------- | - | ------------ | - | - | ---------- | -
|                                                                            |  | Previously
 Reported |            | Adjustments |   | As
 Restated |  
|                                                                            |  |                      |            |             |   |              |  
|                                                                            |  |                      |            |             |   |              |   |   |            |  
|Cash Flows
 From Operations                                                 |  |                      |            |             |   |              |   |   |            |  
|Net Loss                                                                    |  | $                    | (3,594,449 | )           | $ | (2,019,611   | ) | $ | (5,614,060 | )
|                                                                            |  |                      |            |             |   |              |   |   |            |  
|Adjustments
 required to reconcile net loss to cash consumed by operations: |  |                      |            |             |   |              |   |   |            |  
|Charges not
 requiring outlay of cash:                                      |  |                      |            |             |   |              |   |   |            |  
|Stock
 options issued for services                                          |  |                      | 770,000    |             |   | 2,000,000    |   |   | 2,770,000  |  
|Changes in
 assets and liabilities:                                         |  |                      |            |             |   |              |   |   |            |  
|Decrease
 (increase) in miscellaneous receivable                            |  |                      | (4,070     | )           |   | 12,423       |   |   | 8,353      |  
|                                                                            |  |                      |            |             |   |              |   |   |            |  
|Net Cash
 Consumed by Operating Activities                                  |  |                      | (1,001,246 | )           |   | (7,188       | ) |   | (1,008,434 | )
|                                                                            |  |                      |            |             |   |              |   |   |            |  
|                                                                            |  |                      |            |             |   |              |   |   |            |  
|Cash Flows
 from Investing Activities:                                      |  |                      |            |             |   |              |   |   |            |  
|Investment
 in mining rights                                                |  |                      | (121,802   | )           |   | 7,188        |   |   | (114,614   | )
|                                                                            |  |                      |            |             |   |              |   |   |            |  
|Net Cash
 Consumed by Investing Activities                                  |  | $                    | (129,678   | )           | $ | 7,188        |   | $ | (122,490   | )
|                                                                            |  |                      |            |             |   |              |   |   |            |  

12

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2008
(Unaudited)

Consolidated
Statement of Cash Flows (Cumulative since inception of exploration stage) to
November 30, 2008

|                                                                            |  |                      |             |             |   |              |   |   |             |  
|--------------------------------------------------------------------------- |  | -------------------- | ----------- | ----------- | - | ------------ | - | - | ----------- | -
|                                                                            |  | Previously
 Reported |             | Adjustments |   | As
 Restated |  
|                                                                            |  |                      |             |             |   |              |  
|                                                                            |  |                      |             |             |   |              |   |   |             |  
|Cash Flows From Operations                                                  |  |                      |             |             |   |              |   |   |             |  
|Net Loss                                                                    |  | $                    | (10,556,899 | )           | $ | (2,019,611   | ) | $ | (12,576,510 | )
|                                                                            |  |                      |             |             |   |              |   |   |             |  
|Adjustments
 required to reconcile net loss to cash consumed by operations: |  |                      |             |             |   |              |   |   |             |  
|Charges not requiring outlay of cash:                                       |  |                      |             |             |   |              |   |   |             |  
|Stock
 options issued for services                                          |  |                      | 770,000     |             |   | 2,000,000    |   |   | 2,770,000   |  
|Changes in assets and liabilities:                                          |  |                      |             |             |   |              |   |   |             |  
|Decrease
 (increase) in miscellaneous receivable                            |  |                      | (15,408     | )           |   | 12,423       |   |   | (2,985      | )
|                                                                            |  |                      |             |             |   |              |   |   |             |  
|Net Cash
 Consumed by Operating Activities                                  |  |                      | (3,255,599  | )           |   | (7,188       | ) |   | (3,262,787  | )
|                                                                            |  |                      |             |             |   |              |   |   |             |  
|Cash Flows from Investing Activities:                                       |  |                      |             |             |   |              |   |   |             |  
|Investment
 in mining rights                                                |  |                      | (189,531    | )           |   | (7,813       | ) |   | (197,344    | )
|                                                                            |  |                      |             |             |   |              |   |   |             |  
|Net Cash
 Consumed by Investing Activities                                  |  |                      | (427,308    | )           |   | (7,813       | ) |   | (435,121    | )
|                                                                            |  |                      |             |             |   |              |   |   |             |  
|Cash Flows from Financing Activities:                                       |  |                      |             |             |   |              |   |   |             |  
|Proceeds
 from exercises of warrants                                        |  |                      | 242,500     |             |   | 15,000       |   |   | 257,500     |  
|                                                                            |  |                      |             |             |   |              |   |   |             |  
|Net Cash
 Provided by Financing Activities                                  |  | $                    | 3,735,000   |             | $ | 15,000       |   | $ | 3,750,000   |  
|                                                                            |  |                      |             |             |   |              |   |   |             |  

13

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2008
(Unaudited)

3.          SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Exploration Stage Accounting

The Company is an
exploration stage company, as defined in Statement of Financial Accounting
Standards (SFAS) No. 7 and Industry Guide # 7 of the Securities and Exchange
Commission. Generally accepted accounting principles govern the recognition of
revenue by an exploration stage enterprise and the accounting for costs and
expenses. From inception to November 30, 2008, the Company has been in the
exploration stage and all its efforts have been devoted to acquiring mining
rights, drilling, mapping, and assaying. No revenue has been realized through
November 30, 2008.

Fixed Assets

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

Investments in Mining Rights

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

Mine Development Costs

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

Net Loss per Share

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

At November 30, 2008, there
were warrants outstanding to purchase 4,527,500 shares of common stock and
options to purchase 9,000,000 shares of common stock. At November 30, 2007,
there were warrants outstanding to purchase 100,000 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.

14

---



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 six
month period ended November 30, 2008, the Companys Board of Directors issued
38,000 shares of common stock to consultants as compensation for services;
these shares were valued at $24,300. 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. As of November 30, 2008, the shares have not
been issued; however, the value of the shares has been included as part of
stockholders deficiency.

There were
150,000 shares of common stock issued for services in the six month period
ended November 30, 2007 valued at $48,000.

New Accounting
Pronouncements

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

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

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

15

---



U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2008
(Unaudited)

4.          COMMON STOCK

During the six
months ended November 30, 2008, the Company issued 800,000 shares of common
stock and warrants to purchase 400,000 shares of common stock for gross
proceeds of $400,000. The warrants are exercisable at $1.00 per share and
expire one year after issuance. In addition, during the quarter and six months
ended November 30, 2008, the Company issued 200,000 and 640,000, respectively,
shares of common stock for $50,000 and $160,000, respectively upon exercise of
a warrant.

During the
quarter ended November 30, 2007, the Company issued 200,000 shares of common
stock for $20,000. In connection with the sale of the shares of common stock,
the Company issued warrants to purchase 100,000 shares of common stock at an
exercise price of $0.25 per share. The warrants by their terms expire one year
from the date of issuance.

5.          WARRANTS

The following
table summarizes warrant activity during the six month period ended November
30, 2008.

|                                                                        |  |  |           |  
|----------------------------------------------------------------------- |  |  | --------- | -
|Warrants outstanding as of
 May 31, 2008                                |  |  | 4,767,500 |  
|                                                                        |  |  |           |  
|Warrants Issued during the
 six month period ended November 30, 2008    |  |  | 400,000   |  
|Warrants exercised during
 the six month period ended November 30, 2008 |  |  | (640,000  | )
|Warrants expired during
 the six month period ended November 30, 2008   |  |  |          |  
|                                                                        |  |  |           |  
|                                                                        |  |  |           |  
|Warrants outstanding as of
 November 30, 2008                           |  |  | 4,527,500 |  
|                                                                        |  |  |           |  

As of November
30, 2008, there were warrants to purchase 4,527,500 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.

The following
shows the activity of Company options during the six month period ended
November 30, 2008:

|                                                                       |  |              |           |       |   |      | 
|---------------------------------------------------------------------- |  | ------------ | --------- | ----- | - | ---- | 
|                                                                       |  | # of Options |           | Price |  
|                                                                       |  |              |           |       |  
|                                                                       |  |              |           |       |   |      | 
|Options outstanding May 31, 2008                                       |  |              |          |       |   |     | 
|                                                                       |  |              |           |       |   |      | 
|Options granted during the six month period
 ended November 30, 2008   |  |              | 9,000,000 |       | $ | 0.36 | 
|Options cancelled during the six month
 period ended November 30, 2008 |  |              |          |       |   |     | 
|                                                                       |  |              |           |       |   |      | 
|Options outstanding as of November 30, 2008                            |  |              | 9,000,000 |       | $ | 0.36 | 
|                                                                       |  |              |           |       |   |      | 

16

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7.          RELATED PARTY TRANSACTIONS

During the
quarter ended November 30, 2008, the 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. These
shares have 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 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 $12,576,510, 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, continuing effort to raise
capital in the public and private markets.

17

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U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2008
(Unaudited)

9.          SUBSEQUENT EVENTS

A.          Convertible
Promissory Notes Payable.

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

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

The notes
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.

In February
2009, the Companys Board of Directors approved the issuance of up to
$1,500,000 in convertible promissory notes on the same terms as those described
above. As of May 10, 2009, the Company has issued convertible promissory notes
with an aggregate principal amount of $180,000 to three 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.

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.

18

---



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

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

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

D.          Miscellaneous

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

19

---



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

Liquidity and Capital Resources

We were formed
as a mineral exploration company on January 21, 1998. We are an
exploration stage company. There is no assurance that commercially viable
mineral deposits exist in sufficient amounts in our areas of exploration to
justify exploitation. Further exploration will be required before a final
evaluation as to the economic and legal feasibility of the concessions can
occur. Because we are still in our exploration stage, we have no
revenues and have had only losses since our inception. Accordingly, a
comparison of our financial information for accounting periods would likely not
be meaningful or helpful in making an investment decision regarding our
Company. Our plan of operations for the next twelve months is to continue the
drilling campaign as more fully described in the Companys Current Annual
Report on Form 10-K/A filed on February 23, 2009, provided that we receive
sufficient funding to do so. However, we have made no commitments for capital
expenditures over the next 12 months. Our management estimates that
approximately $1,335,000 will be required over the next 12 months to maintain
our current status. This amount does not include any additional exploration. We
estimate these expenses to include approximately $350,000 for salaries,
outsourced labor and consulting services, $600,000 for professional services,
including work undertaken by the independent accountant and legal fees, $50,000
for rent, maintenance, and utilities, $130,000 for permits and expenses required
to maintain the concessions, $105,000 for taxes and insurance, $80,000 for
office expenses, and $20,000 for other miscellaneous expenses, including
marketing and investor relations expenses.

We may attempt
to interest an operating company to enter into a joint venture to
undertake exploration work on the concessions owned by us, or we may attempt to
access the public or private debt or equity markets to move toward the
production phase, or even consider an outright sale.

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

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 six
month period ending November 30, 2008, we invested approximately $858,476 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 than 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.

20

---



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 | 
|                   |  |                      | 
|                   |  | Amount               |  | Market
 Price |   | Total
 Value of
 Reserves | 
|                   |  |                      |  |               |   |                           | 
|Proven 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 | 
|                   |  |                      |  |               |   |                           |  |   |            | 

|                   |  |           |  |               |   |                           |  |   |             | 
|------------------ |  | --------- |  | ------------- | - | ------------------------- |  | - | ----------- | 
|                   |  | Amount    |  | Market
 Price |   | Total
 Value of
 Reserves | 
|                   |  |           |  |               |   |                           | 
|Probable 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.

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 $363,535 with a cash balance of $52,093 as of
November 30, 2008, as compared to $897,681 in total assets and a cash balance
of $623,017 as of May 31, 2008. This was mainly due to increases in geological
and personnel expenses.

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.

21

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Results of Operations for the Three and Six
Month Periods Ending November 30, 2008 and 2007.

We did not
earn any revenues and have had only losses since our inception, including
during the six month periods ended on November 30, 2008 and 2007.

We incurred operating expenses in the amount of $2,253,032 and $43,201
during the quarters ended November 30, 2008 and 2007, respectively. We granted
stock in lieu of compensation valued at $1,271,150 during the quarter ended
November 30, 2008 compared to none in the comparable period for 2007.
Geological expenses increased by $325,049 during the quarter ended November 30,
2008 compared to the comparable period for 2007. 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 $467,851 over the comparable period for 2007. Additional
office expenses, depreciation, insurance and other expenses in Mexico increased
by $145,781 during the quarter ended November 30, 2008 compared to the
comparable period in 2007 due to the general construction of the metallurgical
laboratory.

We incurred operating expenses in the amount of $5,619,414 and $297,245
during the six months ended November 30, 2008 and 2007, respectively. We
granted options and stock in lieu of compensation valued at $4,041,150 during
the six months ended November 30, 2008 compared to none in the comparable
period for 2007. Geological expenses increased by $485,469 during the six
months ended November 30, 2008 compared to the comparable period for 2007. 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 $481,439 over the comparable
period for 2007. Additional office expenses, depreciation, insurance and other
expenses in Mexico increased by $314,111 during the quarter ended November 30,
2008 compared to the comparable period in 2007 due to the general construction
of the metallurgical laboratory.

Off Balance Sheet Arrangements

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

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls

We carried out
an evaluation required by Rule 13a-15 of the Securities Exchange Act of 1934
(the Exchange
Act) under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of our disclosure controls and procedures over financial
reporting as of November 30, 2008.

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

22

---



The evaluation
of our disclosure controls and procedures included a review of our objectives
and processes and effect on the information generated for use in this Report.
This type of evaluation is done quarterly so that the conclusions concerning
the effectiveness of these controls can be reported in our periodic reports
filed with the SEC. Based on their evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that as of the end of the period covered
by this quarterly report on Form 10-Q, our controls design was adequate for financial
disclosures required for the preparation of the Form 10-Q filing. However, due
to a lack of reporting system from the subsidiary to the parent company and
weakness in the parents internal controls around the accounting for
share-based compensation, the controls were not operating effectively. The
certifying officers have taken note of the reasons for the material weaknesses.
The certifying officers have also taken additional measures to improve the
financial reporting and oversight of the subsidiary as well as the preparation
and review of share-based compensation in accordance with SFAS No. 123R.

Changes in Internal Control over Financial
Reporting

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

23

---



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.

24

---



SIGNATURES

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

|                                                                 | 
|---------------------------------------------------------------- | 
|U.S. Precious Metals, Inc.                                       | 
|(Registrant)                                                     | 
|                                                                 | 
|/s/ M. Jack
 Kugler                                              | 
|                                                                 | 
|M. Jack
 Kugler                                                  | 
|Chief
 Executive Officer and  Chairman of the Board of Directors | 
|May 14, 2009                                                     | 
|                                                                 | 
|/s/ Jesus Oliveras                                               | 
|                                                                 | 
|Jesus Oliveras                                                   | 
|Chief Financial Officer                                          | 
|May 14, 2009                                                     | 

25

---



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

26

---