COMMITMENTS AND CONTINGENCIES

12 Months Ended

May 31, 2012

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

8. COMMITMENTS AND CONTINGENCIES

Lease - Head Office

In August 2011 the Company relocated its headquarters from Lake Mary, Florida to Lithia, Florida to the premises of our then Chairman. The space was rent free based on an oral arrangement between the parties. If rent were charged for this space, the amount would not be material.

During the first fiscal quarter of 2012, we relocated our headquarters from Lithia, Florida to Odessa, Missouri to the premises of one of our directors and our then President. The space was rent free based on an oral arrangement between the parties.

During July 2012, we relocated our headquarters from Odessa, Missouri to Marlboro New Jersey where we are now renting office space under a 12 month lease, with an option to extend the term of the lease for a further 12 months, at $1,300 per month and operating expenses. This lease is personally guaranteed by one of our officers and directors.

Leases - Mexican Operation

The Company leases a warehouse (storage) facility in the city of Morelia, Michoacán, Mexico. This lease expires February 1, 2013. The Company may decide prior to the termination of this contract whether it wishes to renew. The landlord is not obligated to renew the lease.

Rent expense for this property for the twelve months ended May 31, 2012 and 2011 was respectively $45,095 and $46,067.

As at May 31, 2012 the balance payable under this lease through February 1, 2013 was $16,382.

Mining rights

The Company is required to make payments to the Mexican government on a bi-annual basis to maintain its mining concessions. In the twelve months ended May 31, 2012 the Company made payments of $76,290 to the Mexican government to maintain its mining concessions. It is anticipated that these payments will increase by 75% - 100% in the twelve months ending May 31, 2013.

As at the date of this report, we have not made payments of approximately $57,000 in respect of these mining rights which were due and payable by July 31, 2012. However, we have initiated payment of all or substantially all of the amount due for 2012, and expect that such payment will be made in the next seven to ten days. In addition, we recently became aware of an assessment from 2007 in the amount of $13,000 in respect such surface taxes. We are currently evaluating whether these mining rights in respect of 2007 are indeed due and payable.

Legal

Title Dispute

On April 3, 2012, our Mexican subsidiary company, US Precious Metals SA de CV, was served with a lawsuit under case number 293/2012 by Mr. Israel Tentory Garcia ("Plaintiff") regarding one of our mining concessions. The case was filed in a local court in the Federal District of Mexico City.

By way of background, during 2003, we contracted with eight private individuals, including the Plaintiff, to acquire an exploration concession to 174.54 hectares (the Solidaridad I claim). Pursuant to this agreement, we paid the former holders 1.5 million shares of our common stock. The Agreement further provided for the payment of $1 million to the former holders upon the occurrence of certain conditions. In his lawsuit, the Plaintiff alleges that the payment was due and payable on or about 2009 and ownership of the mining concession should revert back to him.

We have retained counsel in Mexico to represent our subsidiary in this matter. We strongly dispute the allegations raised in the lawsuit and intend to vigorously defend our rights to the mining concession. We have filed an answer to the complaint pursuant to which we alleged numerous defects in both fact and law. Part of our answer includes the position that when we contracted with Plaintiff and the seven other parties in 2003, their rights to the Solidaridad I exploration concession had expired in 2001, and thus they had no ownership rights to convey to us in 2003. As a result, we have asserted that they are not entitled to receive any additional consideration from us, and, in addition, we have demanded a return of the 1.5 million shares previously issued to them. In addition, we have filed a proceeding in a separate court (Superior Court, Mexico City) under Mexican law seeking a dismissal of the case due to the lack of jurisdiction by the current court.