uspr_10q-083113.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

	For the quarterly period ended:	AUGUST 31, 2013

or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period:

	Commission File Number:	000-50703

	U.S. PRECIOUS METALS, INC.
	(Exact name of registrant as specified in its charter)

Delaware		14-1839426
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

176 Route 9 North, Suite 306 Marlboro, New Jersey		07728
(Address of principal executive offices)		(Zip Code)

732 - 851-7707

(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 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes o No

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).

o Yes x No

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: 135,814,318 shares of common stock issued and outstanding as of October 18, 2013.

U.S.PRECIOUS METALS, INC.

INDEX

PART 1: FINANCIAL INFORMATION		2

ITEM 1. FINANCIAL STATEMENTS		2

CONDENSED CONSOLIDATED BALANCE SHEETS		2

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)		3

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT		4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)		10

NOTES TO CONDENSED CONSOLIDATD FINANCIAL STATEMENTS		11

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		28

ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		35

ITEM 4. CONTROLS AND PROCEDURES.		35

PART 2: OTHER INFORMATION		36

ITEM 1. LEGAL PROCEEDINGS		36

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		36

ITEM 3. DEFAULT OF SENIOR SECURITIES		37

ITEM 4. MINING SAFETY DISCLOSURES		37

ITEM 5. OTHER INFORMATION		36

ITEM 6. EXHIBITS		37

SIGNATURES		38

PART 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

	August 31, 2013			May 31, 2013
	(Unaudited)			(Audited)
ASSETS
Current Assets:
Cash	$	25,524		$	28,691
Prepaid and other current assets		7,875			8,762
Total current assets		33,399			37,453

Property and equipment, net		33,125			35,653

Other Assets
Investment in mining rights and other		157,273			157,421

Total Assets	$	223,797		$	230,527

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities:
Accounts payable and accrued expenses	$	3,054,806		$	2,950,677
Convertible notes payable		1,067,344			930,923
Derivative liability on short term convertible note payable		219,675			-
Total current liabilities		4,341,825			3,881,600

Commitments and Contingencies

Stockholders’ Deficit:
Preferred stock: authorized 10,000,000 shares of $0.00001 par value; no shares issued and outstanding		-			-
Common stock: authorized 150,000,000 shares of
$0.00001 par value; 123,681,244 and 121,781,244 shares issued and outstanding respectively		1,237			1,218
Additional paid in capital		25,515,336			25,325,355
Deficit accumulated during exploration stage		(29,634,601	)		(28,977,646	)
Total stockholders’ deficit		(4,118,028	)		(3,651,073	)

Total Liabilities and Stockholders’ Deficit	$	223,797		$	230,527

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended August 31,						January 21, 1998 (Date of Inception)to August 31,
	2013			2012			2013

Revenues	$	-		$	-		$	-

Costs and Expenses
General and administrative		462,716			693,422			28,594,645
Debt reduction through legal settlement		-			-			(692,315	)
Operating Loss		(462,716	)		(693,422	)		(27,902,330	)

Other Income (Expense):
Change in derivative liability		(47,908	)		-			(47,908	)
Interest expense (net)		(146,331	)		(55,943	)		(1,684,363	)
Total other income (expense)		(194,239	)		(55,943	)		(1,732,271	)


Loss before income taxes		(656,955	)		(749,365	)		(29,634,601	)

Provision for income taxes		-			-			-

Net loss	$	(656,955	)	$	(749,365	)	$	(29,634,601	)

Net loss per share
Basic and diluted	$	(0.01	)	$	(0.01	)

Weighted average number of shares
outstanding		122,407,059			105,197,230

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FROM INCEPTION (JANUARY 21, 1998) TO AUGUST 31, 2013

	Common Stock						Additional Paid in			Deficit Accumulated During Exploration
	Shares			Amount			Capital			Stage			Total
Balance, May 31, 2001	$	-		$	-		$	-		$	-		$	-
Shares issued to incorporator		1,961,184			19			(19	)		-			-

Balance, May 31, 2002		1,961,184			19			(19	)		-			-

Sales of common stock		5,000,000			50			124,950			-			125,000
Shares issued for services		13,100,000			131			133,869			-			134,000
Shares issued in exchange for
mining rights		1,500,000			15			14,985			-			15,000
Net loss for the period		-			-			-			(215,924	)		(215,924	)

Balance, May 31, 2003		21,561,184			215			273,785			(215,924	)		58,076

Sales of common stock		1,880,000			19			229,981			-			230,000
Shares issued for services		2,910,000			29			88,721			-			88,750
Cancellation of shares		(400,000	)		(4	)		4			-			-
Net loss for the period		-			-			-			(313,127	)		(313,127	)

Balance, May 31, 2004		25,951,184			259			592,491			(529,051	)		63,699

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FROM INCEPTION (JANUARY 21, 1998) TO AUGUST 31, 2013

CONTINUED

	Common Stock							Additional Paid in		Deficit Accumulated During Exploration
	Shares			Amount				Capital		Stage			Total
Balance, May 31, 2004
(carried forward)		25,951,184			$	259		$	592,491	$	(529,051	)	$	63,699

Sales of common stock		860,000				9			177,491		-			177,500
Shares issued for services		100,000				1			24,999		-			25,000
Issuance of stock paid in
prior year		80,000				1			19,999		-			20,000
Retirement of stock due to
settlement agreement		(175,166	)			(2	)		2		-			-
Net loss for the period		-				-			-		(226,093	)		(226,093	)

Balance, May 31, 2005		26,816,018				268			814,982		(755,144	)		60,106

Sales of common stock		4,332,500				43			1,122,457		-			1,122,500
Shares issued for services		233,961				3			96,252		-			96,255
Exercise of warrants		10,000				-			2,500		-			2,500
Net loss for the period		-				-			-		(280,014	)		(280,014	)

Balance, May 31, 2006		31,392,479				314			2,036,191		(1,035,158	)		1,001,347

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FROM INCEPTION (JANUARY 21, 1998) TO AUGUST 31, 2013

CONTINUED

	Common Stock						Additional Paid in			Deficit Accumulated During Exploration
	Shares			Amount			Capital			Stage			Total

Balance, May 31, 2006
(carried forward)		31,392,479		$	314		$	2,036,191		$	(1,035,158	)	$	1,001,347

Shares issued for services		905,355			9			232,618			-			232,627
Retirement shares issued in
prior year for which no
consideration was
received		(452,835	)		(5	)		5			-			-
Issuance of stock paid in
prior year		267,500			3			(3	)		-			-
Net loss for the period		-			-			-			(898,843	)		(898,843	)

Balance, May 31, 2007		32,112,499			321			2,268,811			(1,934,001	)		335,131

Sales of common stock		10,175,000			102			1,417,398			-			1,417,500
Shares issued for services		4,808,000			48			4,009,152			-			4,009,200
Exercise of warrants		320,000			3			79,997			-			80,000
Options granted
Net loss for the period		-			-			-			(5,028,449	)		(5,028,449	)

Balance, May 31, 2008		47,415,499			474			7,775,358			(6,962,450	)		813,382

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FROM INCEPTION (JANUARY 21, 1998) TO AUGUST 31, 2013

CONTINUED

	Common Stock				Additional Paid in		Deficit Accumulated During Exploration
	Shares		Amount		Capital		Stage			Total
Balance, May 31, 2008		47,415,499	$	474	$	7,775,358	$	(6,962,450	)	$	813,382
(carried forward)

Sales of common stock		800,000		8		399,992		-			400,000
Shares issued for services		1,838,000		19		1,014,281		-			1,014,300
Exercise of warrants		740,000		7		184,991		-			184,998
Share based compensation		-		-		2,770,000		-			2,770,000
Net loss for the period								(6,964,811	)		(6,964,811	)
Balance, May 31, 2009		50,793,499		508		12,144,622		(13,927,261	)		(1,782,131	)
Shares and warrants issued
for services		2,473,063		24		1,251,954		-			1,251,978
Notes converted into shares
of common stock		53,134		1		15,939		-			15,940
Share based compensation		-		-		636,656		-			636,656
Discount on convertible
notes payable		-		-		317,500		-			317,500
Net loss for the year		-		-		-		(4,653,712	)		(4,653,712	)

Balance, May 31, 2010		53,319,696		533		14,366,671		(18,580,973	)		(4,213,769	)

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FROM INCEPTION (JANUARY 21, 1998) TO AUGUST 31, 2013

CONTINUED

	Common Stock				Additional Paid in			Deficit Accumulated During Exploration
	Shares		Amount		Capital			Stage			Total
Balance, May 31, 2010 (carried forward)		53,319,696	$	533	$	14,366,671		$	(18,580,973	)	$	(4,213,769	)
Shares issued for services		9,670,000		97		725,679			-			725,776
Shares issued for cash		14,000,000		140		497,610			-			497,750
Notes converted into shares
of common stock		110,950		1		33,379			-			33,380
Partial cost of issuance of
convertible notes		-		-		81,598			-			81,598
Shares issued for
compensation		1,000,000		10		199,990			-			200,000
Options granted during the year		-		-		580,000			-			580,000
Modification of director
options		-		-		210,000			-			210,000
Net loss for the year		-		-		-			(3,083,077	)		(3,083,077	)
Balance, May 31, 2011		78,100,646		781		16,694,927			(21,664,050	)		(4,968,342	)
Shares issued for cash		6,221,429		62		614,938			-			615,000
Shares issued as compensation		1,750,000		18		174,982			-			175,000
Shares issued for services		1,450,000		14		344,986			-			345,000
Notes converted into shares		13,960,588		140		2,731,216			-			2,731,356
Warrants exercised		1,475,000		15		138,735			-			138,750
Stock options exercised		350,000		3		(3	)		-			0
Stock options issued		-		-		989,619			-			989,619
Net loss for the year		-		-		-			(2,886,579	)		(2,886,579	)
Balance, May 31, 2012		103,307,663	$	1,033	$	21,689,400		$	(24,550,629	)	$	(2,860,196	)

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FROM INCEPTION (JANUARY 21, 1998) TO AUGUST 31, 2013

CONCLUDED


	Common Stock						Additional Paid In			Deficit Accumulated During Exploration
	Shares			Amount			Capital			Stage			Total
Balance, May 31, 2012 (carried forward)		103,307,663		$	1,033		$	21,689,400		$	(24,550,629	)	$	(2,860,196	)

Shares issued for cash		6,750,000			68			587,406			-			587,474

Shares issued as compensation		1,750,000			17			314,983			-			315,000

Shares issued for services		12,000,000			120			2,259,880			-			2,260,000

Shares rescinded for services		(3,000,000	)		(30	)		(179,970	)		-			(180,000	)

Notes converted for shares		77,024			1			23,107			-			23,108

Warrants exercised		155,986			2			23,623			-			23,625

Cashless exercise of stock options		740,571			7			(7	)		-			0

Stock options issued		-			-			606,933			-			606,933

Net loss for the year		-			-			-			(4,427,017	)		(4,427,017	)

Balance, May 31 2013		121,781,244			1,218			25,325,355			(28,977,646	)		(3,651,073	)

Shares issued for cash		1,900,000			19			189,981			-			190,000

Net loss for the period		-			-			-			(656,955	)		(656,955	)

Balance, August 31 2013		123,681,244		$	1,237		$	25,515,336		$	(29,634,601	)	$	(4,118,028	)

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended August 31,						January 21, 1998 (Date of Inception Of Exploration Stage) To August 31,
	2013			2012			2013
Cash Flows From Operating Activities:
Net loss	$	(656,955	)	$	(749,365	)	$	(29,634,601	)
Adjustments required to reconcile net loss to net
cash used in operating activities:
Charges and credits not requiring the use of cash:
Depreciation		2,528			2,527			101,267
Equity securities issued for services		-			355,000			16,505,763
Amortization of loan discount		8,766			-			367,166
Origination interest on derivative liability		79,767			-			79,767
Change in fair derivative value		47,908			-			47,908
Bad debt expense		-			-			109,259
Debt reduction through legal settlements		-			-			(692,315	)
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses and other current assets		1,035			11,212			(91,752	)
Increase in interest accrued on convertible notes		27,654			23,189			1,004,871
Increase (decrease) in accounts payable,
accrued expenses and other current liabilities		104,130			194,949			3,908,350
Net Cash Used in Operating Activities		(385,167	)		(162,488	)		(8,294,317	)

Cash Flows From Investing Activities:
Investment in mining rights		-			-			(201,588	)
Loan to affiliated company		-			-			(361,275	)
Repayment of loan by affiliated company		-			-			253,000
Acquisition of equipment		-			-			(134,392	)
Net Cash Used in Investing Activities		-			-			(444,255	)

Cash Flows From Financing Activities:
Proceeds from sales of common stock		190,000			92,000			5,382,724
Proceeds from exercises of warrants		-			-			429,872
Proceeds from convertible notes, net		192,000			-			2,949,500
Loan from affiliated company		-			-			70,000
Repayment of loan from affiliated company		-			-			(68,000	)
Loans from officers		-			-			117,700
Repayment of loans from officers		-			-			(117,700	)
Net Cash Provided by Financing Activities		382,000			92,000			8,764,096

Net increase (decrease) in cash		(3,167	)		(70,488	)		25,524
Cash beginning of period	$	28,691		$	116,669		$	-
Cash end of period	$	25,524		$	46,181		$	25,524

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

U.S. Precious Metals, Inc. was incorporated in the state of Delaware in 1998 as a mineral exploration company. U.S. Precious Metals, Inc. and its wholly owned Mexican subsidiary company, U.S. Precious Metals de Mexico, S.A. de C.V, (“U.S. Precious Metals Mexico”), (collectively “the Company”, “We” or “Us”) are engaged in the acquisition, exploration and development of mineral properties. We currently focus on gold and base minerals primarily located in the State of Michoacan, Mexico where we own exploration and exploitation concessions to approximately 37,000 contiguous acres of land (the “Solidaridad Property”).

On May 11, 2013, the Company entered into a Share Exchange Agreement with Resource Technology Corp., a newly formed Florida corporation (“RTC”), and the RTC shareholders to acquire all of the issued and outstanding shares of RTC in exchange for 300 million shares of common stock of the Company. The total number of shares issuable to the RTC shareholders may be reduced as described below. RTC maintains three ore supply contracts with third party suppliers, and a Plasmafication™ Toll Processing Agreement with Plasma Processing, LP., a Florida limited partnership (“PP LP”). The ore supply agreements and the Toll Processing Agreement enable RTC to receive 1/3rd of the revenues derived from the plasma processing of ore concentrates from the ore supply agreements.

The Plasma Plant and Plasma Processing.

PP LP owns the right to operate a plasma processing facility located in 29 Palms, California. The plant took three years to build and is permitted to process ore concentrate. The plant is currently not in commercial production. The parties believe that initial upgrades to the facility will commence within 90 to 120 days which will enable the facility to process concentrates at the rate of approximately 9 tons/day. PP LP expects to make further upgrades to the facility which would increase its capacity to approximately 27 tons/day. These upgrades are subject to PP LP raising funds sufficient to complete necessary improvements to its plasma processing plant.

Plasmafication™ or plasma processing employs extreme temperatures (in excess of 7,000 F) to dissociate ore concentrates into their basic elemental state. Plasmafication™ is unique to the mining industry, and the parties believe that this process will yield significantly greater processing returns than milling processes currently employed in the mining industry. Current milling methods will recover the desired mineral down to a certain particle size (ie 300 or 600 mesh) based on the parameters of the existing machinery. However, conventional processes are not highly effective in recovering precious metals from highly complex ore structures. The high temperatures of plasma processing separate the metals from the substrate and turns organics from a solid to a gas. The metalloid fractions are then sent through a hydraulic cooling system to produce dore pellets. Secondary and tertiary processing is then applied to further recover and refine the desired precious metal constituents.

Ore Supply Agreements.

RTC holds ore supply agreements and arrangements with three, separate third parties, two of whom are from domestic mining properties and the third is from a mining property located in the Far East. Each of the ore concentrate suppliers has agreed to split the revenues of post plasma processing three equal ways among the ore supplier, RTC and PP LP. Under the Plasmafication Toll Processing Agreement discussed below, PP LP will bear the cost and expense of the plasma processing.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

1.	NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES CONT.

Nature of Operations Cont.

Plasmafication™ Toll Processing Agreement.

The Toll Processing Agreement between PP LP and RTC provides that PP LP will provide a range of services, including the Plasmafication™ of the RTC concentrate from the ore supply contracts. These services will be provided at the sole cost and expense of PP LP. The agreement further provides for an initial processing capacity of 5 tons/day of RTC concentrate for approximately 200 days per annum. PP LP will be required to upgrade its current plant to achieve this processing rate which as mentioned above is expected to occur within 90 to 120 days. These upgrades are expected to bring the total processing rate of the plant to about 9 tons/day. The agreement allows for an increased capacity to process 10 tons/day of RTC concentrate for approximately 300 days per annum. In order to achieve this rate, total plant capacity will have to be increased to about 29 tons/day.

PP LP has guaranteed a benchmark run of 5 tons/day for 20 consecutive days (“Benchmark Run”) with a minimum value of $50,000 (net to RTC) per ton using the RTC concentrate (or a total of $5,000,000 in net proceeds to RTC) from the existing ore supply contracts. The guarantee is limited to the proportionate reduction of the number of shares of USPR common stock issuable to the RTC shareholders (as described below). The benchmark run must be completed prior to June 1, 2014.

PP LP and RTC have agreed to split any costs required to ship the RTC concentrate to the plasma facility in California, among other terms and conditions.

Share Exchange Agreement.

As stated above, pursuant to the Share Exchange Agreement, the Company has agreed to acquire all of the issued and outstanding shares of RTC (“RTC Shares”) from the RTC shareholders in exchange for 300 million shares of common stock of the Company (“USPR Shares”). The RTC Shares and the USPR Shares issuable to the respective parties will be held in escrow and the USPR shares issuable to the RTC shareholders may be reduced as stated herein. While the shares are in escrow, voting rights will remain with the named party. The agreement provides that if the Benchmark Run does not yield net cash proceeds of Five Million Dollars ($5,000,000) to RTC, then the number of Exchange Shares in total will be proportionately reduced. The closing of the transactions contemplated by the Agreement will occur no later than June 1, 2014. The agreement contains customary representations and warranties by all parties. On September 10, 2013, the Company amended the Share Exchange Agreement with RTC and the RTC shareholders. Under the amendment, the parties agreed to reduce the number of “Exchange Shares” as defined in Section 4.01 of the Agreement (issuable to the RTC shareholders) from 300,000,000 shares of USPR common stock to 290,000,000 shares of USPR common stock.

The RTC shareholders are Wolz International, LLC (“Wolz”), Titan Productions, Inc. (“Titan”), and Mercury6, LP (“Mercury6”). Assuming a completion of the transaction without further proportionate reduction in the USPR Shares, Wolz, Titan and Mercury will receive 145 million shares, 72.5 million shares and 72.5 million shares, of common stock of USPR, respectively. Mr. Gennaro Pane, our Chairman and Chief Executive Officer, is the sole officer and member of Wolz (and will own approximately 51% of such shares), and Chad Altieri, our Board member, is the sole owner of Mercury. In addition, Messrs Pane and Altieri own or control limited partnership interests in PP LP.

The Share Exchange Agreement was approved by an independent committee of the Company Board of Directors and is subject however to shareholder approval. In addition to normal closing conditions, the Company will be required to obtain shareholder approval of the transaction, as well as shareholder approval to increase in its authorized shares necessary to complete the transaction. The Company intends to seek shareholder approval in the immediate future.

The Company cannot predict whether it will be successful in closing the transaction with RTC.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

On May 22, 2013, US Precious Metals, Inc. (“Company”) entered into a Mining Services Agreement with Mesa Acquisitions Group, LLC, a Florida limited liability company (“Contractor”), in association with Alba Petroleos De El Salvador Sem De CV, a Venezuelan company. Under the agreement, Contractor has agreed to perform certain mining services on a portion of the Company’s Mexican mining concessions. The Company maintains approximately 37,000 acres of mining concessions located in the State of Michoacán, Mexico, and the agreement covers the Solidaridad I & II mining concessions (or approximately 5,000 acres). Under the agreement, Contractor has agreed to perform the various mining services in three, separate phases described below:

▪

Phase 1 entails the immediate commission of high-tech satellite imaging to identify mineralization and confirm the two previous drilling campaigns on the mining concessions known as Solidaridad I and/or Solidaridad II.

The estimated costs of Phase 1 is approximately $400,000.

▪

Phase 2 entails the development of the necessary infrastructure to conduct full scale mining operations on the Solidaridad I and/or Solidaridad II mining concessions, including limited exploration, establishment of roads, water, power (electricity) and staging area for employees on site.

The estimated costs of Phase 2 is approximately $10 million.

▪

Phase 3 entails the construction of a processing plant to process the ore, which will be owned by the Company.

The estimated costs for the construction of the processing plant is approximately $40 million.

Contractor will be responsible for the costs and expenses of; the satellite imaging described in Phase 1, the limited exploration and build out of the infrastructure described in Phase 2, and the construction of the processing plant described in Phase 3. The obligation of contractor to proceed to Phases 2 and 3 will be dependent upon the company receiving positive results of the satellite imaging. The size and capacity of the processing plant to be constructed by the Contractor will be determined by parties, subject however to the results of the satellite imaging. Actual mining and processing expenses will be allocated between the parties in proportion to their revenue allocation described below (70% for Company/30% for Contractor).

As consideration for the mining services, Contractor will receive the following consideration from the Company:

Phase 1 and Phase 2. As consideration for Phases 1 and 2, the Company will issue to Contractor 10 million shares of its common stock.

Phase 3. As consideration for completion of Phase 3, Contractor will earn a 30% revenue interest in the revenues resulting from the sale of the ore, subject to it paying its proportionate share of the mining and milling expenses. If Contractor fails to perform or elects not to perform Phase 3 for any reason within 12 months from the completion of Phase 2, Contractor will forfeit all rights to the project.

In addition to the consideration stated above, as a further inducement for Contractor to enter into the Mining Services Agreement, the Company’s Chairman has agreed to issue to Contractor an additional 5 million shares of our common stock held by the Chairman. This is not a Company obligation and will occur after completion of development under separate agreement.

The parties will be obligated to share in the mining and processing costs and revenues generated from any ore processing on a proportionate basis, that is 70% to the Company and 30% to Contractor.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

The Mining Services Agreement contains extensive terms and obligations regarding the performance of the mining services by Contractor. Accordingly, the descriptions of the Mining Services Agreement is not complete, and is qualified in their entirety by reference to each agreement which are filed as an exhibit to our Annual Report on Form 10-K/A for the fiscal year ended May 31, 2013, filed with the Securities and Exchange Commission (“ SEC ”) on September 16, 2013.

Mr. George Mesa, the sole owner of Contractor, has been the Company’s Director of Security for the Company’s Mexican mining concessions since September 2012. Mr. Mesa received stock options to acquire 1 million share of our common stock at an exercise price of $0.12 in connection with that appointment.

On September 19, 2013, the Company in conjunction with its Mining Services Partners Mesa Acquisition Group LLC/Alba Petroleos De El Salvador Sem De Cv, announced the successful completion of Phase 1 Satellite Imaging under the Mining Services Agreement. The results of the Satellite Imaging are disclosed in Note 10- Subsequent Events Below.

Significant Accounting Policies

Basis of Presentation: Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion the financial statements include all adjustments (consisting of normal recurring accruals) necessary to make the financial statements not misleading. Operating results for the three months ended August 31, 2013 are not necessarily indicative of the results that may be expected for the year ended May 31, 2014. For more complete financial information, these unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended May 30, 2013 included in our Form 10-K filed with the SEC.

Exploration Stage Company: We are considered an exploration stage company under the criteria set forth by the Securities and Exchange Commission (“SEC”) since we have not yet demonstrated the existence of proven or probable reserves, as defined by the SEC, at our Solidaridad Property. As a result, and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for exploration stage companies, all expenditures for exploration and evaluation of our property are expensed as incurred and, unless mineralized material is classified as proven or probable reserves, substantially all expenditures for mine and mill construction have been and will continue to be expensed as incurred. Certain expenditures, such as for rolling stock or other general-purpose equipment, may be capitalized, subject to evaluation of the possible impairment of the asset. We will not exit the exploration stage unless and until we demonstrate the existence of proven or probable reserves that meet the SEC guidelines.

Proven and Probable Reserves: The definition of proven and probable reserves is set forth in SEC Industry Guide 7. Proven reserves are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (b) grade and/or quality are computed from the results of detailed sampling; and (c) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. In addition, reserves cannot be considered proven and probable until they are supported by a feasibility study, indicating that the reserves have had the requisite geologic, technical and economic work performed and are economically and legally extractable at the time of the reserve determination. As of August 31, 2013, none of our mineralized material met the definition of proven or probable reserves.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

1.	NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES CONT

Significant Accounting Policies Cont

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying unaudited consolidated financial statements include, but are not limited to, the identification and valuation of proven and probable reserves; estimates related to asset impairments of long lived assets and investments; classification of expenditures as either an asset or an expense; stock-based compensation expenses; valuation of deferred tax assets; and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from these estimates.

Foreign Currency Translation: The operations and assets of U.S. Precious Metals Mexico are in Mexico. U.S. Precious Metals Mexico depends on the ability of U.S. Precious Metals, Inc. to raise cash which is transferred to U.S. Precious Metals Mexico to meet its operating cash needs. Therefore, our management has determined that the functional currency of U.S. Precious Metals Mexico is the US dollar. U.S. Precious Metals Mexico financial statements are denominated in Mexican Pesos. Since that is the case, we remeasure U.S. Precious Metals Mexico financial statements in US dollars. Any gains or losses arising on the remeasurement are reflected in the Statements of Operations.

The accounts of U.S. Precious Metals Mexico are remeasured in US dollars as follows:

(a)	Current assets, current liabilities, and long-term monetary assets and liabilities are translated based on the rates of exchange in effect at the balance sheet dates.

(b)	Non-monetary assets, liabilities, and equity accounts are translated at the exchange rates prevailing at the times of acquisition of assets, assumption of liabilities or equity investments.

(c)	Revenues and expenses are translated at the average exchange rates for each period, except for charges for amortization and depreciation of non-monetary assets which are translated at the rates associated with the assets.

Cash and cash equivalents -- Cash and cash equivalents consist of cash and highly liquid debt instruments with original maturities of less than three months.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

1.	NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES CONT

Significant Accounting Policies Cont

Property and equipment: Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the related reasonably assured lease term. The estimated useful lives are as follows:

Vehicles	4 years
Machinery and equipment	3-10 years

We review our property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

Maintenance and repairs of property and equipment are charged to operations. Major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and any gain or loss is included in operations.

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: 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 mineralized material is classified as proven and probable reserves are expensed as mine development costs. At the point we reach our operating stage, such costs will be capitalized and will be written off as depletion expense as the mineralized material is mined.

Deferred Costs and Other: Offering costs with respect to issue of common stock, warrants or options by us were initially deferred and ultimately offset against the proceeds from these equity transactions if successful or expensed if the proposed equity transaction is unsuccessful.

Impairment of Long-Lived and Intangible Assets: In the event that facts and circumstances indicated that the cost of long-lived and intangible assets may be impaired, an evaluation of recoverability was performed. If an evaluation was required, the estimated future undiscounted cash flows associated with the asset were compared to the asset's carrying amount to determine if a write-down to market value or discounted cash flow value was required. No impairment was recorded during the three periods ended August 31, 2013 or 2012.

Financial Instruments: The estimated fair values for financial instruments were determined at discrete points in time based on relevant market information. These estimates involved uncertainties and could not be determined with precision. The carrying amounts of notes receivable, accounts receivable, accounts payable and accrued liabilities approximated fair value because of the short-term maturities of these instruments. The fair value of notes payable approximated to their carrying value as generally their interest rates reflected our effective annual borrowing rate.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

1.	NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES CONT

Significant Accounting Policies Cont

Fair Value Measurements: ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.

Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.

Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.

Our financial instruments consist of cash and cash equivalents, short-term trade prepaid expenses, payables, accruals and convertible notes payable. The carrying values of cash and cash equivalents, short-term trade prepaid expenses, payables, accruals and convertible notes payable approximate their fair value due to their short maturities.

Income Taxes: We account for income taxes under the liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Derivative Financial Instruments: We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used the Black Scholes valuation model which approximated the binomial lattice options pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

Debt Discount and Amortization of Debt Discount: Debt discount represents costs incurred in obtaining the debt funding and the fair value of embedded conversion options of various convertible debt instruments and attached convertible equity instruments issued in connection with debt instruments. The debt discount is amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt, using the straight-line method which approximates the interest method. The amortization of debt discount is included as a component of other expenses in the accompanying statements of operations.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

1.	NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES CONT

Significant Accounting Policies Cont

Revenue Recognition Policy: Revenue will be recognized when persuasive evidence of an arrangement exists, such as when a purchase order or contract is received from a customer, the price is fixed, title to the goods has passed, and there is reasonable assurance of collection. We have not yet entered into any contractual arrangement to deliver product or services.

Advertising costs: Advertising costs are expensed as incurred. No advertising costs were incurred during the three month periods ended August 31, 2013 or 2012.

Comprehensive Income (Loss): Comprehensive income is defined as all changes in stockholders' equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our Inception there have been no differences between our comprehensive loss and net loss.

Our comprehensive loss was identical to our net loss for the three month periods ended August 31, 2013 and 2012.

Net Income (Loss) Per Share: Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during each period. Diluted income per share reflects the potential dilution that could occur if potentially dilutive securities, as determined using the treasury stock method, are converted into common stock. Potentially dilutive securities, such as stock options and warrants, are excluded from the calculation when their inclusion would be anti-dilutive, such as periods when a net loss is reported or when the exercise price of the instrument exceeds the fair market value. During the three month periods ended August 31, 2013 and 2012, there were warrants and options outstanding to purchase our common stock, and conversion privileges attached to convertible notes. The common share equivalents of these securities have not been included in the calculations of loss per share because such inclusions would have anti-dilutive effects.

Stock-Based Compensation: We have adopted ASC Topic 718, “Accounting for Stock-Based Compensation”, which establishes a fair value method of accounting for stock-based compensation plans. In accordance with guidance now incorporated in ASC Topic 718, the cost of stock options and warrants issued to employees and non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate, and dividend yield.

Business Segments: We believe that our activities during the three month periods ended August 31, 2013 and 2012 comprised a single segment.

Recently Issued Accounting Standards: We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

2. GOING CONCERN AND LIQUIDITY

As shown in the accompanying financial statements, we have experienced continuing losses since Inception (January 21, 1998), and as at August 31, 2013, have a working capital deficit of $4,308,426, accumulated losses of $29,634,601 since Inception (January 21, 1998), recurring negative cash flows from operations and presently do not have sufficient resources to meet our outstanding liabilities or accomplish our objectives during the next twelve months.

As at August 31, 2013, we were in default on repayment of convertible promissory notes with principal balances of $575,000 together with accrued interest of $380,881 totaling $955,881.

Moreover, effective May 23, 2012, we amended our Settlement Agreement and Payment Agreement with our former attorneys. As result of the amendment, the payment of the initial installment of $403,554, originally due on May 24, 2012, was extended to July 24, 2012. In addition, commencing May 23, 2012, interest accrued on the amount due, which is $1,614,216, at the rate of 5% per annum. We were unable to make the scheduled payment of $403,554 and accrued interest on July 24, 2012 and defaulted under the terms of this agreement, and the entire amount, including interest, became due and payable. On October 1, 2012, we entered into a second amendment to our Settlement Agreement and Payment Agreement with our former attorneys effective July 23, 2012. As a result of the second amendment, the date for the payment of the initial installment of $403,554 was extended to December 1, 2012.

We have failed to make this schedule payment on December 1, 2012. Thus, our former attorneys have the ability to avail themselves of all rights and privileges under the existing agreements with us and under the laws of Mexico and the United States. The total balance due to our former attorneys, including accrued interest, at August 31, 2013 was $1,716,155.

In addition, we owe another former attorney the sum of approximately $90,000 under an arbitration award. The attorney has initiated efforts to effect a judgment against the Company.

At the time of this report, we do not have the funding available to repay the convertible promissory notes, make the payment required under the amended agreement with our former attorneys or pay the arbitration award to the other former attorney.

These conditions raise substantial doubt about our ability to continue as a going concern.

In our audited financial statements for the fiscal years ended May 31, 2013 and 2012, contained in our Annual Report, the Report of the Independent Registered Public Accounting Firm included an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.

Our present plans to overcome these difficulties, the realization of which cannot be assured, include, but are not limited to, continuing efforts to raise new funding in the public and private markets, to sell some or all of our assets and to initiate a renegotiation of the terms of scheduled repayments to our creditors.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

3. SUPPLEMENTAL CASH FLOW INFORMATION

	Three Months Ended August 31,
	2013		2012

Income taxes paid	$	-	$	-

Interest paid	$	-	$	-

Equity securities issued for services
1,750,000 shares of common stock issued to directors as compensation	$	-	$	315,000
Additional expense to vest previously issued options		-		40,000

Total shares and warrants issued for services	$	-	$	355,000

4. PROPERTY AND EQUIPMENT

As at August 31, 2013 and May 31, 2013 property and equipment consisted of the following:

	August 31, 2013			May 31, 2013

Vehicles	$	41,877		$	41,877
Machinery and equipment		92,515			92,515

Total property and equipment		134,392			134,392

Less accumulated depreciation		(101,267	)		(98,739	)

Total property and equipment net	$	33,125		$	35,653

Depreciation expense for the three months ended August 31, 2013 and 2012 was $2,528 and $2,527, respectively.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

5. CONVERTIBLE NOTES PAYABLE

	Principal Balance		Loan Discount			Accrued Interest		Total

May 31, 2013	$	575,000		-		$	355,923	$	930,923
Issued in the period		200,000		(100,000	)		-		100,000
Converted into shares of common stock		-		-			-		-
Amortization of loan discount		-		8,766			-		8,766
Interest accrued in the period		-		-			27,655		27,655
August 31, 2013	$	775,000	$	(91,234	)	$	383,578	$	1,067,344

Effective August 31, 2012, we were in default on repayments of convertible notes payable outstanding totaling $575,000 together with accrued interest of $380,881. The notes in default bear simple interest at an annual rate of 16% and may be converted into the shares of our common stock at the option of the note holder or automatically, if we complete any financing that results in proceeds of at least $10 million to us, or upon the occurrence of a change in control of us.

On July 17, 2013, we issued a convertible debenture for $100,000. The convertible debenture has a 6 month term and bears interest of 12%. The convertible debenture may be prepaid at a rate of 150% of the principal balance outstanding along with accrued interest. At any time after the maturity date of the convertible loan, if any principal balance is still outstanding, the balance shall be convertible into shares of the common stock at a 42% discount to the lowest closing price of the prior 20 trading days. As the conversion feature only applies after the maturity of the convertible debenture, no value has been assigned to it and no loan discount has been recognized on the convertible debenture.

On July 31, 2013, we issued a convertible debenture for $100,000. The convertible debenture has a 12 month term and bears interest of 12%. The convertible debenture may be prepaid at rates of between 125 - 142% of the principal balance outstanding along with accrued interest. At any time after six months, the convertible debenture is convertible into shares of the Company’s common stock at a 42% discount to the lowest closing price of the prior 20 trading days.

We paid commissions to a FINRA broker/dealer in the amount of $8,000 in respect of this loan and accounted for this payment as a discount on the convertible debenture. The debt discount was recorded as reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture.

We evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined it is indexed to the Company’s common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

5. CONVERTIBLE NOTES PAYABLE CONT.

We valued the conversion feature at origination at $171,767 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 6 month to maturity, risk free interest rate of 0.11% and annualized volatility of 140%. $92,000 of the value assigned to the beneficial conversion feature was recognized as a debt discount on the convertible debenture. The debt discount was recorded as reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $79,767 of the value assigned to the beneficial conversion feature was recognized as origination interest on the derivative liability and expensed on origination.

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as another income or expense item.

At August 31, 2013, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: 6 month, risk free interest rate of 1% and annualized volatility of 135% and determined that, since origination, the fair value of our derivative liability had increased by $47,908 to $219,675. Accordingly we recognized a corresponding expense on derivative liability in conjunction with this revaluation.

6. COMMITMENTS AND CONTINGENCIES

Lease – Head Office

We rent office space in Marlboro New Jersey 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 who is also a director.

Leases – Mexican Operation

The Company leases a warehouse (storage) facility in the city of Morelia, Michoacán, Mexico at a monthly rental of $2,234. This lease expires on February 1, 2014.

Mining rights

The Company is required to make payments to the Mexican government on a bi-annual basis to maintain its mining concessions. The Company has made the payment due on July 31, 2013 and the next payment, estimated at approximately $55,000 will be due on January 31, 2014.

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.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

6. COMMITMENTS AND CONTINGENCIES CONT.

Legal cont.

Title Dispute cont.

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.

On May 21, 2013, we were informed by our Mexican counsel that the Court issued a ruling dismissing the lawsuit filed by Plaintiff against our subsidiary, US Precious Metals SA de CV. The Court ruled that the Plaintiff did not prove the claims asserted in the lawsuit, and that our subsidiary is not liable to Plaintiff’s for any of such claims. In June 2013, Plaintiff filed an appeal of the Court ruling described in the preceding sentence and we filed a responsive brief in support of our position. On August 14, 2013, we were informed that the Court dismissed Plaintiff’s appeal without prejudice. According to our Mexican counsel, Plaintiff maintains the right to re-file his lawsuit against our subsidiary, US Precious Metals SA de CV.

7. STOCKHOLDERS’ DEFICIT

Preferred Stock

No shares of preferred stock were issued or outstanding during the three periods ended August 31, 2013 and 2012.

Common Stock and Warrants

The following shares of common stock and warrants were issued and warrants cancelled in the three months ending August 31, 2013:

	Common Stock		Warrants

May 31, 2013		121,781,244		7,827,180
Issued for cash proceeds of $190,000		1,900,000		950,000
Warrants expired, unexercised		-		(3,924,048	)
August 31, 2013		123,681,244		4,853,132

Between June 13, 2013 and August 23, 2013, the Company issued 1.9 million shares of its common stock, together with warrants to buy 950,000 shares of its common stock for proceeds of $190,000. The warrants had terms of 6 or 12 months and exercise prices of $0.15 or $0.20.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

7. STOCKHOLDERS’ DEFICIT CONT

Common Stock and Warrants Cont.

The following table summarizes information about warrants outstanding at August 31, 2013:

Exercise Price	Warrants Outstanding	Weighted Average Life of Outstanding Warrants In Months
$0.075	666,667	1.6
$0.10	833,334	1.1
$0.125	503,334	2.4
$0.15	683,334	6.3
$0.16	924,797	23.9
$0.20	741,667	11.0
$0.25	500,000	0.1
Total	4,853,132	7.8

Stock Options

In August 2008, our shareholders approved a Stock Option Plan (the “Plan”). Under the terms of 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.

	Stock Options Outstanding and Exercisable	Weighted Average Exercise Price
May 31, 2013	16,500,000	$0.13
Granted	-	-
Cancelled or forfeited	(500,000)	(0.18)
Exercised	-	-
August 31, 2013	16,000,000	$0.13

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

7. STOCKHOLDERS’ DEFICIT CONT

Stock Options Cont

The following table summarizes information about stock options outstanding and exercisable at August 31, 2013:

Exercise Price		Stock Options Issued and Exercisable	Intrinsic Value of Stock Options Issued and Exercisable		Weighted Average Life of Stock Options Issued and Exercisable in Years
$	0.065	6,000,000	$	690,000		2.5
$	0.07	1,000,000		110,000		2.1
$	0.12	1,000,000		60,000		4.1
$	0.16	3,500,000		70,000		3.7
$	0.18	1,000,000		-		3.3
$	0.185	1,000,000		-		3.1
$	0.19	1,000,000		-		4.8
$	0.20	500,000		-		3.1
$	0.25	1,000,000		-		4.7
		16,000,000	$	930,000		3.2

The aggregate intrinsic value represents the difference between our closing stock price of $0.18 per share as of August 31, 2013 and the exercise price multiplied by the number of options outstanding and exercisable as of that date.

8. RELATED PARTY TRANSACTIONS

In July and August 2013, the Company paid a total of $125,000 to a company controlled by Mr. George Mesa, our Director of Security, and owner of Mesa Acquisitions Group LLC. Mr. Mesa had previously advanced a like amount of funds which were used by Resource Technology Corp. (“RTC”) in connection with the transportation of ore supply, and related costs. As mentioned above, in May 2013, we entered into a Share Exchange Agreement with RTC and its shareholders, which includes our Chairman and a director, to acquire the issued and outstanding shares of RTC from the RTC shareholders.

9. INCOME TAXES

We have had losses since our Inception, and therefore are not subject to federal or state income taxes.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

10. SUBSEQUENT EVENTS

On September 4, 2013, we appointed Mr. Hans H. Hertell as the Company’s President, and in connection with such appointment, Daniel Moon resigned as the Company’s President. In addition, on that same date, our Board of Directors approved an Employment Agreement with Mr. Hertell and a Consulting Agreement with Hertell Group, LLC. (“Hertell Group”). Mr. Hertell is the sole officer and member of Hertell Group.

Under the Employment Agreement, among other terms, we agreed to pay Mr. Hertell an annual salary of $500,000. The salary commences at such time as we generate monthly gross revenues from our plasma processing operations of at least one million dollars ($1,000,000) for two (2) consecutive months (“Performance Event”), and (ii) upon our achievement of the Performance Event, the Base Salary shall commence effective as of the first day of the stated two (2) consecutive month period and shall continue throughout the Term. In addition, upon occurrence of the Performance Event, the Executive will be entitled to receive a stock award of 1,000,000 shares of common stock (“Stock Grant”), which shall vest immediately. Either party may terminate this Agreement by providing at least ten (10) days written notice to the other party.

Under the Consulting Agreement, among other terms, the Hertell Group will provide general business consulting services including but not limited to business development strategy, introduction of prospective business acquisitions or joint venture participation, deal-making, introduction to capital markets, marketing strategies, and other duties as mutually agreed upon by the parties. As consideration or the services, the Hertell Group will receive 9,000,000 shares of our common stock, valued at $1,530,000, which will be issued immediately. The term of the Consulting Agreement is three years.

On September 4, 2013, the Company’s Board of directors approved a stock grant of 250,000 shares of common stock issuable to each member of the Board of Directors on such date. A total of 2,250,000 shares of common stock are issuable as of such stock grant, valued at $382,500.

On September 10, 2013, the Company amended its Share Exchange Agreement with RTC and the RTC shareholders. Under the amendment, the parties agreed to reduce the number of “Exchange Shares” as defined in Section 4.01 of the Agreement (issuable to the RTC shareholders) from 300,000,000 shares of USPR common stock to 290,000,000 shares of USPR common stock.

On September 16, 2013, the Company appointed Mr. Michael Volkov to its Board of Directors. Mr. Volkov received a stock option to acquire 1,000,000 shares of common stock at $0.22 per share.

On September 19, 2013, the Company in conjunction with its Mining Services partners Mesa Acquisition Group LLC/Alba Petroleos De El Salvador Sem De Cv, announced the successful completion of Phase 1 Satellite Imaging under the Mining Services agreement.

The satellite imaging covered 2,134 acres of the Company’s 37,000 acres. The purpose of the imaging was twofold: (1) to confirm existing geology developed by Mr. David Burney, USPR’s geologist through 2 drilling programs and on-site mapping and sampling, and (2) to identify further areas of potential interest, if any. The Company believes that both goals were achieved with this imaging program. The satellite imaging identified 27 gold anomalies, a number of which also showed high intensity levels. A total of 217 surface acres were identified by the 27 anomalies.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2013

(unaudited)

10. SUBSEQUENT EVENTS CONT

The Company has entered into discussions with its Mining Services partners to immediately enter into Phase 2 of the project (Please refer to the Company’s Form 8-K filed with the Securities and Exchange Commission on May 25, 2013 for more information regarding the Mining Services Agreement)). In addition, the Company, through its Mining Services partners, expects to immediately embark on the execution of the field work, performing and applying the Forming Short-Pulsed Electromagnetic Fields (FSPEF) and Vertical Electric-Resonance Sounding (VERS) on a majority of the 2,134 acres.

On September 26, 2013, we entered into a convertible promissory note for $300,000 with a two year term, bearing interest at 12%. The maximum proceeds to be received under the note is $270,000 with the balance of $30,000 representing a discount on issue. We received $150,000 upon closing the note and the balance of $120,000 is payable to us by the lender in such amount and at such dates as the lender may choose in its sole discretion. The lender may convert the convertible promissory note into shares of our common stock at any time after six months at a 40% discount to the lowest trade price in the 25 trading days prior to conversion.

On September 30, 2013, we were served with a law suit by an holder of our convertible notes. The lawsuit demands repayment of a total of $632,666 in principal and interest due under the convertible notes. The Company has previously reported that it has been in default of these convertible notes. The Company intends to file an answer to the complaint.

Effective October 7, 2013 a noteholder converted a $25,000 convertible note and accrued interest of $14,422 into 183,074 shares of our common stock.

Effective October 16, 2013 one shareholder of ours exercised warrants to acquire 33,000 shares of our common stock at $0.10 per share and a second shareholderof ours exercised warrants to acquire 666,667 shares of our common stock at $0.125 per share

On October 16, 2013, we reappointed Mr. David Cutler was re-appointed as its Chief Financial Officer. Mr. Cutler will act in such officer capacity on a part-time basis. The Company and Mr. Cutler have reached an oral arrangement pursuant to which Mr. Cutler will be compensated at $5,000 per month. Mr. Cutler received a stock option to acquire 500,000 shares of common stock at $0.19 per share.

The Company evaluated subsequent events through the date these financial statements were issued. Other than those set out above, there have been no subsequent events after August 31, 2013 for which disclosure is required.

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

NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. This quarterly report on Form 10-Q (this “Quarterly Report”) contains certain forward-looking statements that are subject to risks and uncertainties. The statements contained in this Quarterly Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this Quarterly Report, the words “anticipate,” “believe,” “plan,” “target,” “estimate,” “intend,” “expect” and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding our strategy, future plans for exploration and production, future expenses and costs, future liquidity and capital resources, and estimates of mineralized material. All forward-looking statements in this Quarterly Report are based upon information available to our management on the date of this Quarterly Report.

Forward-looking statements are subject to a number of risks and uncertainties and there can be no assurance that such statements will be accurate. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially and adversely from those described herein as anticipated, believed, planned, targeted, estimated, intended or expected. Although we believe the assumptions underlying and expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or achievements. Actual results could differ materially and adversely from those discussed in this Quarterly Report.

Substantial risks exist with respect to an investment in us. These risks include but are not limited to, those factors discussed in our Annual Report on Form 10-K/A for the fiscal year ended May 31, 2013, filed with the Securities and Exchange Commission (“SEC”) on September 16, 2013 (the “Annual Report”) including the section entitled “Item 1A. Risk Factors.” More broadly, these factors include, but are not limited to:

▪	Our current financial condition and immediate need for capital;
▪	Potential dilution resulting from the issuance of new securities for any funding;
▪	Unexpected changes in business and economic conditions;
▪	Change in interest rates and currency exchange rates;
▪	Timing and amount of production, if any;
▪	Technological changes in the mining industry;
▪	Changes in exploration and overhead costs;
▪	Access to and availability of materials, equipment, supplies, labor and supervision, power and water;
▪	Results of future feasibility studies, if any;
▪	The level of demand for our products;
▪	Changes in our business strategy;
▪	Interpretation of drill hole results and the geology, grade and continuity of mineralization;
▪	The uncertainty of mineralized material estimates and timing of development expenditures;
▪	Commodity price fluctuations; and
▪	Changes in exploration results.

We qualify all of our forward-looking statements by the cautionary statements listed above, as well as those factors described in our Annual Report including the referenced “Item 1A. Risk Factors.” The list above, together with the factors described in our Annual Report under “Item 1A. Risk Factors,” is not exhaustive of the factors that may affect the accuracy of our forward-looking statements. You should read this Quarterly Report completely and with the understanding that our actual future results may be materially and adversely different from what we expect. These forward-looking statements represent our beliefs, expectations and opinions only as of the date of this Quarterly Report. Except as required by applicable law, including the securities laws of the United States, we assume no obligation to update any such forward-looking statements.

Overview

We were formed as a mineral exploration company on January 21, 1998. We are engaged in the acquisition, exploration and development of mineral properties. We focus on gold and base minerals primarily located in the State of Michoacan, Mexico where we own exploration and exploitation concessions to approximately 37,000 contiguous acres of land (the “Solidaridad Property”). Mineral exploration requires significant capital and our assets and resources are limited. We have never earned revenue from our operations and have relied on equity and debt financing to fund our operations to date.

We are considered an exploration stage company for accounting purposes because we have not demonstrated the existence of proven or probable reserves. In accordance with accounting principles generally accepted in the United States of America, all expenditures for exploration and evaluation of our properties have been expensed as incurred. Furthermore, unless our mineralized material is classified as proven or probable reserves, substantially all expenditures have been or will be expensed as incurred. Since substantially all of our expenditures to date have been expensed and we expect to expense significant expenditures during the fiscal year 2013, most of our investment in mining properties do not appear as an asset on our balance sheet.

On May 11, 2013, the Company entered into a Share Exchange Agreement with Resource Technology Corp., a newly formed Florida corporation (“RTC”), and the RTC shareholders to acquire all of the issued and outstanding shares of RTC in exchange for 300 million shares of common stock of the Company. The total number of shares issuable to the RTC shareholders may be reduced as described below. RTC maintains three ore supply contracts with third party suppliers, and a Plasmafication™ Toll Processing Agreement with Plasma Processing, LP., a Florida limited partnership (“PP LP”). The ore supply agreements and the Toll Processing Agreement enables RTC to receive 1/3rd of the revenues derived from the plasma processing of ore concentrates from the ore supply agreements.

The Plasma Plant and Plasma Processing.

Ore Supply Agreements.

RTC holds ore supply agreements and arrangements with three, separate third parties, two of whom are from domestic mining properties and the third is from a mining property located in the Far East. Each of the ore concentrate suppliers have agreed to split the revenues post plasma processing three equal ways among the ore supplier, RTC and PP LP. Under the Plasmafication Toll Processing Agreement discussed below, PP LP will bear the costs and expense of the plasma processing.

Plasmafication™ Toll Processing Agreement.

PP LP and RTC have agreed to split any costs required to ship the RTC concentrate to the plasma facility in California, among other terms and conditions.

Share Exchange Agreement.

As stated above, pursuant to the Share Exchange Agreement, the Company has agreed to acquire all of the issued and outstanding shares of RTC (“RTC Shares”) from the RTC shareholders in exchange for 300 million shares of common stock of the Company (“USPR Shares”). The RTC Shares and the USPR Shares issuable to the respective parties will be held in escrow and the USPR shares issuable to the RTC shareholders may be reduced as stated herein. While the shares are in escrow, voting rights will remain with the named party. The agreement provides that if the Benchmark Run does not yield net cash proceeds of Five Million Dollars ($5,000,000) to RTC, then the number of Exchange Shares in total will be proportionately reduced. The closing of the transactions contemplated by the Agreement will occur no later than June 1, 2014. The agreement contains customary representations and warranties by all parties. On September 10, 2013, the Company amended its Share Exchange Agreement with RTC and the RTC shareholders. Under the amendment, the parties agreed to reduce the number of “Exchange Shares” as defined in Section 4.01 of the Agreement (issuable to the RTC shareholders) from 300,000,000 shares of USPR common stock to 290,000,000 shares of USPR common stock.

The Share Exchange Agreement was approved an independent committee of Directors, subject however to shareholder approval. In addition to normal closing conditions, the Company will be required to obtain shareholder approval of the transaction, as well as shareholder approval to increase in its authorized shares necessary to complete the transaction. The Company intends to seek shareholder approval in the immediate future.

The Company cannot predict whether it will successful in closing the transaction with RTC.

▪

The estimated costs of Phase 1 is approximately $400,000.

▪

The estimated costs of Phase 2 is approximately $10 million.

▪

Phase 3 entails the construction of a processing plant to process the ore, which will be owned by the Company.

The estimated costs for the construction of the processing plant is approximately $40 million.

As consideration for the mining services, Contractor will receive the following consideration from the Company:

Phase 1 and Phase 2. As consideration for Phases 1 and 2, the Company will issue to Contractor 10 million shares of its common stock.

The parties will be obligated to share in the mining and processing costs and revenues generated from any ore processing on a proportionate basis, that is 70% to the Company and 30% to Contractor.

During the three months ended August 31, 2013 we focused our efforts on seeking to raise funding to meet our existing liabilities, achieve our objective to develop our mining interests and complete the Share Exchange Agreement with Resource Technology Corporation.

On July 9, 2013, the Company’s Board of Directors approved and recommended that the Company increase its authorized shares of common stock from 150,000,000 to 475,000,000 and that the proposed action be submitted to a vote of its shareholders. The purpose of the action is to enable to Company to complete the Share Exchange Agreement with Resource Technology Corporation pursuant to which the Company will be required to issue 300,000,000 shares of its common stock to the shareholders of Resource Technology Corporation (“RTC Transaction”) (See Company’s Form 8-K filed with the Securities and Exchange Commission on May 17, 2013). The Share Exchange Agreement was previously approved an independent committee of Directors, however subject to subsequent approval of the Company’s shareholders. The record date established by the Board of Directors was July 9, 2013, however, it was subsequently changed by the Board of Directors to September 16, 2013 (“Record Date”).

The Company intends to seek the written consent of stockholders as of September 16, 2013 holding in excess of a majority of the voting stock to affect the Proposed Actions. If the proposed action were not adopted by written consent, it would have been required to be considered by the Company’s stockholders at special stockholders meeting. The Company intends to file a notice to non-voting stockholders in the form of a Schedule 14C Information Statement. Pursuant to Section 228 of the DGCL, no advance notice is required to be provided to the other stockholders; who have not consented in writing to such action, of the taking of the stated corporate action without a meeting of stockholders. No additional action will be undertaken pursuant to such written consents, and no dissenters’ rights under the DGCL are afforded to the company stockholders as a result of the action to be taken.

On July 17, 2013, Mr. David Cutler resigned in his capacity as Chief Financial Officer of the Company. Mr. Cutler did not resign over any disagreement with the Company on any matter relating to our operations, policies or practices. Mr. Cutler was initially hired as the Company’s Chief Financial Officer on a part time basis on November 29, 2011. He will continue to provide ongoing financial consulting services for the Company until such time as the Company hires a full time chief financial officer.

On July 17, 2013, we entered into a convertible debenture for $100,000. The convertible debenture has a 6 month term and bears interest of 12%. The convertible debenture may be prepaid at a rate of 150% of the principal balance outstanding along with accrued interest. At any time after the maturity date of the convertible loan, if any principal balance is still outstanding, the balance shall be convertible into shares of the common stock at a 42% discount to the lowest closing price of the prior 20 trading days.

Liquidity and Capital Resources

As at August 31, 2013, we were in default on repayment of convertible promissory notes with principal balances of $575,000 together with accrued interest of $380,881 totaling $955,881.

In addition, we owe another former attorney the sum of approximately $90,000 under an arbitration award. The attorney has initiated efforts to effect a judgment against the Company.

These conditions raise substantial doubt about our ability to continue as a going concern.

In our audited financial statements for the fiscal years ended May 31, 2013 and 2012, contained in our Annual Report, the Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.

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 volatile financial markets that may make it difficult to satisfy our need for additional capital to finance our plan of operations for fiscal 2014 through either debt or equity. As a result, we continue to seek appropriate opportunities that are likely to provide us with adequate fiscal resources to execute our plan of operations in the current fiscal year and beyond.

Depending on market conditions and the options available to us, we may attempt to enter into a joint venture with an operating company or permit an operating company or third party to undertake exploration work on the Solidaridad Property, we may attempt to sell all or part of our Solidaridad Property, or we may seek equity or debt financing (including borrowing from commercial lenders) or we may consider a sale of ourselves or our assets.

To date, we have raised capital through the sale of shares of our common stock and sales of convertible promissory notes. During the three months ended August 31, 2013, we issued 1.9 million shares of its common stock, together with warrants to buy 950,000 shares of its common stock for proceeds of $190,000. The warrants had terms of 6 or 12 months and exercise prices of $0.15 or $0.20.

As mentioned above, we must obtain additional funding to continue our operations. There can be no guarantee that we will be able to obtain additional funding on terms that are favorable to us or at all. As an exploration stage company, we have no current ability to generate revenue and no plans to do so in the foreseeable future. Our assets consist of cash, 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.

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 Solidaridad Property; 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.

RESULTS OF OPERATIONS

THREE MONTHS ENDED AUGUST 31, 2013 COMPARED TO THE THREE MONTHS ENDED AUGUST 31, 2012

Revenue

We earned no revenue in either the three months ended August 31, 2013 or 2012 and as an exploration stage company we do not anticipate earning revenue in the foreseeable future.

General and administrative expenses

During the three months ended August 31, 2013, we incurred general and administrative expenses of $462,716, compared to the $693,422 incurred in the three months ending August 31, 2012, a decrease of $230,706, or 33%. The decrease relates primarily to the fact that in the three months ended August 2012, we issued 1,750,000 shares valued at $315,000 as compensation to our directors and recognized stock option expense of $40,000 to vest previously issued stock option. There was no similar stock and option compensation expense in the three months ended August 31, 2013. This decrease was partially offset by payments of $125,000 to a company controlled by Mr. George Mesa, our Director of Security, and owner of Mesa Acquisitions Group LLC. Mr. Mesa had previously advanced a like amount of funds which were used by Resource Technology Corp. (“RTC”) in connection with the transportation of ore supply, and related costs. As mentioned above, in May 2013, we entered into a Share Exchange Agreement with RTC and its shareholders, which includes our Chairman and a director, to acquire the issued and outstanding shares of RTC from the RTC shareholders.

Interest expense (net)

During the three months ended August 31, 2013, we incurred interest expense (net) of $146,331 compared to $55,943 during the three months ended August 31, 2012, an increase of $138,296, or 247%.

The increase was due to initial interest on the origination of a derivative liability, loan interest and amortization of debt discount on the $200,000 of convertible debentures that we entered into during the three months ended August 31, 2013.

Net loss

The net loss for the three months ended August 31, 2013 was $656,955 compared to $749,365 during the three months ended August 31, 2012, a decrease of $92,410, or 12%, due to the factors discussed above.

CASH FLOW INFORMATION FOR THE THREE MONTHS ENDED AUGUST 31, 2013 COMPARED TO THE THREE MONTHS ENDED AUGUST 31, 2012

Net cash flow used in operations in the three months ended August 31, 2013 was $385,167 compared to $162,488 for the three months ended August 31, 2012, an increase of $222,679, or 137%.

In the three months ended August 31, 2013, our net loss was $656,955 which was offset by $138,969 in non cash items and a positive movement in operating assets and liabilities of $132,819 to arrive at net cash used in operations of $385,167. By comparison, in the three months ended August 31, 2012, our net loss was $749,365 which was offset by $357,527 in non cash items and a positive movement in operating assets and liabilities of $229,350 to arrive at net cash used in operations of $162,488.

No cash flow was provided by, or used in, investing activities during the three months ended August 31, 2013 or 2012.

Net cash flow generated from financing activities was $382,000 in the three months ended August 31, 2013 compared to $92,000 for the three months ended August 31, 2012, an increase of $290,000 or 8%.

This increase arose to the fact that we received $98,000 more from the sale of our shares of common stock and warrants in the three months ended August 31, 2013 than we did in the three months ended August 31, 2012 and the fact that we received net proceeds of $192,000 by entering into convertible debentures in the three months ended August 31, 2013 compared to $0 in the three months ended August 31, 2012 .

ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), as of the last day of the fiscal period covered by this report, August 31, 2012.The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of August 31, 2013.

Changes in Internal Control over Financial Reporting.

During the fiscal quarter ended August 31, 2013, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART 2: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

During the three months ended August 31, 2013, we received $190,000 from the sale of 1,900,000 units. Each unit consists of one share of our common stock, and one half of a warrant. The warrants had terms of 6 or 12 months and exercise prices of $0.15 or $0.20. The transaction was exempt under Section 4(2) and 3(b) of the Securities Act of 1933, as amended, and the rules and regulations promulgated there under, including Regulations D, due to the facts that the investor was an accredited investor, had acquired the shares for investment purposes and not with a view for re-distribution, had access to sufficient information concerning the Company, and the certificate(s) representing such shares will bear a restrictive legend.

During the three months ended August 31, 2012, we received $92,000 from the sale of 1,226,665 units. Each unit consists of one share of our common stock, and one half of a warrant. The conversion price of the warrant is $0.10 during an exercise period of twelve months. The transaction was exempt under Section 4(2) and 3(b) of the Securities Act of 1933, as amended, and the rules and regulations promulgated there under, including Regulations D, due to the facts that the investor was an accredited investor, had acquired the shares for investment purposes and not with a view for re-distribution, had access to sufficient information concerning the Company, and the certificate(s) representing such shares will bear a restrictive legend.

ITEM 3. DEFAULT OF SENIOR SECURITIES.

As at August 31, 2013 we are in default on repayment of convertible promissory notes with principal balances of $575,000 together with accrued interest of $380,881 totaling $955,881.

As of the date of this report, we have not paid the holders of these notes as required under their terms.

ITEM 4. MINING SAFETY DISCLOSURES

Mining operations and properties in the United States are subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), issuers are required to disclose specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities.

During the three month periods ending August 31, 2013 and, 2012, we did not conduct mining operations nor maintain any mining properties in the US. Consequently we were not subject to any health or safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities during the three month periods ending August 31, 2013 and 2012.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

		Incorporation by Reference
Exhibit Number	Exhibit Description	Form	File Number	Exhibit	File Date	Filed herewith
31.1	Certification of Principal Executive Officer as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended					X
31.2	Certification of Principal Financial Officer as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended					X
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)					X
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)					X
101.INS	XBRL Instance Document (1)					X
101.SCH	XBRL Taxonomy Extension Schema Document (1)					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (1)					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (1)					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (1)					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (1)					X
(1)	Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	U.S. Precious Metals, Inc.

	By:	/s/ Gennaro Pane
		Name: Gennaro Pane
		Title: Chief Executive Officer
		Date: October 18, 2012


	U.S. Precious Metals, Inc.

	By:	/s/ David J Cutler
		Name: David J Cutler
		Title: Chief Financial Officer
		Date: October 18, 2012