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

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended:	AUGUST 31, 2015
or
☐	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.)
242A West Valley Brook Road Califon, New Jersey	07830
(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.

☒ Yes   ☐  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).

☒ Yes   ☐ 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	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes   ☒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: 194,737,658 shares of common stock issued and outstanding as of October 20, 2015.

U.S.PRECIOUS METALS, INC.

INDEX

PART 1: FINANCIAL INFORMATION	1
ITEM 1. FINANCIAL STATEMENTS	1
CONDENSED CONSOLIDATED BALANCE SHEETS	1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)	2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT	3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)	4
NOTES TO CONDENSED CONSOLIDATD FINANCIAL STATEMENTS	5
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	54
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	63
ITEM 4. CONTROLS AND PROCEDURES.	64
PART 2: OTHER INFORMATION	64
ITEM 1. LEGAL PROCEEDINGS	64
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	65
ITEM 3. DEFAULT OF SENIOR SECURITIES	66
ITEM 4. MINING SAFETY DISCLOSURES	66
ITEM 5. OTHER INFORMATION	66
ITEM 6. EXHIBITS	67
SIGNATURES	68

PART 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

U.S. PRECIOUS METALS, INC. (An Exploration Stage Company) CONDENSED CONSOLIDATED BALANCE SHEETS
	August 31, 2015 (Unaudited)			May 31, 2015 (Audited)
ASSETS
Current Assets:
Cash	$	117,971		$	179,895
Cash restricted		222,500			-
Prepaid and other current assets		9,325			32,762
Total current assets		349,796			212,657
Property and equipment, net		12,905			15,432
Other Assets
Investment in mining rights and other		43,967			44,106
Total Assets	$	406,668		$	272,195
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses	$	1,373,195		$	2,479,667
Convertible notes payable		1,602,478			1,717,860
Derivative liability		1,655,709			2,600,189
Total current liabilities		4,631,382			6,797,716
Long Term Liability
Convertible note payable, net of debt discount		34,772			42,475
Derivative liability on long term convertible note payable		410,272			528,409
Total Ling term liabilities		450,044			570,884
Commitments and Contingencies
Stockholders' Deficit:
Preferred stock:  authorized 10,000,000 shares of $0.00001 par value; no shares issued and outstanding, respectively		-			-
Common stock:  authorized 325,000,000 shares of $0.00001 par value; 189,401,330 (unaudited)  and 164,573,557 shares issued and outstanding respectively		1,894			1,646
Additional paid in capital		51,408,219			48,880,714
Deficit accumulated during exploration stage		(56,079,871	)		(55,978,765	)
Total stockholders' deficit		(4,669,758	)		(7,096,405	)
Total Liabilities and Stockholders' Deficit	$	406,668		$	272,195

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

1

U.S. PRECIOUS METALS, INC. (An Exploration Stage Company) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
	Three Months Ended August 31,
	2015			2014
Revenues	$	-		$	-
Costs and Expenses
General and administrative		1,263,568			1,432,394
Operating Loss		(1,263,568	)		(1,432,394	)
Other Income (Expense):
Gain (loss) on settlement of liabilities		1,131,205			-
Change in derivative liability		581,986			(34,151	)
Interest expense (net)		(550,729	)		(173,211	)
Total other income (expense)		1,162,462			(207,362	)
Loss before income taxes		(101,106	)		(1,639,756	)
Provision for income taxes		-			-
Net income (loss)	$	(101,106	)	$	(1,639,756	)
Net income (loss) per share
Basic and diluted	$	(0.00	)*	$	(0.01	)
Weighted average number of  shares
outstanding
Basic and diluted		171,543,157			148,461,468
' * denotes a loss of less than $(0.01) per share.

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

2

U.S. PRECIOUS METALS, INC. (An Exploration Stage Company) CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
	Preferred Stock						Common Stock						Additional Paid In Capital		Deficit Accumulated During Exploration Stage			Total
	Shares			Amount			Shares			Amount
Balance, May 31 2014 audited		1,250,000		$	13			143,748,746		$	1,437		$	44,854,841	$	(49,544,756	)	$	(4,688,465	)
Shares issued for cash		-			-			7,921,667			79			743,396		-			743,475
Shares issued as compensation		-			-			3,250,000			33			774,967		-			775,000
Shares issued for services		-			-			2,050,000			21			601,479		-			601,500
Notes payable converted for shares		-			-			5,703,144			57			918,307		-			918,364
Accounts payable converted for shares		-			-			600,000			6			157,994		-			158,000
Warrants exercised		-			-			300,000			3			39,997		-			40,000
Stock options issued		-			-			-			-			724,730		-			724,730
Stock options exercised		-			-			1,000,000			10			64,990		-			65,000
Termination of RTC restructuring agreement		(1,250,000	)		(13	)		-			-			13		-			-
Net loss for the year		-			-			-			-			-		(6,434,009	)		(6,434,009	)
Balance, May 31, 2015 audited		-			-			164,573,557			1,646			44,880,714		(55,978,765	)		(7,096,405	)
Shares issued for cash		-			-			12,226,785			122			545,378		-			545,500
Notes payable converted for shares		-			-			9,255,876			93			1,135,698		-			1,135,791
Shares issued as compensation		-			-			500,000			5			74,995		-			75,000
Shares issued for services		-			-			1,528,444			15			114,576		-			114,591
Cancellation of shares issues		-			-			(1,000,000	)		(10	)		10		-			-
Warrants exercised		-			-			316,668			3			39,580		-			39,583
Accrued compensation settled with shares		-			-			2,000,000			20			159,980		-			160,000
Accrued compensation settled with options		-			-			-			-			457,288		-			457,288
Net loss for the period		-			-			-			-			-		(101,106	)		(101,106	)
Balance at August 31, 2015 unaudited		-		$	-			189,401,330		$	1,894		$	51,408,219	$	(56,079,871	)	$	(4,669,758	)

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

3

U.S. PRECIOUS METALS, INC. (An Exploration Stage Company) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Three Months Ended August 31,
	2015			2014
Cash Flows From Operating Activities:
Net loss	$	(101,106	)	$	(1,639,756	)
Adjustments required to reconcile net loss to net cash used in operating activities:
Charges and credits not requiring the use of cash:
Depreciation		2,527			2,528
Shares issued as compensation		212,841			495,000
Stock option expense		-			206,958
Gain on settlement of liabilities with stock and options		(1,131,205	)		-
Amortization of loan discount		402,840			7,319
Origination interest on derivative liability		84,028			111,975
Change in fair derivative value		(581,985	)		34,151
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses and other current assets		325			12,453
Increase in interest accrued  on convertible notes		52,047			21,879
Increase (decrease) in accounts payable,
accrued expenses and other current liabilities		553,681			308,097
Net Cash Used in Operating Activities		(506,007	)		(439,396	)
Cash Flows From Investing Activities:		-			-
Net Cash Used in Investing Activities		-			-
Cash Flows From Financing Activities:
Proceeds from sales of common stock		545,500			455,975
Proceeds from exercises of warrants		39,583			15,000
Proceeds from convertible notes, net		219,000			-
Transfer to escrow to repay convertible notes,		(222,500	)		-
Repayment of convertible notes,		(137,500	)		-
Net Cash Provided by Financing Activities		444,083			382,000
Net increase (decrease) in cash		(61,924	)		31,579
Cash beginning of period		179,895			121,754
Cash end of period	$	117,971		$	153,333

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

4

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. 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 Michoacán, Mexico where we own exploration and exploitation concessions to approximately 37,000 contiguous acres of land (the "Solidaridad Property").

The Company has acquired exploration or exploitation concessions to approximately 37,000 acres of land in Michoacán, Mexico. Below is a list of the concessions which the Company has acquired:

Name of Concession	Title Number		Hectares*		Date Acquired	Expiration Date
Solidaridad I		220315		174.5408	July 11, 2003	July 10, 2053
Solidaridad II		220503		2162.2311	August 14, 2003	August 13, 2053
Solidaridad II, Fraction A		220504		1.4544	August 14, 2003	August 13, 2053
Solidaridad II, Fraction B		220505		.0072	August 14, 2003	August 13, 2053
Solidaridad III		223444		294.0620	December 14, 2004	December 13, 2054
Solidaridad IV		220612		149.4244	September 4, 2003	September 3, 2053
Solidaridad V (AKA Le Ceiba)		223119		921.3201	October 19, 2004	October 18, 2054
La Sabila		227272		11,405.0000	June 2, 2006	June 1, 2056

*A Hectare is equivalent to 2.47 acres.

The above group of concessions are collectively referred to as the "Solidaridad Concessions" The Company's concessions have a term of fifty years from the date first acquired and can be renewed for another fifty years. Concessions grant the holder the right to explore and exploit all minerals found in the ground. In order to maintain the concessions, the Company must pay surface taxes semi-annually in January and July and perform minimum amounts of assessment work, on a calendar year basis. Assessment work reports are required to be filed annually in May for the preceding calendar year. The amount of surface taxes and annual assessments are set by regulation and may increase over the life of the concession and include periodic adjustments for inflation.

Mining concessions do not automatically grant the holder the right to enter or use the surface land of the property where such mining concessions are located. In order to access the surface land, the holder must obtain permission from the surface owner. The Company currently has secured access rights to the portions of the Solidaridad Property where its concessions Solidaridad I, Solidaridad III, and Solidaridad V are located by way of a written agreement entered into by and between its Mexican Subsidiary and the owners of the portions of the Solidaridad Property where these concessions are located. This agreement requires the Company to pay an annual rent to the landowner. The Company is in the process of securing, but has not yet secured, access rights to the other portions of the Solidaridad Property, which it plans to do in the future in connection with any decision to begin exploration and/or exploitation of those areas. If the Company is ultimately unable to receive access, or unable to receive access at a reasonable price, it may affect the ability of the Company to explore for, or exploit, mineralized material from those areas.

5

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

1. NATURE OF OPERATIONS (CONTINUED)

Original Transaction with Resource Technology Corp

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 agreement was subject to shareholder approval along with shareholder approval to increase the authorized number of shares of common stock to 480 million. As part of the transaction, RTC had three ore supply contracts with third party suppliers, and a Plasmafication™ Toll Processing Agreement with Plasma Processing, LP., a Florida limited partnership ("PP LP") and an affiliated entity of RTC. The ore supply agreements and the Toll Processing Agreement would 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.

It was represented to us that PP LP owned 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. Plasmafication™ or plasma processing employs extreme temperatures (in excess of 7,000 F) to dissociate ore concentrates into their basic elemental state. At the time of the transaction, the plant was not in commercial production.  The parties at the time believed that initial upgrades to the facility would commence within 90 to 120 days which would enable the facility to process concentrates at the rate of approximately 9 tons/day. PP LP expected to make further upgrades to the facility which would increase its capacity to approximately 27 tons/day.  These upgrades were subject to PP LP raising funds sufficient to complete necessary improvements to its plasma processing plant.

Plasmafication™ Toll Processing Agreement.

The Toll Processing Agreement between PP LP and RTC required PP LP to deliver a range of services, including the Plasmafication™ of the RTC concentrate from the ore supply contracts. These services would be provided at the sole cost and expense of PP LP. The agreement required an initial processing capacity of 5 tons/day of RTC concentrate for approximately 200 days per annum. PP LP was required to upgrade its current plant to achieve this processing rate which as mentioned above was expected to occur within 90 to 120 days. These upgrades were expected to bring the total processing rate of the plant to about 9 tons/day. The agreement allowed 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 would need to be increased to about 29 tons/day.

PP LP 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 completion date for the Benchmark Run was June 1, 2014.

6

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

1.NATURE OF OPERATIONS (CONTINUED)

Share Exchange Agreement.

As stated above, pursuant to the Share Exchange Agreement, the Company 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. The transaction shares were to be held in escrow, however, voting rights would remain with the named party. The agreement further provided that if the Benchmark Run did not yield net cash proceeds of $5 million to RTC, then the number of exchange shares in total would be proportionately reduced. The closing of the transactions contemplated by the Agreement was expected to occur no later than June 1, 2014. The agreement contained 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.

We were informed that the RTC shareholders are Wolz International, LLC ("Wolz"), which owns 50%, Titan Productions, Inc. ("Titan"), which owns 25%, and Mercury6, LP ("Mercury6") which owns 25%. Assuming a completion of the transaction without further proportionate reduction in the USPR Shares, Wolz, Titan and Mercury would have received a proportionate amount of the 300 million shares of our common stock.  We were informed that Mr. Gennaro Pane, our former Chairman and Chief Executive Officer, was the sole officer and a member of Wolz (and would have owned approximately 51% of such shares), and Chad Altieri, our former Board member, is the sole owner of Mercury. In addition, we were informed that Messrs Pane and Altieri owned or controlled limited partnership interests in PP LP.

Restructuring Agreement with RTC

On January 30, 2014, the Company entered into a Restructuring Agreement with RTC, the RTC Shareholders, and Plasmafication Technology Holding, LLC, a Florida limited liability company ("PTH"). As mentioned above, it was represented that PTH was an affiliate of RTC and it owned and operated a plasma processing plant located in 29 Palms, California which employs the Plasmafication™ technology ("Plasma Plant").

Pursuant to the Restructuring Agreement, the Company, RTC and the RTC Shareholders terminated ab initio the Share Exchange Agreement, and the Company entered into new agreements and instruments with the counter parties described below. These new agreements and instruments consist of (i) the Restructuring Agreement, the Technology License Agreement by and between the Company and PTH ("License Agreement"), (ii) an Equipment Purchase and Sale Agreement by and between the Company and PTH ("Equipment Purchase Agreement"), (iii) a Promissory Note issued by PTH in favor of the Company in the amount $5,000,000 ("Promissory Note"), and (iv) a Certificate of Designations relating to 1,250,000 shares of Preferred Stock (defined below) issued to RTC in connection with the transaction ("Certificate of Designations"). The closing of the Restructuring Agreement occurred on February 4, 2014 ("Closing").

The Restructuring Agreement and related agreements and instruments contained the following material terms and conditions, among others:

7

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

1.NATURE OF OPERATIONS (CONTINUED)

Processing Rights.

Under the terms of the Restructuring Agreement, PTH agreed to process the Company's ore concentrate at its Plasma Plant five (5) days per month for each month during a term agreed by the parties. The term begins with the date that the Plasma Plant is ready to commence commercial operations at the processing rate of 5 tons/day and terminating on the date that the Company Plasma Facility (defined below) is fully permitted and ready to commence commercial operations at a processing rate of 10 tons/day. PTH informed the Company that it expected to be fully operational during the fourth calendar quarter of 2014. The Company agreed to pay its ratable share of PTH overhead and direct costs as set forth in the agreement, and apart from the foregoing, PTH would not receive any royalty or other fee.

Licensing Rights. 

Under the Technology Licensing Agreement, PTH granted the Company a non-exclusive, royalty free license to use PTH's Plasmafication™ technology for a term of 25 years. The technology covers and relates to the construction and use of a Company owned plasma plant described below. The Licensing Agreement was subject to other customary terms and conditions.

Construction of a Company Owned Plasma Plant.

Under the Equipment Purchase Agreement, PTH agreed to construct, on behalf of the Company, a 10 ton/day plasma processing plant on its premises located in 29 Palms, California ("Company Facility"). The plant was to be constructed on an actual costs basis without markup by PTH, and PTH also agreed to pay for 1/3rd of the construction costs. The estimated costs of construction for the Company Facility was approximately $18 million. The parties intended to formulate in the near future a draw schedule which would detail construction and payment milestones, however, in order to initiate the construction process, the Company would have been be required to pay a down payment of $1.5 million. In addition to other terms and conditions therein, PTH agreed to assist in obtaining the necessary Federal, state and local permits and licenses to construct and operate the Company Plasma facility, however, the Company was required to bear the related costs. Upon completion of the facility, the Company would own 100% of the Company Facility, however, any Licensed Technical Information will be subject to the Licensing Agreement.

In addition, the parties would be required to enter into an operating and maintenance agreement which would address the operation and maintenance of the Company Owned Plasma Plant.

Promissory Note. 

As a material inducement for the Company to enter into the Restructuring Agreement, PTH delivered to the Company a Promissory Note in the principal amount is $5 million. The note was payable on or before January 30, 2015 with no interest prior to the payment due date. The promissory note provided for certain conditions set forth therein.

No value has been assigned to the Processing Rights, Licensing Rights, PTH's assistance to construct a Company Owned Plant or Promissory Note in these financial statements. Effective as the date of this agreement, the Company, RTC and PTH, were all development stage companies, none of which have the existing financials resources, established business operating processes or ongoing profitable business operations to meet their obligations under the terms of these agreements at the time the agreements were signed. The Company, RTC and PTH's ability to meet their obligations under the terms of these agreements wasdependent on their ability to raise the future funding required and to successfully develop and implement their business plans which could not be guaranteed at the time the agreements were signed. Accordingly the realization of any future value from these rights and notes was highly uncertain at the time the agreements were signed and accordingly no value was assigned to them.  

8

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

1.NATURE OF OPERATIONS (CONTINUED)

Promissory Note Continued. 

Preferred Stock and Certificate of Designation. In connection with the Restructuring Agreement, the Company issued to RTC 1,250,000 shares of its newly created Class A Super Voting Preferred Stock ("Preferred Stock"). The Preferred Stock has the rights privileges and preferences as is set forth in the Certificate of Designations filed with the Delaware Secretary of State. As stated in the Certificate of Designations, each share of the Preferred Stock has identical rights as 100 shares of the Company's common stock. These rights, privileges and preferences include among others; (i). each share of Preferred Stock has 100 to 1 voting rights, voting along with the Company's common stock, (ii). each share of Preferred Stock has 100 to 1 rights upon liquidation and distribution of the Company, (iii). each share of Preferred Stock has the right to convert into 100 shares of common stock of the company. The Company increased its authorized shares of common stock from 150 million to 325 million in order to allow for the conversion of the Preferred Stock, among other considerations.

The market value of the 1,250,000 shares of its newly created Class A Super Voting Preferred Stock is assumed to equate to the value of 125,000,000 shares of the common stock which was $16,250,000 on January 30, 2014 when the Company became contractually obligated to issue these shares.

In addition, under the Restructuring Agreement, the Company and RTC and its shareholders granted mutual releases, and provided customary representations and warranties.

The Share Exchange Agreement was adopted by the unanimous consent of the Board of Directors of the Company, RTC, each RTC shareholders and PTH. All of the shareholders of RTC were signatories to the agreement.

As mention above, the Company was informed that the RTC shareholders are Wolz International, LLC ("Wolz") owning 50% of RTC, Titan Productions, Inc. ("Titan") owning 25% of RTC, and Mercury6, LP ("Mercury6") owning 25% of RTC. Assuming the issuance of the Preferred Stock to its shareholders,  Wolz would have receive 625,000 shares of Preferred Stock convertible into 62.5 million shares of common stock, and each of Titan and Mercury will receive 312,500 shares of Preferred Stock convertible into 31.5 million shares of common stock. We were informed that Mr. Gennaro Pane, our former Chairman and Chief Executive Officer, was the sole officer of Wolz and owned approximately 51% of Wolz, and Chad Altieri, our former Board member, is the sole officer and owner of Mercury.  In addition, we were informed that Mr. Pane was a managing member of PTH and Messrs Pane and Altieri owned or controlled approximately (or approximately 24% of the Company's issued and outstanding common stock), and each of Titan and Mercury will receive 312,500 shares of Preferred Stock convertible into 31.5 million shares of common stock (or approximately 12% of the Company's issued and outstanding common stock for each entity). We were informed that Mr. Gennaro Pane, our former Chairman and Chief Executive Officer, was the sole officer and a member of Wolz (and would have owned approximately 51% of such shares), and Chad Altieri, our former Board member, is the sole owner of Mercury. In addition, we were informed that Messrs Pane and Altieri owned or controlled limited partnership interests in PP LP.

Unregistered Sale of Securities.

At Closing, the Company issued to RTC 1,250,000 shares of Preferred Stock. Each share of Preferred Stock has identical rights as 100 shares of common stock except that each share Preferred Stock is convertible to 100 shares of common stock (or a total of 125 million shares of common stock of the Company).

9

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

1.NATURE OF OPERATIONS (CONTINUED)

Unregistered Sale of Securities Continued.

These securities qualified for exemption under Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder. The offering was not a "public offering" as defined in Section 4(2) due to the insubstantial number of persons involved in the offering, manner of the offering and number of securities offered. These shareholders made certain representations and warranties, including their investment intent. They also agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act.

Material Modification to Rights of Security Holders.

On January 31, 2014, the Company filed the Certificate of Designations with the Delaware Secretary of State. The Certificate of Designation allows for the creation and issuance of the 1,250,000 shares of Preferred Stock. As stated in the Certificate of Designations, each share of the Preferred Stock has identical rights as 100 shares of the Company's common stock. These rights, privileges and preferences include among others; (i) each share of Preferred Stock shall have 100 to 1 voting rights, voting along with the Company's common stock, (ii) each share of Preferred Stock shall have 100 to 1 rights upon liquidation and distribution of the Company, (iii) each share of Preferred Stock shall have the right to convert into 100 shares of common stock of the Company. On January 29, 2014, the Company's Board of Directors approved the Certificate of Designations, the filings of the Certificate of Designations with the Delaware Secretary of State and the issuance of the Preferred Stock created thereby to RTC.

Change of Control of Registrant.

At Closing of the Restructuring Agreement, the Company issued to RTC 1,250,000 shares of Preferred Stock. Each share of Preferred Stock has identical rights as 100 shares of common stock except that each share Preferred Stock is convertible to 100 shares of common stock (or a total of 125 million shares of common stock of the Company). As a result, a change of control occurred with respect to the Company. Immediately prior to Closing, the Company had 150 million shares of common stock authorized, of which 135,259,321 shares were issued and outstanding and 10 million shares of preferred stock, of which no shares were outstanding.

Immediately after Closing, the authorized, issued and outstanding shares of common stock of the Company were unchanged and the Company had 10 million shares of preferred stock authorized, of which the Company had 1,250,000 shares of preferred stock issued and outstanding designated the Series A Super Voting Preferred Stock referred to herein as the "Preferred Stock."

After giving effect to the conversion of the Preferred Stock by RTC, RTC would own approximately 125 million shares of common stock or approximately 48% of the common stock of the Company after giving effect to the conversion of the Preferred Stock to common stock. The RTC shareholders were Wolz International, LLC (" Wolz ") owning 50% of RTC, Titan Productions, Inc. (" Titan ") owning 25% of RTC, and Mercury6, LP (" Mercury6 ") owning 25% of RTC. Wolz received 625,000 shares of Preferred Stock convertible into 62.5 million shares of common stock (or approximately 24% of the Company's issued and outstanding common stock), and each of Titan and Mercury received 312,500 shares of Preferred Stock convertible into 31.25 million shares of common stock (or approximately 12% of the Company's issued and outstanding common stock for each entity). We were informed that Mr. Gennaro Pane, our former Chairman and Chief Executive Officer, was the sole officer and a member of Wolz (and would have owned approximately 51% of such shares), and Chad Altieri, our former Board member, is the sole owner of Mercury.

10

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

1.NATURE OF OPERATIONS (CONTINUED)

Termination of Agreement with RTC

PTH failed to pay the $5,000,000 due under the Promissory Note and such failure continues as of the date of this report. The Company believes that the failure of RTC constituted a material breach to the Restructuring Agreement. As a result of that breach, along with other factors, the Company rescinded the Restructuring Agreement and cancelled the Preferred Stock, including all rights, privileges and preferences thereto. On May 12, 2015 and again on May 14, 2015, the Company notified RTC that it rescinded the Restructuring Agreement and cancelled the Preferred Stock, including all rights, privileges and preferences thereto, effective immediately. The Company provided a similar notification to PTH cancelling the Restructuring Agreement and related agreements with PTH.

On May 15, 2015, the Company received notification from an attorney at law acting as the custodian for RTC requesting the conversion of the Preferred Stock into 125,000,000 shares of common stock of the Company. The Company's position is that RTC has no rights to the Preferred Stock and the Company will take no action with respect to the purported conversion notice from RTC.

The Company undertook the above-described actions unilaterally and these actions were not the product of a negotiated settlement between the Company and the counterparties to the Restructuring Agreement, including RTC.

Lawsuit with RTC

On August 8, 2015, we were served with a lawsuit by Resource Technology Corporation ("RTC").

The Lawsuit was filed in the 11th Judicial Circuit Court, Dade County, Florida (Case: 2015-017057-CA-01). The Plaintiff, RTC, contends that the Restructuring Agreement does not allow for the unilateral termination of the agreement, rescission of the Certificate of Designations relating to the Preferred Stock nor the cancellation of the Preferred Stock. It further states that the obligations of PTH were not intertwined with that of RTC, and therefore the Company's termination of the agreement and cancellation of the Preferred Stock was inappropriate and ineffective, and further the Company's sole remedy would be to seek judgment against PTH for its default under the Promissory Note. The action seeks declaratory relief from the Court: (i) to declare that the Company did not have the legal right to terminate the Restructuring Agreement and rescind the Series A Preferred Stock, (ii) to determine that the unilateral actions by the Company in terminating the Restructuring Agreement and rescinding the Series A Preferred Stock is without merit, (iii) to enter a final judgment directing the issuance of the Preferred Stock to Plaintiff, (iv) to enter an order finding that any shareholder vote that have taken place without Plaintiff be declared null and void, (v) alternatively, if it is held that the Company did have the right to terminate the Restructuring Agreement and rescind the Series A Preferred Stock, to declare that the original Share Exchange Agreement with RTC be reinstated along with an extension of performance time periods (for RTC) as determined by the Court, and (vi) be awarded attorney's fees and court costs. In addition, the action asserts that the Company converted the Series A Preferred Stock, which was property of Plaintiff. The Plaintiff demands a judgment of $20,000,000 plus interest and court costs, and seeks a trial by jury.

11

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

1.NATURE OF OPERATIONS (CONTINUED)

  Lawsuit with RTC Continued

The Company retained outside counsel to vigorously defend its position in this matter and avail itself of all legal and equitable rights and remedies against PTH, RTC and all other culpable parties in this matter.

On September 4, 2015, the Company filed a Notice of Removal to United Stated District Court, Southern District of Florida. 

On September 25, 2015, we filed our Answer, Affirmative Defenses, Counterclaims and Third Party Complaint.

Answer, Affirmative Defenses, Counterclaims and Third Party Claims

Answer and Affirmative Defenses

In our Answer, we denied Plaintiffs claims for Specific Performance, Declaratory Relief and Conversion. In addition, we asserted numerous affirmative defenses, including among others that RTC obtained the Company's consent through fraud, deceit or misrepresentation and RTC failed to satisfy certain conditions under the Restructuring Agreement.

Counterclaims and Third Party Complaint

In our responsive pleadings, we asserted numerous counterclaims against RTC and by way of a Third Party Complaint, we asserted third party claims against Gennaro (Jerry) Pane ("Pane"), Chad Altieri ("Altieri"), Barrington (Barry) Schneer and Joseph Spano ("Individual Defendants") and PTH.

The Company's counterclaims against RTC include, among others, breach of contract, fraudulent inducement to enter into the Share Exchange Agreement and the Restructuring Agreement based in part on the misrepresentations of Pane and Altieri, rescission of the Restructuring Agreement based on the misrepresentations of Pane and Altieri and the failure of consideration, and RTC's unjust enrichment. The Company's third party claims include, among others, fraud against all of the third party defendants, the breach of fiduciary duty and negligent misrepresentation against Pane and Altieri. In addition, we have alleged the third party defendants conspired to defraud the Company to issue the Preferred Stock.

Key allegations in our Counterclaims and Third Party Claims include the following:

• RTC/PTH and the Individual Defendants misrepresented that they had the necessary permits to legally operate their plasma facility in the City of Twentynine Palms, California; when in fact RTC/PTH could not legally operate the plasma facility because they did not have, among other things, the necessary Conditional Use Permit and Certificate of Occupancy required by the City of Twentynine Palms.

• RTC and PTH, through the Individual Defendants, provided financial statements and information to the Company that we allege were false and materially misleading.

• RTC /PTH and the Individual Defendants misrepresented their technical expertise and ability to operate a plasma facility.

• RTC/PTH and the Individual Defendants since October 2013 continually misrepresented that PTH had received the necessary funding, or that funding was imminent, to improve its plasma facility in Twentynine Palms. In reality, in October 2014, PTH had received only a fraction of the necessary funding.

12

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

1.NATURE OF OPERATIONS (CONTINUED)

  Lawsuit with RTC Continued

The Company has demanded a judgment against RTC and the third party defendants for compensatory damages, punitive damages, interest, taxable costs, attorneys' fees and any such other and further relief as the Court deems just and proper.

Mining Services Agreement with Mesa Acquisition Group LLC

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 (Solidaridad I & II mining concessions (or approximately 5,000 acres)). These services were to be performed the various mining services in three, separate phases described below:

●Phase 1 required 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 was approximately $400,000.

 ●Phase 2 required 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 was approximately $10 million.

●Phase 3 required the construction of a processing plant to process the ore, which will be owned by the Company and the performance of all surface and underground mining operations.

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

Contractor is 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 and all mining costs. 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. All actual mining costs was to be paid for by Contractor and milling 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 was to receive the following consideration from the Company:

Phase 1 and Phase 2. As consideration for completion of Phases 1 and 2, the Company agreed to issue to Contractor 10 million shares of its common stock. The Company issued the common stock to the Contractor, however, the Contractor failed to perform all of the required services under Phase 1 and Phase 2.

Phase 3. As consideration for completion of Phase 3, Contractor would earn a 30% revenue interest in the revenues resulting from the sale of the ore, subject to it paying its proportionate share of the 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.

13

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

1. NATURE OF OPERATIONS (CONTINUED)

Mining Services Agreement with Mesa Acquisition Group LLC Continued

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

The parties are obligated to share in the milling and processing costs and revenues generated from any ore processing on a proportionate basis that is 70% to the Company and 30% to Contractor. 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 are not complete, and are qualified in their entirety by reference to each agreement, which is 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 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.  On September 21, 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, reported the results of the Phase 1 Satellite Imaging program under the Mining Services Agreement.

As at the date of this report, communications with Mesa Acquisition Group LLC has ceased and no further operations have been undertaken under the Mining Service Agreement. It is not clear, if, or when, any further work will be performed under the terms of this agreement. As of the date of this filing, the Contractor has not performed its obligations under the Mining Services Agreement.

New Production and Drilling Programs

In May 2014, we paid $35,000 as a deposit on a sales proposal to install limited production equipment on our property in Mexico for a total cost of $450,000. In August and September 2014, we made two further deposits of $21,250 and $75,000, respectively, under the terms of the sales proposal. As at the date of this report, no progress has taken place in respect of this project.

In February 2015, we entered into a further contract with the same contractor to drill 5,000 meters for $1,762,047, $195,790 payable in stock and the balance of $1,566,257 payable in cash.

Pursuant to the drilling program we have completed approximately 4,000 meters of drilling over 27 holes.

During the period from February 2015 through August 31, 2015, we paid $1,180,251 in cash and issued 1,398,444 shares of our common stock in respect of this contract. As of August 31, 2015, a balance of $456,716 had been invoiced to us and was due and payable to the Contractor. We dispute this balance as it includes work which had not been authorized by the Company, only 4,000 of the contracted 5,000 meters had been drilled and no credit had been given for the stock issued to the Contractor by the Company. As of the issuance of this report, we do not have the funding to pay the balance due and payable or the balance of the work to be performed under the terms of the contract and we will need to raise the additional funds through the sale of further equity or debt instruments. These is no guarantee that we will be success in raising the necessary funding

14

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

1. NATURE OF OPERATIONS (CONTINUED)

Corporate Matters

On June 25, 2015, the Board of Directors of the Company appointed John Gildea as the Company's Chief Executive Officer and on that same date, Mr. Gildea resigned as the Company's Chief Operating Officer.

The Company and Mr. Gildea have entered into an oral arrangement pursuant to which Mr. Gildea will receive a monthly compensation of $8,000 for acting in such capacity. In addition, Mr. Gildea will receive an initial grant of common stock in the amount of 500,000 shares, and he will receive a quarterly common stock grant of 200,000 shares, subject to Board of Directors approval.

Effective August 13, 2015 we entered into Separation agreements with Messrs. Serrat and Figueredo, our former Director of Mexican Operations and Chief Technology Officer, respectively, whereby we issued each of them 1 million shares of our common stock and 1.25 million, five year stock options with an exercise price of $0.07 in full and final settlement of any and all balances owed to them by the Company.

2. SUMMARY OF 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, 2015 are not necessarily indicative of the results that may be expected for the year ended May 31, 2016. 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, 2015 included in our Form 10-K filed with the SEC.

Exploration Stage Accounting

The Company is an exploration stage company, as defined in pronouncements of the Financial Accounting Standards Board (FASB) and Industry Guide #7 of the Securities and Exchange Commission.  Generally accepted accounting principles govern the recognition of revenue by an exploration stage enterprise and the accounting for costs and expenses. As an exploration stage company is also required to make additional disclosures as defined under the then current Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915, "Development-Stage Entities". Additional disclosures required are that our financial statements be identified as those of an exploration stage company, and that the statements of operations, changes in changes in stockholders' deficit and cash flows disclosed activity since the date of its Inception (January 21, 1998). Effective June 10, 2014, the FASB changed its regulations with respect to development stage entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2014, with the option for entities to early adopt these new provisions. Consequently these additional disclosures are not included in its financial statements

15

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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, 2015, none of our mineralized material met the definition of proven or probable reserves.

Consolidated Statements

The consolidated financial statements include the accounts of the Company and its subsidiary company.  All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimated.

Foreign Currency Translation

The assets of the Mexican subsidiary are located in Mexico.  The Mexican subsidiary depends on the ability of the parent company to raise cash which is transferred to the subsidiary to meet its operating cash needs.  Therefore, the Company's management has determined that the functional currency of the Mexican subsidiary is the US dollar. Since that is the case, the Company remeasures its subsidiary financial statements in US dollars.  Any gains or losses are reflected on the Statements of Operations.

The accounts of the Mexican subsidiary 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.

16

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash Equivalents

The Company considers all short term investments purchased with an original maturity of three months or less to be cash equivalents.

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.

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.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash, a small portion of which is located in Mexico.

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

17

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and Equipment Continued

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

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 at a mine site before proven reserves have been established are expensed as mine development costs.  At the point proven reserves have been established at a mine site, such costs will be capitalized and will be written off as depletion expense as the minerals are extracted.

As of August 31, 2014, none of the mine concessions met the requirements for qualification as having proven reserves.

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 will be performed. If an evaluation was required, the estimated future undiscounted cash flows associated with the asset would be 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 month periods ended August 31, 2014 and 2103. 

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. 

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 a Black Scholes valuation 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.

18

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.  Current tax benefits are offset by a valuation reserve as they are considered not likely to be realized in the foreseeable future.

Recognition of Revenue

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.  The Company has not yet entered into any contractual arrangement to deliver product or services.

Advertising Costs

The Company will expense advertising costs when advertisements occur.  There has been no spending thus far on advertising.

Stock Based Compensation

The cost of equity instruments issued to non-employees in return for goods and services is measured by the fair value of the goods or services received or the measurement date fair value of the equity instruments issued, whichever is the more readily determinable.  The cost of employee services received in exchange for equity instruments is based on the grant date fair value of the equity instruments issued.

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. 

Net Income (Loss) Per Share

The Company computes net income (loss) per common share in accordance with Accounting  Standards  Update ("ASU"),  Earning Per Share (Topic 260) which requires the  presentation of both basic and diluted  earnings per share ("EPS")on the  consolidated  income  statements..  Under these provisions, basic and diluted net income (loss) per common share are computed by dividing the net income (loss) available to common shareholders for each period by the weighted average number of shares of common stock outstanding during the period.  During the three months ended August 31, 2015 and 2014 there were warrants and options outstanding to purchase Company common stock and notes payable that are convertible into shares of the Company's common stock. The common share equivalents of these have not been included in the calculations of loss per share because such inclusions would have anti-dilutive effects as the Company incurred a loss from operations during the three month periods ended August 31, 2015 and 2014.

19

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Other Comprehensive Income (Loss)

The Company reports as other comprehensive income (loss) those revenues, gains and losses not included in the determination of net income.  During the three month periods ended May 31, 2014 and 2013, the Company did not have any gains and losses resulting from activities or transactions that resulted in comprehensive income or loss.

Segment Reporting

Management treats the operation of the Company as one segment.

New Accounting Pronouncements

The Company has  reviewed  all  recently  issued,  but not  yet  effective,  accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material  impact on its  financial  condition  or the results of its operations.

3.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, 2015, have a working capital deficit of $4,281,586, accumulated losses of $56,079,871, 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, 2015, we were in default on repayment of convertible promissory notes with principal balances of $550,000 together with accrued interest of $511,382 totaling $1,091,096.

As of the date of this report, while we have made the mining rights payment to the Mexican government in respect of our Solidaridad I concession, we have not had the funds to make made the payment (approximately $90,000) for the remaining concessions which were due on July 31, 2015. Consequently we are now in default under the terms of these mineral concessions.

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, pay the outstanding and overdue mining rights payments  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, 2015 and 2014, 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.

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.

20

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

4.SUPPLEMENTAL CASH FLOW INFORMATION

	Three Months Ended August 31,
	2015		2014
Income taxes paid	$	-	$	-
Interest paid	$	-	$	-
Liabilities settled for shares of common stock
Convertible Notes Payable, debt discount, accrued interest and derivative liabilities settled with the issuance of 9,255,876 and 3,040,622 shares of  common stock, respectively	$	1,135,791	$	462,591
Accrued compensation settled through the issuance of 2,000,000 shares of common stock and 2,500,000 five year options with and exercise price of $0.07	$	1,562,253	$	-

5.PROPERTY AND EQUIPMENT

As at August 31, 2015 and May 31, 2015, property and equipment consisted of the following:

	August 31, 2015			May 31, 2015
Vehicles	$	41,877		$	41,877
Machinery and equipment		92,515			92,515
Total property and equipment		134,392			134,392
Less accumulated depreciation		(121,487	)		(118,960	)
Total property and equipment net	$	12,905		$	15,432

Depreciation expense for the three months ended August 31, 2015 and 2014 was $2,527 and $2,528, respectively.

21

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE

	Principal Balance			Loan Discount			Accrued Interest			Total
May 31, 2014	$	933,920		$	(98,448	)	$	461,298		$	1,296,770
Issued in the year		1,800,000			(1,756,741	)		-			43,259
Converted into shares of common stock		(467,781	)		156,711			(34,000	)		(345,070	)
Amortization of debt discount		-			643,561			-			643,561
Interest accrued		-			-			121,815			121,815
May 31, 2015		2,266,139			(1,054,917	)		549,113			1,760,334
Issued in the period		240,833			(237,833	)		-			3,000
Repaid in cash		(100,385	)		-			-			(100,385	)
Converted into shares of common stock		(575,633	)		80,451			(10,000	)		(505,182	)
Amortization of debt discount		-			431,300			-			431,300
Interest accrued		-			-			48,183			48,183
August 31, 2015	$	1,830,955		$	(780,999	)	$	587,296		$	1,637,250
Less long term		(211,589	)		195,483			(18,667	)		(34,772	)
Short term	$	1,619,366		$	(585,516	)	$	568,629		$	1,602,478

As at August 31, 2015, we were in default on repayment of various convertible promissory notes included in the above table with principal balances of $550,000 together with accrued interest of $541,096 totaling $1,091,096. 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 September 30, 2013, a holder of our convertible notes (referenced above) served us with a lawsuit. The lawsuit demanded repayment of a total of $632,666 in principal and interest due under the convertible notes. The lawsuit was dismissed by court due to lack of jurisdiction.

Notes Payable – Current Period Activity

During the three months ended August 31, 2015, the Company issued three additional convertible notes payable for $240,833, generating net cash receipts after initial debt discount of $219,000, settled principal balances of $575,633, accrued interest of $10,000 and debt discount of $80,451 through the issuance of 9,255,870 shares of our common stock in full or part settlement of three promissory notes and repaid principal balances of $100,385 and associated prepayment penalties of $37,155 on the partial repayment of two promissory notes. Further as of August 31, 2015, we had raised an additional $222,500 through the share of sales of our common stock that was committed to further repayment of our convertible note payable and consequently is disclosed as restricted cash as of August 31, 2015.As disclosed Note 11 Subsequent Events below, these funds were used to repay convertible notes payable as required.

22

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Note Payable – Lender A

On September 26, 2013, we entered into a convertible promissory note with a maximum amount of $300,000, to be funded during 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.

Tranche One

We initially received $150,000 upon closing the note.  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. The $150,000 was received net of a debt discount of $16,667 and the principal balance to be repaid is $166,667. The $16,667 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.

We valued the conversion feature at origination at $259,659 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 18 month term to maturity, risk free interest rate of 0.34% and annualized volatility of 143%. $150,000 of the value assigned to the derivative liability 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 $109,659 of the value assigned to the derivative liability 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 other income or expense item.

At November 30, 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 0.26% and annualized volatility of 133% and determined that, since origination, the fair value of our derivative liability had decreased by $33,956 to $225,703. Accordingly, we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

Tranche Two

On February 20, 2014, we received a further net advance for $30,000 under the terms of the note.

The $30,000 advance was received net of a debt discount of $3,333 and the principal balance to be repaid is $33,333. The $3,333 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.

23

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Note Payable – Lender A Continued

We valued the conversion feature at origination at $42,385 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 18 month term to maturity, risk free interest rate of 0.25% and annualized volatility of 128%. $30,000 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 $12,385 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 other income or expense item.

At February 28, 2014, we revalued the conversion feature of the entire $200,000 convertible debenture using the Black Scholes valuation model with the following assumptions: 18 month term, risk free interest rate of 0.25% and annualized volatility of 128% and determined that, since the previous revaluation or origination, the fair value of our derivative liability had increased by $37,892 to $305,980 Accordingly we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

Between March 26, 2014 and May 15, 2014, the holder made 4 separate conversion requests and converted the $91,080 of the principal receiving a total of 1,320,000 shares of our common stock upon such conversions.

On each partial settlement, we revalued the proportionate amount of the derivative liability to it fair value and recognized any gain or loss on the change in fair value of the derivative liability as other income or expense in the statement of operations. On issuance of shares of our common stock on partial settlement of the note, we transferred the proportionate balance of the derivative liability together with the proportionate balance of unamortized debt discount to additional paid in capital.

At May 31, 2014, we revalued the conversion feature of the remaining balance of $132,920 principal and interest outstanding using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 16 month term, risk free interest rate of 0.195% and annualized volatility of 120%  and determined that, since the previous revaluation, the fair value of our remaining derivative liability had decreased by $27,310 to $146,674 Accordingly we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

Between June 1, 2014 and August 20, 2014, the holder made 4 separate conversion requests and converted the remaining $132,920 of the principal receiving a total of 1,724,266 shares of our common stock upon such conversions.

On each partial settlement, we revalued the proportionate amount of the derivative liability to it fair value and recognized any gain or loss on the change in fair value of the derivative liability as other income or expense in the statement of operations. On issuance of shares of our common stock on partial settlement of the note, we transferred the proportionate balance of the derivative liability together with the proportionate balance of unamortized debt discount to additional paid in capital.

As at August 31, 2014, no balance was outstanding under this convertible note payable.

24

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Note Payable – Lender A Continued

Tranche Three

On September 3, 2014, we received a further net advance for $75,000 under the terms of the note.

The $75,000 advance was received net of a debt discount of $8,333 and the principal balance to be repaid is $83,333. The $8,333 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.

We valued the conversion feature at origination at $112,164 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 18 term month to maturity, risk free interest rate of 0.52% and annualized volatility of 123%. $75,000 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 $37,164 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 November 30, 2014, we revalued the conversion feature of the entire $83,333 convertible debenture using the Black Scholes valuation model with the following assumptions: 18 month term, risk free interest rate of 0.45% and annualized volatility of 117% and determined that the fair value of our derivative liability had decreased by $4,057 to $108,107 Accordingly we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

On December 3, 2014, a onetime interest expense of 12%, or $10,000, was accrued on the principal balance of $83,333 and we valued the conversion feature in respect of the $10,000 interest accrual using the Black Scholes valuation model with the following assumptions: 18 month term, risk free interest rate of 0.389% and annualized volatility of 117% and determined that the initial value of the derivative liability related to the accrued interest was $13,409. Accordingly $10,000 of the value assigned to the beneficial conversion feature was recognized as a debt discount on the accrued interest. The debt discount was recorded as reduction (contra-liability) to the accrued interest and is being amortized over the life of the convertible debenture. The balance of $3,409 of the value assigned to the beneficial conversion feature was recognized as origination interest on the derivative liability and expensed on origination.

At February 28, 2015, we revalued the conversion feature of the entire $83,333 convertible debenture and the accrued interest of $10,000 using the Black Scholes valuation model with the following assumptions: 18 month term, risk free interest rate of 0.4312% and annualized volatility of 105% and determined that the fair value of our derivative liability had decreased by $3,799 to $117,717 Accordingly we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

25

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Note Payable – Lender A (Continued)

Tranche Three Continued

Between March 3, 2015 and April 24, 2015, the holder made 4 separate conversion requests and converted the entire principal balance of $83,333 and accrued interest of $10,000 into a total of 1,335,141 shares of our common stock upon such conversions in full repayment of this tranche of the note payable.

On each partial settlement, we revalued the proportionate amount of the derivative liability to it fair value and recognized any gain or loss on the change in fair value of the derivative liability as other income or expense in the statement of operations. On issuance of shares of our common stock on partial settlement of the note, we transferred the proportionate balance of the derivative liability together with the proportionate balance of unamortized debt

Tranche Four

On December 17, 2014, we received a further net advance for $75,000 under the terms of the note.

The $75,000 advance was received net of a debt discount of $8,333 and the principal balance to be repaid is $83,333. The $8,333 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.

We valued the conversion feature at origination at $101,931 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 24 month term to maturity, risk free interest rate of 0.62% and annualized volatility of 115%. $75,000 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 $26,931 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 February 28, 2015, we revalued the conversion feature of the entire $83,333 convertible debenture using the Black Scholes valuation model with the following assumptions: 22 month term, risk free interest rate of 0.62% and annualized volatility of 109% and determined that the fair value of our derivative liability had increased by $8,944 to $110,875 Accordingly we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

On March 17, 2015, a onetime interest expense of 12%, or $10,000, was accrued on the principal balance of $83,333.

26

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Note Payable – Lender A (Continued)

Tranche Four Continued

At May 31, 2015, we revalued the conversion feature of the entire $83,333 convertible debenture and $10,000 in accrued interest using the Black Scholes valuation model with the following assumptions: 18 month term, risk free interest rate of 0.458% and annualized volatility of 110% and determined that the fair value of our derivative liability had increased by $75,825 to $186,700 Accordingly we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

Between June 17, 2015 and July 22, 2015, the holder made 4 separate conversion requests and converted the entire principal balance of $83,333 and accrued interest of $10,000 into a total of 1,251,113 shares of our common stock upon such conversions in full repayment of this tranche of the note payable.

On each partial settlement, we revalued the proportionate amount of the derivative liability to it fair value and recognized any gain or loss on the change in fair value of the derivative liability as other income or expense in the statement of operations. On issuance of shares of our common stock on partial settlement of the note, we transferred the proportionate balance of the derivative liability together with the proportionate balance of unamortized debt discount to additional paid in capital.

Tranche Five

On April 28, 2014, we received a further net advance for $50,000 under the terms of the note.

The $50,000 advance was received net of a debt discount of $5,556 and the principal balance to be repaid is $55,556. The $5,556 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.

We valued the conversion feature at origination at $71,928 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 24 term month to maturity, risk free interest rate of 0.56% and annualized volatility of 118%. $50,000 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 $21,928 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 May 31, 2015, we revalued the conversion feature of the entire $55,556 convertible debenture using the Black Scholes valuation model with the following assumptions: 23 month term, risk free interest rate of 0.588% and annualized volatility of 109% and determined that the fair value of our derivative liability had increased by $42,161 to $114,089 Accordingly we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

27

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Note Payable – Lender A (Continued)

Tranche Five Continued

On March 17, 2015, a onetime interest expense of 12%, or $6,667, was accrued on the principal balance of $55,556.

At August 31, 2015, we revalued the conversion feature of the entire $55,556 convertible debenture and $6,667 accrued interest using the Black Scholes valuation model with the following assumptions: 20 month term, risk free interest rate of 0.621% and annualized volatility of 115% and determined that the fair value of our derivative liability had decreased by $16,388 to $104,802 Accordingly we recognized a corresponding gain on derivative liability in conjunction with this revaluation

Tranche Six

On August 28, 2015, we received a further net advance for $75,000 under the terms of the note.

The $75,000 advance was received net of a debt discount of $8,333 and the principal balance to be repaid is $83,333. The $8,333 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.

We valued the conversion feature at origination at $143,553 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 24 month term to maturity, risk free interest rate of 0.737% and annualized volatility of 111%. $75,000 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 $68,533 of the value assigned to the beneficial conversion feature was recognized as origination interest on the derivative liability and expensed on origination.

At August 31, 2015, we revalued the conversion feature of the $83,333 convertible debenture using the Black Scholes valuation model with the following assumptions: 40 month term, risk free interest rate of 0.737% and annualized volatility of 111% and determined that the fair value of our derivative liability had decreased by $153 to $143,380. Accordingly we recognized a corresponding gain on derivative liability in conjunction with this revaluation

As of August 31, 2015, a total of $145,556 was outstanding under this convertible note in respect of principal and accrued interest relating to Tranches Five and Six.

28

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender B

On January 30, 2014, we issued a convertible debenture to a former lender for $125,000. The convertible debenture had a 6 month term and bore interest of 12%. The convertible debenture could have been 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 was still outstanding, the balance was convertible into shares of the common stock at a 40% discount to the lowest closing price of the prior 20 trading days. As the conversion feature only applied after the maturity of the convertible debenture, no value was assigned to it at origination of the loan and no loan discount was recognized on the convertible debenture at origination. This convertible debenture was due on July 30, 2014 and the holder converted the entire principal amount of the note as described further below.

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. Since the conversion price can change with reductions in the price of Company common stock, the conversion feature meets the definition of a derivative. We therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. We valued the conversion feature at default at $111,975 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 3 month term to maturity, risk free interest rate of 0.03% and annualized volatility of 59%. The balance of $111,975 was recognized as interest on origination and expensed in full on default.

Between January 30, 2014 and August 15, 2014, the holder made 6 separate conversion requests and converted the entire $125,000 principal amount of the note receiving a total of 1,316,356 shares of our common stock. The holder waived their right to charge interest on this loan. As of August 31, 2014, the note has been satisfied in full.

On each partial settlement, we revalued the proportionate amount of the derivative liability to it fair value and recognized any gain or loss on the change in fair value of the derivative liability as other income or expense in the statement of operations. On issuance of shares of our common stock on partial settlement of the note, we transferred the proportionate balance of the derivative liability together with the proportionate balance of unamortized debt

On April 4 2014, we issued a further convertible debenture for $150,000 to this lender. The convertible debenture has a 6 month term and bears interest of 10%. The convertible debenture could have been 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 was still outstanding, the balance could be convertible into shares of the common stock at a 40% 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. This convertible debenture was due on October 4, 2014 and the holder converted the entire principal amount of the note as described further below.

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. Since the conversion price can change with reductions in the price of Company common stock, the conversion feature meets the definition of a derivative. We therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. We valued the conversion feature at default at $157,587 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 3 month to maturity, risk free interest rate of 0.02% and annualized volatility of 49%. The balance of $157,587 was recognized as interest on origination and expensed in full on default.

29

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender B (Continued)

Between October 6, 2014 and October 20, 2014, the holder made 4 separate conversion requests and converted the entire $150,000 principal amount of the note receiving a total of 1,128,968 shares of our common stock. The holder waived their right to charge interest on this loan. As of November 30, 2014, the note has been satisfied in full.

On each partial settlement, we revalued the proportionate amount of the derivative liability to it fair value and recognized any gain or loss on the change in fair value of the derivative liability as other income or expense in the statement of operations. On issuance of shares of our common stock on partial settlement of the note, we transferred the proportionate balance of the derivative liability together with the proportionate balance of unamortized debt

On December 16, 2014, we issued a convertible debenture to this lender for $500,000. The convertible debenture had a 6 month term and was not subject to interest. The convertible debenture could be prepaid for $600,000 in the first 90 days of the loan and for $650,000 from the 91^stto the 120^th day of the loan. Interest accrued at 5% per annum after the loan matured. At any time after the maturity date of the convertible loan, if any principal balance was still outstanding, the balance was convertible into shares of the common stock at a 40% discount to the lowest closing price of the prior 20 trading days.

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.

We valued the conversion feature at origination at $502,152 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 6 month to maturity, risk free interest rate of 0.16% and annualized volatility of 107%. $500,000 of the value assigned to the derivative liability 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 $2,152 of the value assigned to the derivative liability 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 February 28, 2015, 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 0.1% and annualized volatility of 73% and determined that, since origination, the fair value of our derivative liability had increased by $1,821 to $503,973. Accordingly, we recognized a corresponding loss on derivative liability in conjunction with this revaluation

At May 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: 3 month risk free interest rate of 0.02% and annualized volatility of 59% and determined that, since origination, the fair value of our derivative liability had increased by $483,683 to $987,656. Accordingly, we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

As of May 31, 2015, a balance of $500,000 principal was outstanding under the terms of this convertible note payable.

30

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender B (Continued)

Between June 16, 2015 and August 18, 2015, the holder made 7 separate conversion requests and converted a principal balance of $465,000 into a total of 7,304,763 shares of our common stock upon such conversion.

On each partial settlement, we revalued the proportionate amount of the derivative liability to it fair value and recognized any gain or loss on the change in fair value of the derivative liability as other income or expense in the statement of operations. On issuance of shares of our common stock on partial settlement of the note, we transferred the proportionate balance of the derivative liability together with the proportionate balance of unamortized debt discount to additional paid in capital.

Further on August 26, and August 28, 2015, we made cash repayment of $25,000 and $27,500, respectively, in full repayment of the remaining principal balance of $35,000 and related repayment penalties of $17,500.

Convertible Note Payable – Lender C

On January 28, 2015, we entered into a convertible promissory note with a new lender for a maximum amount of $250,000, to be funded during a two year term, bearing interest at 12%. The maximum proceeds to be received under the note is $225,000 with the balance of $25,000 representing a discount on issue.

Tranche One

We initially received a net of $47,500 upon closing the note.  The lender may convert the convertible promissory note into shares of our common stock at any time at a 40% discount to the lowest trade price in the 25 trading days prior to conversion. The $47,500 was received net of a debt discount of $2,500 and the principal balance to be repaid is $50,000. The $2,500 debt discount was recorded as reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. A one off interest charge of 12% or $6,000 was accrued on the convertible promissory note on issuance.

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.

We valued the conversion feature at origination at $66,725 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 24 month term to maturity, risk free interest rate of 0.50% and annualized volatility of 125%. $56,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture and its accrued interest. 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 $10,725 of the value assigned to the derivative liability 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 other income or expense item.

31

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender C (Continued)

At February 28, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: 24 month term to maturity, a risk free interest rate of 0.587% and annualized volatility of 121% and determined that, since origination, the fair value of our derivative liability had increased by $5,316 to $72,041. Accordingly, we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

At May 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: 20 month to maturity, a risk free interest rate of 0.486% and annualized volatility of 108% and determined that, since origination, the fair value of our derivative liability had increased by $40,346 to $112,387. Accordingly, we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

On August 4 and 21, 2015, the holder made 2 separate conversion requests and converted a principal balance of $27,300 into a total of 700,000 shares of our common stock upon such conversion.

On each partial settlement, we revalued the proportionate amount of the derivative liability to it fair value and recognized any gain or loss on the change in fair value of the derivative liability as other income or expense in the statement of operations. On issuance of shares of our common stock on partial settlement of the note, we transferred the proportionate balance of the derivative liability together with the proportionate balance of unamortized debt discount to additional paid in capital.

At August 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: 17 months to maturity, a risk free interest rate of 0.535% and annualized volatility of 114% and determined that, since origination, the fair value of our derivative liability had increased by $19,550 to $46,857. Accordingly, we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

As disclosed In Note 11 Subsequent Events below, effective October 6, 2015, Lender C converted a $18,048 principal balance of their loan into 800,000 shares of our common stock, as described in Note 6 Convertible Notes Payable above.

Tranche Two

On May 8, 2015 we received a further net of $47,500 under the terms of the note.  The lender may convert the convertible promissory note into shares of our common stock at any time at a 40% discount to the lowest trade price in the 25 trading days prior to conversion. The $47,500 was received net of a debt discount of $2,500 and the principal balance to be repaid is $50,000. The $2,500 debt discount was recorded as reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. A one off interest charge of 12% or $6,000 was accrued on the convertible promissory note on issuance.

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.

32

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender C (Continued)

We valued the conversion feature at origination at $87,305 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 24 month term to maturity, risk free interest rate of 0.50% and annualized volatility of 125%. $56,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture and its accrued interest. 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 $33,805 of the value assigned to the derivative liability 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 other income or expense item.

At May 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: 23 month to maturity, a risk free interest rate of 0.596% and annualized volatility of 109% and determined that, since origination, the fair value of our derivative liability had increased by $27,928 to $115,233. Accordingly, we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

At August 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: 20 month to maturity, a risk free interest rate of 0.596% and annualized volatility of 109% and determined that, since origination, the fair value of our derivative liability had decreased by $2,287 to $112,946. Accordingly, we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

As of August 31, 2015, the total balance due under this note convertible was $84,700 relating to the principal and accrued interest payable under tranches one and two

Convertible Note Payable – Lender D

On February 20, 2015, we issued a convertible debenture to a former lender for $300,000. The convertible debenture had a 12 month term and was not subject to interest. The convertible debenture could be prepaid with prepayments penalties ranging from 120% to 135%. At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 45% discount to the lowest closing price of the prior 20 trading days.

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.

We valued the conversion feature at origination at $396,646 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 12 month term to maturity, risk free interest rate of 0.16% and annualized volatility of 107%. $300,000 of the value assigned to the derivative liability 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 $96,646 of the value assigned to the derivative liability was recognized as origination interest on the derivative liability and expensed on origination.

33

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender D (Continued)

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 other income or expense item.

At February 28, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 12 month term to maturity, risk free interest rate of 0.22% and annualized volatility of 104% and determined that, since origination, the fair value of our derivative liability had increased by $1,821 to $393,151. Accordingly, we recognized a corresponding loss on derivative liability in conjunction with this revaluation

At May 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 9 month term to maturity, risk free interest rate of 0.12% and annualized volatility of 94% and determined that, since origination, the fair value of our derivative liability had increased by $123,935 to $517,086. Accordingly, we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

As of May 31, 2015, a balance of $300,000 principal was outstanding under the terms of this convertible note payable.

Between August 25 and 28, 2015, we made principal repayments of $65,385 and paid prepayment penalties of $19,615 in partial repayment of this note.

As of August 31, 2015, a balance of $234,615 principal was outstanding under the terms of this convertible note payable.

As disclosed In Note 11 Subsequent Events below, on between September 4 and September 29, 2015, we made principal repayments of $198,854 and paid prepayment penalties of $56,146 in further partial repayment of this note. Effective October 6, 2015, the holder converted the remaining $38,462 principal balance of the loan into 1,185,258 shares of our common stock.

As of the date of the issuance of this report, the loan has been repaid in full.

Convertible Note Payable – Lender E

On March 26, 2015, we issued a convertible debenture to a new lender for $317,250 under which we received net proceeds of $291,000, net of original debt discount of $26,250. The convertible debenture has a 9 month term and bears interest at 9.5%. The convertible debenture could be prepaid with prepayments penalties of 120%.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 40% discount to the lowest intraday trading price of the prior 20 trading days.

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.

34

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender E (Continued)

We valued the conversion feature at origination at $282,565 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 9 month term to maturity, risk free interest rate of 0.205% and annualized volatility of 94%. The value assigned to the derivative liability 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.

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 other income or expense item.

At May 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 6 month term to maturity, risk free interest rate of 0.12% and annualized volatility of 81% and determined that, since origination, the fair value of our derivative liability had increased by $215,176 to $497,741. Accordingly, we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

As of May 31, 2015, a balance of $323,595 principal and accrued interest was outstanding under the terms of this convertible note payable.

At August 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 3 month term to maturity, risk free interest rate of 0.306% and annualized volatility of 74% and determined that, since origination, the fair value of our derivative liability had decreased by $21,045 to $476,696. Accordingly, we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

As of August 31, 2015, a balance of $331,130 principal and accrued interest was outstanding under the terms of this convertible note payable.

As disclosed In Note 11 Subsequent Events below, effective October 12, 2015, Lender E converted a $20,000 principal balance of the loan into 638,570 shares of our common stock.

Convertible Note Payable – Lender F

Tranche One

On May 12, 2015, we issued a convertible debenture to a new lender for $105,000 under which we received net proceeds of $96,000, net of original debt discount of $9,000. The convertible debenture had a 12 month term and was bears interest at 10%. The convertible debenture could be prepaid with prepayments penalties ranging between 120% and 150%.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 40% discount to the lowest intraday trading price of the prior 20 trading days.

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.

35

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender F (Continued)

We valued the conversion feature at origination at $144,755 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 12 months to maturity, risk free interest rate of 0.24% and annualized volatility of 108%. $96,000 of the value assigned to the derivative liability 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 $48,755 of the value assigned to the derivative liability 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 other income or expense item.

At May 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 12 month to maturity, risk free interest rate of 0.2414% and annualized volatility of 109% and determined that, since origination, the fair value of our derivative liability had increased by $34,771 to $179,226. Accordingly, we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

As of May 31, 2015, a balance of $105,547 principal and accrued interest was outstanding under the terms of this convertible note payable.

At August 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 9 months to maturity, risk free interest rate of 0.3179% and annualized volatility of 102% and determined that, since origination, the fair value of our derivative liability had decreased by $13,575 to $165,951. Accordingly, we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

Tranche Two

On July 14 2015, we issued a additional convertible debenture to a lender F for $105,000 under which we received net proceeds of $96,000, net of original debt discount of $9,000. The convertible debenture had a 12 month term and was bears interest at 10%. The convertible debenture could be prepaid with prepayments penalties ranging between 120% and 150%.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 40% discount to the lowest intra day trading price of the prior 20 trading days.

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.

We valued the conversion feature at origination at $104,637 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 12 months to maturity, risk free interest rate of 0.24% and annualized volatility of 108%. $94,000 of the value assigned to the derivative liability 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 $10,637 of the value assigned to the derivative liability was recognized as origination interest on the derivative liability and expensed on origination 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 other income or expense item.

36

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender F (Continued)

ASC 815At August 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 10 months to maturity, risk free interest rate of 0.3179% and annualized volatility of 102% and determined that, since origination, the fair value of our derivative liability had increased by $65,042 to $169,679. Accordingly, we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

As of August 31, 2015, a balance of $214,574 principal and accrued interest was outstanding under the terms of Trance One and Two from this lender.

Convertible Note Payable – Lender G

Tranche One

On May 13, 2015, we issued a convertible debenture to a new lender for $105,000 under which we received net proceeds of $96,000, net of original debt discount of $9,000. The convertible debenture had a 12 month term and was bears interest at 10%. The convertible debenture could be prepaid with prepayments penalties ranging between 120% and 150%.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 40% discount to the lowest intra day trading price of the prior 20 trading days.

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.

We valued the conversion feature at origination at $144,755 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 12 months to maturity, risk free interest rate of 0.24% and annualized volatility of 108%. $96,000 of the value assigned to the derivative liability 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 $48,755 of the value assigned to the derivative liability 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 other income or expense item.

At May 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 12 months to maturity, risk free interest rate of 0.2414% and annualized volatility of 109% and determined that, since origination, the fair value of our derivative liability had increased by $34,771 to $179,226. Accordingly, we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

As of May 31, 2015, a balance of $105,547 principal and accrued interest was outstanding under the terms of this convertible note payable.

37

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender G (Continued)

At August 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 8 months to maturity, risk free interest rate of 0.5523% and annualized volatility of 102% and determined that, since origination, the fair value of our derivative liability had decreased by $13,190 to $166,036. Accordingly, we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

Tranche Two

On July 21 2015, we issued an additional convertible debenture to a lender G for $52,500 under which we received net proceeds of $48,000, net of original debt discount of $4,500. The convertible debenture had a 12 month term and was bears interest at 10%. The convertible debenture could be prepaid with prepayments penalties ranging between 120% and 150%.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 40% discount to the lowest intra day trading price of the prior 20 trading days.

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.

We valued the conversion feature at origination at $51,858 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 12 months to maturity, risk free interest rate of 0.34% and annualized volatility of 105%. $47,000 of the value assigned to the derivative liability 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 $4,858 of the value assigned to the derivative liability 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 other income or expense item.

At August 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 11 months to maturity, risk free interest rate of 0.4505% and annualized volatility of 110% and determined that, since origination, the fair value of our derivative liability had decreased by $33,074 to $84,932. Accordingly, we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

As of August 31, 2015, a balance of $161,253 principal and accrued interest was outstanding under the terms of Trance One and Two from this lender.

Convertible Note Payable – Lender H

Tranche One

On May 15, 2015, we issued a convertible debenture to a new lender for $150,000 under which we received $147,000, net of fees of $3,000. The convertible debenture has a 6 month term and was bears interest at 12%. The convertible debenture could be prepaid with prepayments penalties of 150%, subject to approval of the lender.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 42.5% discount to the lowest intraday trading price of the prior 20 trading days.

38

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Convertible Notes Payable – Lender H (Continued)

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.

We valued the conversion feature at origination at $180,146 using the Black Scholes valuation model with the following assumptions:  dividend yield of zero, 6 months to maturity, risk free interest rate of 0.08% and annualized volatility of 76%. $147,000 of the value assigned to the derivative liability 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 $33,146 of the value assigned to the derivative liability 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 other income or expense item.

At May 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 6 months to maturity, risk free interest rate of 0.0478% and annualized volatility of 77% and determined that, since origination, the fair value of our derivative liability had increased by $58,808 to $238,954. Accordingly, we recognized a corresponding loss on derivative liability in conjunction with this revaluation.

As of May 31, 2015, a balance of $150,789 principal and accrued interest was outstanding under the terms of this convertible note payable.

At August 31, 2015, we revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 3 months to maturity, risk free interest rate of 0.6756% and annualized volatility of 68% and determined that, since origination, the fair value of our derivative liability had decreased by $15,834 to $223,120. Accordingly, we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

As of August 31, 2015, a balance of $155,326 principal and accrued interest was outstanding under the terms of this convertible note payable.

Tranche Two

As disclosed in Note 11 Subsequent Events below, on October 9, 2015, we issued and additional convertible debenture to lender H in the amount of $50,000 under which we received $49,000, net of fees of $1,000. The convertible debenture has a 6 month term and was bears interest at 12%. The convertible debenture could be prepaid with prepayments penalties of 150%, subject to approval of the lender.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 42.5% discount to the lowest intraday trading price of the prior 20 trading days

39

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

6.CONVERTIBLE NOTES PAYABLE (CONTINUED)

Movement in Derivative Liabilities

The effect of changes in the value of our derivative liabilities described in this note are summarized in the following table:

May 31, 2014	$	149,674
Value acquired during the period		2,448,891
Settled on issuance of common stock		(573,295	)
Revaluation on settlement on issuance of common stock or at reporting dates stock or at reporting dates		1,103,268
May 31, 2015		3,128,598
Value acquired during the period		300,028
Settled on issuance of common stock or repayment of debt		(780,659	)
Revaluation on settlement on issuance of common stock or at reporting dates stock or at reporting dates		(581,986	)
August 31, 2015		2,065,981
Long term		(410,272	)
Short term	$	1,655,709

7.            COMMITMENTS AND CONTINGENCIES

Lease – Head Office

From May 2012 through December 2014, our headquarters was in Marlboro New Jersey where we rented office space under the terms of 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 was personally guaranteed by one of our former officers and directors. Neither the lease nor the personal guarantee were ever been finalized or signed. In January 2015 we relocated our head office to Califon, New Jersey where our head office location is provided to us, free of charge, by one of our directors.

Leases – Mexican Operation

The Company leases a warehouse (storage) facility in the city of Morelia, Michoacán, Mexico at a monthly rental of $1,700. This lease expired on February 1, 2014 and was extended for a further twelve month period on the same terms. Effective February 1, 2015 we extended the terms of the lease for a further twelve months on the same terms as before.

40

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

7.            COMMITMENTS AND CONTINGENCIES (CONTINUED)

Leases – Mexican Operation Continued

Effective January 1, 2014 we entered into a new rental agreement with the landowner of the land on which our mining concessions are located. Under the terms of the new agreement we agreed to pay a monthly rental of approximately $4,249 on a going basis to be able to have access to our mining concessions.

Mining rights

The Company is required to make payments to the Mexican government on a bi-annual basis to maintain its mining concessions. In the twelve months ended May 31, 2015 the Company made payments of $189,868 (2014 - $147,105) to the Mexican government to maintain its mining concessions. It is anticipated that these payments will increase in the twelve months ending May 31, 2016. As of the date of this report, we have made the mining rights payment for the Solidaridad I concession, however, we have not made the payment (approximately $90,000) for the remaining concessions which were due on July 31, 2015.

Other Commitments

Drilling Contractor

In May 2014, we paid $35,000 as a deposit on a sales proposal to install limited production equipment on our property in Mexico for a total cost of $450,000. In August and September 2014, we made a two further deposits of $21,250 and $75,000, respectively, under the terms of the sales proposal.

As at the date of this report, no progress has taken place in respect of this project.

In February 2015, we entered into a further contract with the same contractor to drill 5,000 meters for $1,762,047, $195,790 payable in stock and the balance of $1,566,257 payable in cash.

Pursuant to the drilling program we have completed approximately 4,000 meters of drilling over 27 holes.

During the period from February 2015 through August 31, 2015, we paid $1,180,251 in cash and issued 1,398,444 shares of our common stock in respect of this contract. As of August 31, 2015, a balance of $456,716 had been invoiced to us and was due and payable to the Contractor. We dispute this balance as it includes work which had not been authorized by the Company, only 4,000 of the contracted 5,000 meters had been drilled and no credit had been given for the stock issued to the Contractor by the Company. As of the issuance of this report, we do not have the funding to pay the balance due and payable or the balance of the work to be performed under the terms of the contract and we will need to raise the additional funds through the sale of further equity or debt instruments. These is no guarantee that we will be success in raising the necessary funding

Employment Agreement Effective August 28, 2013, we appointed Mr. Hans H. Hertell 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.

41

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

7.            COMMITMENTS AND CONTINGENCIES (CONTINUED)

Employment Agreement (Continued)

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 for the services, the Hertell Group will receive 9,000,000 shares of our common stock which will be issued immediately. The term of the Consulting Agreement is three years.

Legal

Title Dispute

On April 3, 2012, as we have previously reported, Mr. Israel Tentory Garcia filed an action against our Mexican subsidiary, US Precious Metals SA de CV, wherein the plaintiff asserted a number of claims against us, including a demand for the return of one of our concessions (Solidaridad I) for failure to develop the concession. The case was filed in a local court in the Federal District of Mexico City. On May 21, 2013, the Court ruled that the Plaintiff did not prove the claims asserted in the lawsuit, and that our subsidiary is not liable to for any of such claims.

On June 12, 2014, our Mexican subsidiary, US Precious Metals SA de CV was served with another lawsuit from Mr. Israel Tentory Garcia along with seven other plaintiffs. The lawsuit was filed in a commercial court in Mexico City. The claims of the new lawsuit essentially restate the claims of the original lawsuit filed in April 2012.

By way of background, the plaintiffs obtained the exploration rights to the concession known as Solidaridad I from the Mexican government on November 24, 1996. These exploration rights expired on November 23, 2001 under the terms of the concession from the government and as prescribed by the governing statute. On March 13, 2003, we entered into an agreement with the plaintiffs pursuant to which they assigned their rights to this (expired) concession to our Mexican subsidiary. In July 2003, our Mexican subsidiary then applied for and obtained a new exploration and exploitation concession from the Mexican government covering Solidaridad I. The new concession expires July 2053.

Pursuant to this 2003 agreement with the plaintiffs, we issued 1.5 million shares of our common stock to them. The agreement further provided for the payment of $1 million to the plaintiffs upon the occurrence of a sale of the concession for exploitation purposes. In the original action filed in 2012 and in the current action, plaintiff(s) claim that under the agreement the $1 million payment was due and payable no later than 2009 and ownership of the mining concession should revert back to the plaintiff(s) due to the non-payment.

42

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

7.            COMMITMENTS AND CONTINGENCIES (CONTINUED)

Title Dispute (Continued)

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 the lawsuit. Our defense will include, among other positions, the fact that plaintiffs had no concession rights to assign under the March 2003 agreement as their concession expired 16 months earlier, we independently obtained the rights to a new (and current) concession from the Mexican government in July 2003, the agreement is ambiguous as to the payment requirement in 2009 and the matter was previously adjudicated in our favor in earlier action, albeit in a different court. We have filed an answer to the above complaint.

Termination of RTC Agreement

August 8, 2015, we were served with a lawsuit by Resource Technology Corporation ("RTC").

The Lawsuit was filed in the 11th Judicial Circuit Court, Dade County, Florida (Case: 2015-017057-CA-01). The Plaintiff, RTC, contends that the Restructuring Agreement does not allow for the unilateral termination of the agreement, rescission of the Certificate of Designations relating to the Preferred Stock nor the cancellation of the Preferred Stock. It further states that the obligations of PTH were not intertwined with that of RTC, and therefore the Company's termination of the agreement and cancellation of the Preferred Stock was inappropriate and ineffective, and further the Company's sole remedy would be to seek judgment against PTH for its default under the Promissory Note. The action seeks declaratory relief from the Court: (i) to declare that the Company did not have the legal right to terminate the Restructuring Agreement and rescind the Series A Preferred Stock, (ii) to determine that the unilateral actions by the Company in terminating the Restructuring Agreement and rescinding the Series A Preferred Stock is without merit, (iii) to enter a final judgment directing the issuance of the Preferred Stock to Plaintiff, (iv) to enter an order finding that any shareholder vote that have taken place without Plaintiff be declared null and void, (v) alternatively, if it is held that the Company did have the right to terminate the Restructuring Agreement and rescind the Series A Preferred Stock, to declare that the original Share Exchange Agreement with RTC be reinstated along with an extension of performance time periods (for RTC) as determined by the Court, and (vi) be awarded attorney's fees and court costs. In addition, the action asserts that the Company converted the Series A Preferred Stock, which was property of Plaintiff. The Plaintiff demands a judgment of $20,000,000 plus interest and court costs, and seeks a trial by jury.

The Company has retained outside counsel to vigorously defend its position in this matter and avail itself of all legal and equitable rights and remedies against PTH, RTC and all other culpable parties in this matter. On September 4, 2015, the Company filed a Notice of Removal to United Stated District Court, Southern District of Florida. 

On September 25, 2015, we filed our Answer, Affirmative Defenses, Counterclaims and Third Party Complaint.

Answer, Affirmative Defenses, Counterclaims and Third Party Claims

Answer and Affirmative Defenses

In our Answer, we denied Plaintiffs claims for Specific Performance, Declaratory Relief and Conversion. In addition, we asserted numerous affirmative defenses, including among others that RTC obtained the Company's consent through fraud, deceit or misrepresentation and RTC failed to satisfy certain conditions under the Restructuring Agreement.

43

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

7.            COMMITMENTS AND CONTINGENCIES (CONTINUED)

Title Dispute (Continued)

Counterclaims and Third Party Complaint

In our responsive pleadings, we asserted numerous counterclaims against RTC and by way of a Third Party Complaint, we asserted third party claims against Gennaro (Jerry) Pane ("Pane"), Chad Altieri ("Altieri"), Barrington (Barry) Schneer and Joseph Spano ("Individual Defendants") and PTH.

The Company's counterclaims against RTC include, among others, breach of contract, fraudulent inducement to enter into the Share Exchange Agreement and the Restructuring Agreement based in part on the misrepresentations of Pane and Altieri, rescission of the Restructuring Agreement based on the misrepresentations of Pane and Altieri and the failure of consideration, and RTC's unjust enrichment. The Company's third party claims include, among others, fraud against all of the third party defendants, the breach of fiduciary duty and negligent misrepresentation against Pane and Altieri. In addition, we have alleged the third party defendants conspired to defraud the Company to issue the Preferred Stock.

Key allegations in our Counterclaims and Third Party Claims include the following:

• RTC/PTH and the Individual Defendants misrepresented that they had the necessary permits to legally operate their plasma facility in the City of Twentynine Palms, California; when in fact RTC/PTH could not legally operate the plasma facility because they did not have, among other things, the necessary Conditional Use Permit and Certificate of Occupancy required by the City of Twentynine Palms.

• RTC and PTH, through the Individual Defendants, provided financial statements and information to the Company that we allege were false and materially misleading.

• RTC /PTH and the Individual Defendants misrepresented their technical expertise and ability to operate a plasma facility.

• RTC/PTH and the Individual Defendants since October 2013 continually misrepresented that PTH had received the necessary funding, or that funding was imminent, to improve its plasma facility in Twentynine Palms. In reality, in October 2014, PTH had received only a fraction of the necessary funding.

The Company has demanded a judgment against RTC and the third party defendants for compensatory damages, punitive damages, interest, taxable costs, attorneys' fees and any such other and further relief as the Court deems just and proper. Shareholders should be aware that the cost of litigation may prove expensive and, in this regard, the Company will be required to raise additional funds, which will result in significant dilution to existing shareholders

44

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

8.STOCKHOLDERS' DEFICIT

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of 0.00001 per share.

Unregistered Sale of Securities.

On January 30, 2014, the Company entered into a Restructuring Agreement with RTC, the RTC Shareholders, and Plasmafication Technology Holding, LLC, a Florida limited liability company ("PTH"). Under the terms of the agreement, the Company was contracted to issue at Closing 1,250,000 shares of Class A Preferred Stock to RTC. Each share of this Class A Preferred Stock has identical rights as 100 shares of common stock except that each share of this Class A  Preferred Stock is convertible to 100 shares of common stock (or a total of 125 million shares of common stock of the Company).

The market value of the 1,250,000 shares of its newly created Class A Super Voting Preferred Stock is assumed to equate to 125,000,000 shares of the common stock which was $16,250,000 on January 30, 2014 when the Company became contractually obligated to issue these shares.

These securities qualified for exemption under Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder. The offering was not a "public offering" as defined in Section 4(2) due to the insubstantial number of persons involved in the offering, manner of the offering and number of securities offered. These shareholders made certain representations and warranties, including their investment intent. They also agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act.

Material Modification to Rights of Security Holders.

On January 31, 2014, the Company filed the Certificate of Designations with the Delaware Secretary of State. The Certificate of Designation allows for the creation and issuance of the 1,250,000 shares of Preferred Stock. As stated in the Certificate of Designations, each share of the Preferred Stock has identical rights as 100 shares of the Company's common stock. These rights, privileges and preferences include among others; (i) each share of Preferred Stock shall have 100 to 1 voting rights, voting along with the Company's common stock, (ii) each share of Preferred Stock shall have 100 to 1 rights upon liquidation and distribution of the Company, (iii) each share of Preferred Stock shall have the right to convert into 100 shares of common stock of the Company. On January 29, 2014, the Company's Board of Directors approved the Certificate of Designations, the filings of the Certificate of Designations with the Delaware Secretary of State and the issuance of the Preferred stock created thereby to RTC.

Cancellation of Preferred Stock

Termination of Agreement with RTC

PTH failed to pay the $5,000,000 due under the Promissory Note and such failure continues as of the date of this report. The failure of RTC constituted a material breach to the Restructuring Agreement. As a result of that breach, along with other factors, the Company rescinded the Restructuring Agreement and cancelled the Preferred Stock, including all rights, privileges and preferences thereto. On May 12, 2015 and again on May 14, 2015, the Company notified RTC that it has rescinded the Restructuring Agreement and cancelled the Preferred Stock, including all rights, privileges and preferences thereto, effective immediately. The Company provided a similar notification to PTH cancelling the Restructuring Agreement and related agreements with PTH.

45

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

8.STOCKHOLDERS' DEFICIT

Preferred Stock Continued

On May 15, 2015, the Company received notification from an attorney at law acting as the custodian for RTC requesting the conversion of the Preferred Stock into 125,000,000 shares of common stock of the Company. The Company's position is that RTC has no rights to the Preferred Stock and the Company will take no action with respect to the purported conversion notice from RTC.

Lawsuit with RTC

August 8, 2015, we were served with a lawsuit by Resource Technology Corporation ("RTC"). On September 25, 2015, we filed our Answer, Affirmative Defenses, Counterclaims and Third Party Complaint. Please refer to Note 7 Commitments and Contingencies above for a complete discussion of the matter.

Common Stock and Warrants

The Company is authorized to issue 150,000,000 shares of common stock with a par value of $0.00001 per share. On or about February 25, 2014, a majority of the Company's shareholders approved the increase of the authorized common stock from 150,000,000 to 325,000,000 shares.  The Board of Directors previously approved the stated corporate action.  On March 26, 2014, the Company filed with the Securities and Exchange Commission and mailed to its shareholders a Definitive Schedule 14C with respect to the stated increase in authorized shares.

The following shares of common stock and warrants were issued and warrants cancelled in the three months ending August 31, 2015:

	Common Stock			Warrants
May 31, 2015		164,573,557			6,225,630
Issued for cash proceeds of $545,500		12,226,785			6,113,393
Issued on settlement of convertible notes payable		9,255,876			-
Issued as compensation		2,028,444			-
Issued in settlement of accrued compensation		2,000,000			-
Cancellation of stock issued for services		(1,000,000	)		-
Warrants exercised		316,668			(316,668	)
Warrants expired, unexercised		-			(2,864,797	)
August 31, 2015		189,401,330			9,157,559

46

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

8.STOCKHOLDERS' DEFICIT (CONTINUED)

Common Stock and Warrants (Continued)

During the three months ended August 31, 2014, the Company issued:

i) 12,226,785 shares of its common stock, together with warrants to buy 6,113,393 shares of its common stock for proceeds of $545,500.

11,662,500 of these shares carried a ratchet provision whereby if the Company's stock close at a price of less than $0.04 on April1, 2016, the Company will issue additional shares of common stock to the Subscriber so that the average share price per share (including the initial shares issued) equals 80% of the Closing price.

The warrants had terms of 12 months and exercise prices of $0.05 or $0.26.

ii) 9,255,876 shares of its commons stock in settlement of convertible notes payable, accrued interest, debt discount and derivative liabilities totaling $1,135,791.

iii) 500,000 shares of its commons stock valued at $75,000 as compensation to one of our officers.

iv) 1,528,444 shares of its commons stock valued at $114,591 as compensation to consultants to the Company.

v) 2,000,000 shares of its commons stock valued at $160,000 as partial settlement of accrued remuneration due to two of our former officers

In addition:

vi) 1,000,000 shares its commons stock previously issued to consultant for services were can cancelled for non-performance

vii) 316,668 warrants were exercised with an exercise price of $0.125 for gross proceeds of $39,583 and 2,864,797 warrants expired, unexercised.

The following table summarizes information about warrants outstanding at August 31, 2015:

Exercise Price		Warrants Outstanding		Weighted Average Life of Outstanding Warrants In Months
	$0.05		5,831,250		11.5
	$0.125		1,340,000		2.0
	$0.15		266,667		6.1
	$0.20		266,667		5.7
	$0.26		282,143		9.5
Total			9,157,599		9.0

47

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

8.STOCKHOLDERS' DEFICIT-CONTINUED

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.

In August 2014, our Board of Directors approved the establishment of a 2014 Stock Option Plan for up to 20,000,000 shares of Company common stock.

The following table sets stock options granted, exercised and outstanding during the three months ended August 31, 2014 and the twelve months ended May 31, 2014:

	# of Options			Weighted-Average Exercise Price
Options outstanding and vested, May 31, 2014		17,500,000		$	0.13
Granted		3,000,000			0.23
Exercised		(1,000,000	)		(0.065	)
Cancelled or forfeited		(3,500,000	)		(0.18	)
Options outstanding and vested at May 31, 2015		16,000,000			0.15
Granted		2,500,000			0.07
Exercised		-			-
Cancelled or forfeited		(3,500,000	)		(0.16	)
Options outstanding and vested at August 31, 2015		15,000,000		$	0.13

Effective August 13, 2015, we entered into Separation agreements with Messrs Serrat and Figueredo, our former Director of Mexican Operations and Chief Technology Officer, respectively, whereby we issued each of them 1 million shares of our common stock and 1.25 million, five year stock options with an exercise price of $0.07 in full and final settlement of any and all balances owed to them by the Company.

48

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

8.STOCKHOLDERS' DEFICIT (CONTINUED)

Stock Options (Continued)

The following table summarizes information about stock options outstanding at August 31, 2015:

Exercise Price		Options Outstanding and Exercisable		Intrinsic Value of Options Outstanding and Exercisable (1)		Weighted Average Life of Options Outstanding and Exercisable In Years
	$0.065		5,000,000	$	25,000		0.9
	$0.07		2,500,000		-		5.0
	$0.12		1,000,000		-		2.1
	$0.18		1,000,000		-		1.3
	$0.19		1,500,000		-		1.8
	$0.22		1,000,000		-		3.0
	$0.23		1,000,000		-		4.0
	$0.25		1,000,000		-		2.7
	$0.28		1,000,000		-		4.2
			15,-00,000	$	25,000		2.6

(1) Based on closing share price of $0.07 at close of business on August 31, 2015.

The total fair value of options issued during the three month periods ended August 31, 2014 and 2013 were $457,288 and $206,958 respectively.

The fair value of options granted under the Plan are estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions during the three months ending August 31, 2015:

Weighted-average risk-free interest rate		1.58	%
Weighted-average expected life	5 years
Weighted-average expected volatility		164	%
Weighted-average expect dividends		$ 0

The Company expects to issue shares upon exercise of these options from its authorized shares of common stock.

49

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

9.RELATED PARTY TRANSACTIONS

During the three months ended August 31, 2015:

On June 25, 2015, the Board of Directors of the Company appointed John Gildea as the Company's Chief Executive Officer and on that same date, Mr. Gildea resigned as the Company's Chief Operating Officer.

The Company and Mr. Gildea have entered into an oral arrangement pursuant to which Mr. Gildea will receive a monthly compensation of $8,000 for acting in such capacity. In addition, Mr. Gildea will receive an initial grant of common stock in the amount of 500,000 shares, valued at $75,000, and he will receive a quarterly common stock grant of 200,000 shares, subject to Board of Directors approval.

Effective August 13, 2015 we entered into Separation agreements with Messrs Serrat and Figueredo, our former Director of Mexican Operations and Chief Technology Officer, respectively, whereby we issued each of them 1 million shares of our common stock and 1.25 million, five year stock options with an exercise price of $0.07 in full and final settlement of any and all balances owed to them by the Company. The 2 million shares issued under this agreement we valued at $160,000 and the 2.5 million options issued were valued at $427,288

During the year ended May 31, 2015, we issued:

- 2,250,000 shares of our common stock valued as $495,000 as compensation to our directors. Each of our nine directors at the time received 250,000 shares of common stock.

- 1,000,000 shares of our common stock, valued at $280,000, and a 1,000,000 fully vested stock options with an exercise price of $0.29, valued at $263,600, as compensation to a newly appointed director of ours. The 1,000,000 stock grant is compensation for acting as Director of Mergers and Acquisitions. The 1,000,000 stock options is due to his appointment to the Company's Board of Directors.

- 1,000,000 fully vested stock options with an exercise price of $0.23, valued at $206,958, were issued to a Mexican national appointed to our advisory board to assist the Company with its operations in Mexico, including regulatory affairs.

- 1,000,000 shares of our common stock, valued at $300,000 were issued to a new member of our advisory board.

- 1,000,000 fully vested stock options with an exercise price of $0.28, valued at $254,172, were issued to an officer of the Company.

On November 13, 2014, we received an unsecured loan from our former Chairman and Chief Executive Officer in the amount of $25,000.  We received a further  unsecured loan of $25,000 from this former officer and director on December 3, 2014 and as of the date of the report, the balance due to this former officer and director is $50,000.

Termination of Agreement with RTC

As stated elsewhere herein, on January 30, 2014, the Company entered into a Restructuring Agreement with RTC, the RTC Shareholders, and Plasmafication Technology Holding, LLC, a Florida limited liability company ("PTH"). Pursuant to the Restructuring Agreement 1,250,000 shares of our designated Class of Preferred stock, valued at $16,250,000 was issued to the RTC shareholders. This transaction involved a former officer and director of the Company and a former director of the Company.

50

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

9.RELATED PARTY TRANSACTIONS (CONTINUED)

PTH failed to pay the $5,000,000 due under the Promissory Note and such failure continues as of the date of this report. The Company believes that the failure of RTC constitutes a material breach to the Restructuring Agreement. As a result of that breach, along with other factors, the Company rescinded the Restructuring Agreement and cancelled the Preferred Stock, including all rights, privileges and preferences thereto. On May 12, 2015 and again on May 14, 2015, the Company notified RTC that it has rescinded the Restructuring Agreement and cancelled the Preferred Stock, including all rights, privileges and preferences thereto, effective immediately. The Company provided a similar notification to PTH cancelling the Restructuring Agreement and related agreements with PTH.

On May 15, 2015, the Company received notification from an attorney at law acting as the custodian for RTC requesting the conversion of the Preferred Stock into 125,000,000 shares of common stock of the Company. The Company's position is that RTC has no rights to the Preferred Stock and the Company took no action with respect to the purported conversion notice from RTC.

Lawsuit with RTC

August 8, 2015, we were served with a lawsuit by Resource Technology Corporation ("RTC"). On September 25, 2015, we filed our Answer, Affirmative Defenses, Counterclaims and Third Party Complaint. Please refer to Note 7 Commitments and Contingencies above for a complete discussion of the matter.

Effective August 28, 2013, we appointed Mr. Hans H. Hertell 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 which will be issued immediately. The term of the Consulting Agreement is three years.

51

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

9.RELATED PARTY TRANSACTIONS (CONTINUED)

As stated elsewhere herein, on January 30, 2014, the Company entered into a Restructuring Agreement with RTC, the RTC Shareholders, and Plasmafication Technology Holding, LLC, a Florida limited liability company ("PTH"). Pursuant to the Restructuring Agreement 1,250,000 shares of our designated Class of Preferred stock, valued at $16,250,000 was issued to the RTC shareholders. This transaction involved a formed officer and director of the Company and a former director of the Company. .

10.INCOME TAXES

The Internal Revenue Code allows net operating losses (NOL's) to be carried forward and applied against future profits for a period of twenty years. The change of ownership following the RTC restructuring agreement may be limited our ability to utilize these US NOLs under the terms of IRC Section 381. The Mexican equivalent of the Internal Revenue Code allows NOL's to be carried forward for ten years.

We did not provide any current or deferred US federal income tax provision or benefit for any of the periods presented in these financial statements because we have experienced losses since Inception. When it is more likely than not, that a tax asset cannot be realized through future income, the Company must record an allowance against any future potential future tax benefit. We provided a full valuation allowance against the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward periods.

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the three months ended August 31, 2014 and 2013 as defined under ASC 740, "Accounting for Income Taxes." We did not recognize any adjustment to the liability for uncertain ta position and therefore did not record any adjustment to the beginning balance of the accumulated deficit on the balance sheet.

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences for the periods presented are as follows:

	August 2014		August 2013
Income tax provision at the federal statutory rate		39%		39%
Effect of operating losses		(39%)		(39%)
		-%		-%

Changes in the cumulative net deferred tax assets consist of the following:

	August 2015			May 2015
Net loss carry forward	$	21,871,150		$	21,831,719
Valuation allowance		(21,871,150	)		(21,831,719	)
	$	-		$	-

52

US PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 2015 AND 2014

(unaudited)

10.INCOME TAXES CONTINUED

A reconciliation of income taxes computed at the statutory rate is as follows:

	August 2015			August 2014
Tax at statutory rate	$	39,431		$	639,505
Valuation allowance		(39,431	)		(639,505	)
	$	-		$	-

11.SUBSEQUENT EVENTS

Between September 2 and September 18, 2015 we issued 2,887,500 shares of our common stock and 1,443,750 12 month warrants with an exercise price of $0.05 for cash proceeds of $115,500. These shares carried a ratchet provision whereby if the Company's stock close at a price of less than $0.04 on April 1, 2016, the Company will issue additional shares of common stock to the Subscriber so that the average share price per share (including the initial shares issued) equals 80% of the closing price on such date.

On September 14, 2015,  we canceled 375,000 shares of our common stock and refunded $15,000 to a former investor.

Between September 4 and September 29, 2015, we made principal repayments of $198,854 and paid prepayment penalties of $56,146 in further partial repayment of an outstanding note to Lender D.

Effective September 18, 2015, Lender C converted $38,462 principal balance of the loan into 1,185,258 shares of our common stock, as described in Note 6 Convertible Notes Payable above.

Effective September 25, 2015, the Board granted a director, who is also an attorney, 200,000 shares of common stock for his assistance with the pending litigation involving RTC and related parties.

Effective October 6, 2015, Lender C converted a $18,048 principal balance of the loan into 800,000 shares of our common stock, as described in Note 6 Convertible Notes Payable above.

Effective October 9, 2015, we issued and additional convertible debenture to lender H in the amount of $50,000 under which we received $49,000, net of fees of $1,000. The convertible debenture has a 6 month term and was bears interest at 12%. The convertible debenture could be prepaid with prepayments penalties of 150%, subject to approval of the lender.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 42.5% discount to the lowest intraday trading price of the prior 20 trading days as described in Note 6 Convertible Notes Payable above.

Effective October 12, 2015, Lender E converted a $20,000 principal balance of the loan into 638,570 shares of our common stock as described in Note 6 Convertible Notes Payable above.

On October 16, 2014 we formally terminated our consulting agreement with Dr. Edgar Choueiri.

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, 2015 for which disclosure is required.

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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, 2014, filed with the Securities and Exchange Commission (" Commission ") on September 10, 2014 (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.

Management's discussion and analysis of financial condition, changes in financial condition and results of operations is provided as a supplement to the accompanying consolidated financial statements and notes to help provide an understanding of the Company's financial condition and results of operations.

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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 Michoacán, Mexico where we own exploration and exploitation concessions to approximately 37,000 acres of land (the "Solidaridad Property"). See "Item 2. Properties" for more information about our mining concessions. 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, most of our investment in mining properties do not appear as an asset on our balance sheet.

RTC Transactions.

As previously reported by the Company on its Form 8-K filed on May 17, 2013 and as stated above, 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 transaction included 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 enabled RTC to receive 1/3rd of the revenues derived from the plasma processing of ore concentrates from the ore supply agreements.

It was represented to us that PP LP owned the right to operate a plasma processing facility located in 29 Palms, California that the plant took three years to build and was permitted to process ore concentrate. The parties believed that initial upgrades to the facility would commence within 90 to 120 days which will enable the facility to process concentrates at the rate of approximately 9 tons/day. PP LP expected to make further upgrades to the facility which would increase its capacity to approximately 27 tons/day. PP LP 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 agreement provided 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 completion date for the Benchmark Run was June 1, 2014.

We were informed that the RTC shareholders are Wolz International, LLC ("Wolz"), which owned 50%, Titan Productions, Inc. ("Titan"), which owned 25%, and Mercury6, LP ("Mercury6") which owned 25%. Assuming a completion of the transaction without further proportionate reduction in the USPR Shares, Wolz, Titan and Mercury would have received a proportionate amount of the 300 million shares of our common stock.  We were informed that Mr. Gennaro Pane, our former Chairman and Chief Executive Officer, was the sole officer and member of Wolz (and would have owned approximately 51% of such shares), and Chad Altieri, our former Board member, is the sole owner of Mercury. In addition, Messrs Pane and Altieri owned or controlled limited partnership interests in PP LP.

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The Share Exchange Agreement was approved by an independent committee of Directors, subject however to shareholder approval. In addition to normal closing conditions, the Company would have been required to obtain shareholder approval of the transaction, as well as shareholder approval to an increase in its authorized shares necessary to complete the transaction. No approval was obtained as this Agreement was terminated and replaced by Restructuring Agreement (described below).

The above description is a summary of the May 11, 2013 transactions with RTC. For more complete information, please refer to the above stated Form 8-K filed on May 17, 2013.

On January 30, 2014, the Company entered into a Restructuring Agreement with RTC, the RTC Shareholders, and Plasmafication Technology Holding, LLC, a Florida limited liability company ("PTH"). It was represented to us that PTH was an affiliate of RTC and that it owned and operated a plasma processing plant located in 29 Palms, California which employs the Plasmafication™ technology ("Plasma Plant").

Pursuant to the Restructuring Agreement, the Company, RTC and the RTC Shareholders terminated ab initio the Share Exchange Agreement, and the Company entered into new agreements and instruments with the counter parties described below consisting of (i) the Restructuring Agreement, the Technology License Agreement by and between the Company and PTH ("License Agreement"), (ii) An Equipment Purchase and Sale Agreement by and between the Company and PTH ("Equipment Purchase Agreement"), and (iii) A Promissory Note issued by PTH in favor of the Company in the amount $5,000,000 ("Promissory Note"), and (iv) A Certificate of Designations relating to 1,250,000 shares of Preferred Stock (defined below) issued to RTC in connection with the transaction ("Certificate of Designations"). The closing of the Restructuring Agreement occurred on February 4, 2014 ("Closing").

Processing Rights. Under the terms of the Restructuring Agreement, PTH agreed to process the Company's ore concentrate² at its Plasma Plant five (5) days per month for each month during a term agreed by the parties. The term was to begin with the date that the Plasma Plant is ready to commence commercial operations at the processing rate of 5 tons/day and terminating on the date that the Company Plasma Facility (defined below) was fully permitted and ready to commence commercial operations at a processing rate of 10 tons/day. PTH informed the Company that it expected to be fully operational during the fourth calendar quarter of 2014. The Company agreed to pay its ratable share of PTH overhead and direct costs as set forth in the agreement, and apart from the foregoing, PTH would not receive any royalty or other fee.

Licensing Rights. Under the Technology Licensing Agreement, PTH granted the Company a non-exclusive, royalty free license to use PTH's Plasmafication™ technology for a term of 25 years. The technology covered and related to the construction and use of a Company owned plasma plant described below. The Licensing Agreement was subject to other customary terms and conditions.

Construction of a Company Owned Plasma Plant.  Under the Equipment Purchase Agreement, PTH agreed to construct, on behalf of the Company, a 10 ton/day plasma processing plant on its premises located in 29 Palms, California ("Company Facility").  The plant was to be constructed on an actual costs basis without markup by PTH, and PTH also has agreed to pay for 1/3^rd of the construction costs.  The estimated costs of construction for the Company Facility was approximately $18 million. The parties intended to formulate a draw schedule which would detail construction and payment milestones, however, in order to initiate the construction process, the Company would be required to pay a down payment of $1.5 million. In addition to other terms and conditions therein, PTH agreed to assist in obtaining the necessary Federal, state and local permits and licenses to construct and operate the Company Plasma facility, however, the Company would have been required to bear the related costs. Upon completion of the facility, the Company would have owned 100% of the Company Facility, however, any Licensed Technical Information would have been subject to the Licensing Agreement.  In addition, the parties agreed to enter into an operating and maintenance agreement, which would address the operation and maintenance of the Company Owned Plasma Plant.

56

Promissory Note. As a material inducement for the Company to enter into the Restructuring Agreement, PTH delivered to the Company a Promissory Note in the principal amount is $5 million. The note was payable on or before January 30, 2015 with no interest prior to the payment due date. The promissory note had certain offset provisions set forth therein.

The above descriptions of the Restructuring Agreement, the Licensing Agreement, the Equipment Purchase Agreement, the Promissory Note and the Certificate of Designations are not complete, and are qualified in their entirety by reference to each respective agreement which are filed as Exhibits to this Form 8-K filed on February 5, 2014.

No value was assigned to the Processing Rights, Licensing Rights, PTH's assistance to construct a Company owned plant or the Promissory Note in these financial statements.

Preferred Stock and Certificate of Designation. The Company issued to RTC 1,250,000 shares of its newly created Class A Super Voting Preferred Stock ("Preferred Stock"). The Preferred Stock has the rights privileges and preferences as is set forth in the Certificate of Designations. As stated in the Certificate of Designations, each share of the Preferred Stock has identical rights as 100 shares of the Company's common stock. These rights, privileges and preferences include among others; (i). each share of Preferred Stock shall have 100 to 1 voting rights, voting along with the Company's common stock, (ii). each share of Preferred Stock shall have 100 to 1 rights upon liquidation and distribution of the Company, and (iii). each share of Preferred Stock shall have the right to convert into 100 shares of common stock of the company.

The market value of the 1,250,000 shares of its newly created Class A Super Voting Preferred Stock is assumed to equate to 125,000,000 shares of the common stock which was $16,250,000 on January 30, 2014 when the Company became contractually obligated to issue these shares.

In addition, under the Restructuring Agreement, the Company and RTC and its shareholders granted mutual releases, and provided customary representations and warranties.

The Restructuring Agreement was adopted by the unanimous consent of the Board of Directors of the Company, RTC, each RTC shareholders and PTH. All of the shareholders of RTC were signatories to the agreement.

As mention above, the Company was informed that the RTC shareholders were Wolz International, LLC ("Wolz") owning 50% of RTC, Titan Productions, Inc. ("Titan") owning 25% of RTC, and Mercury6, LP ("Mercury6") owning 25% of RTC. Assuming the issuance of the Preferred Stock to its shareholders,  Wolz would have received 625,000 shares of Preferred Stock convertible into 62.5 million shares of common stock, and each of Titan and Mercury would have received 312,500 shares of Preferred Stock convertible into 31.5 million shares of common stock. We were informed that Mr. Gennaro Pane, our former Chairman and Chief Executive Officer, was the sole officer of Wolz and owned approximately 51% of Wolz, and Chad Altieri, our former Board member, is the sole officer and owner of Mercury.  In addition, we were informed that Mr. Pane was a managing member of PTH and Messrs Pane and Altieri owned or controlled approximately 20% and 8%, respectively of PTH.

Termination of Agreement with RTC

PTH failed to pay the $5 million due under the Promissory Note and such failure continues as of the date of this report. The failure of RTC constituted a material breach to the Restructuring Agreement. As a result of that breach, along with other factors, the Company rescinded the Restructuring Agreement and cancelled the Preferred Stock, including all rights, privileges and preferences thereto. On May 12, 2015 and again on May 14, 2015, the Company notified RTC that it rescinded the Restructuring Agreement and cancelled the Preferred Stock, including all rights, privileges and preferences thereto, effective immediately. The Company provided a similar notification to PTH cancelling the Restructuring Agreement and related agreements with PTH.

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On May 15, 2015, the Company received notification from an attorney at law acting as the custodian for RTC requesting the conversion of the Preferred Stock into 125 million shares of common stock of the Company. The Company's position is that RTC has no rights to the Preferred Stock and the Company took no action with respect to the purported conversion notice from RTC.

Shareholders should be aware that the cost of litigation may prove expensive and, in this regard, the Company will be required to raise additional funds, which may result in significant dilution to existing shareholders.

Lawsuit with RTC

As discussed in "PART I, Item 3 – Legal Proceedings" above, on August 8, 2015, we were served with a lawsuit by Resource Technology Corporation ("RTC").  Please refer to that disclosure for a complete description of this matter.

Mining Services Agreement.

On May 22, 2013, the 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 agreed to perform certain mining services on a portion of the Company's Mexican mining concessions (Solidaridad I & II mining concessions (or approximately 5,000 acres)). These services were to be performed in three, separate phases described below:

●Phase 1 entailed 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 was approximately $400,000.

●Phase 2 required 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 was approximately $10 million.

●Phase 3 required the construction of a processing plant to process the ore, which will be owned by the Company, and the performance of all surface and underground mining operations.

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

Contractor is 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 and all mining costs. 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. All actual mining costs are to  be paid for by Contractor and milling 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 was to receive the following consideration from the Company:

58

Phase 1 and Phase 2. As consideration for completion of Phases 1 and 2, the Company agreed to issue to Contractor 10 million shares of its common stock. The Company issued the common stock to the Contractor, however, the Contractor failed to perform all of the required services under Phase 1 and Phase 2.

Phase 3. As consideration for completion of Phase 3, Contractor would have earned a 30% revenue interest in the revenues resulting from the sale of the ore, subject to it paying its proportionate share of the 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 former Chairman 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 are obligated to share in the milling and processing costs and revenues generated from any ore processing on a proportionate basis that is 70% to the Company and 30% to Contractor.

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 is 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 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 shares of our common stock at an exercise price of $0.12 in connection with that appointment.

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 to Resource Technology Corp. ("RTC") in connection with the transportation of ore supply, and related costs.

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, reported the results of the Phase 1 Satellite Imaging program under the Mining Services Agreement.

As at the date of this report, communications with Mesa Acquisition Group LLC has ceased and no further operations have been undertaken under the Mining Service Agreement. It is not clear, if, or when, any furtherwork will be performed under the terms of this agreement.

New Drilling Programs

In May 2014, we paid $35,000 as a deposit on a sales proposal to install limited production equipment on our property in Mexico for a total cost of $450,000. In August and September 2014, we made a two further deposits of $21,250 and $75,000, respectively, under the terms of the sales proposal.

As at the date of this report, no progress has taken place in respect of this project.

In February 2015, we entered into a further contract with the same Contractor to drill 5,000 meters for $1,762,047, $195,790 payable in common stock and the balance of $1,566,257 payable in cash.

Pursuant to the drilling program we have completed approximately 4,000 meters of drilling over 27 holes.

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During the period from February 2015 through August 31, 2015, we paid $1,180,251 in cash and issued 1,398,444 shares of our common stock in respect of this contract. As of August 31, 2015, a balance of $456,716 had been invoiced to us and was due and payable to the Contractor. We dispute this balance as it includes work which had not been authorized by the Company, only 4,000 of the contracted 5,000 meters had been drilled and no credit had been given for the stock issued to the Contractor by the Company. As of the issuance of this report, we do not have the funding to pay the balance due and payable or the balance of the work to be performed under the terms of the contract and we will need to raise the additional funds through the sale of further equity or debt instruments. These is no guarantee that we will be success in raising the necessary funding.

Corporate Matters

During the three months ended August 31, 2014, the Company issued:

i) 12,226,785 shares of its common stock, together with warrants to buy 6,113,393 shares of its common stock for proceeds of $545,500. 11,662,500 of these shares carried a ratchet provision whereby if the Company's stock close at a price of less than $0.04 on April 1, 2016, the Company will issue additional shares of common stock to the Subscriber so that the average share price per share (including the initial shares issued) equals 80% of the closing price on such date.   The warrants had terms of 12 months and exercise prices of $0.05 or $0.26.

ii) 9,255,876 shares of its commons stock in settlement of convertible notes payable, accrued interest, debt discount and derivative liabilities totaling $1,135,791.

iii) 500,000 shares of its commons stock valued at $75,000 as compensation to one of our officers.

iv) 1,528,444 shares of its commons stock valued at $114,591 as compensation to consultants to the Company.

v) 2,000,000 shares of its commons stock valued at $160,000 as partial settlement of accrued remuneration due to two of our former officers

In addition:

vi) 1,000,000 shares its commons stock previously issued to consultant for services were can cancelled for non-performance

vii) 316,668 warrants were exercised with an exercise price of $0.125 for gross proceeds of $39,583 and 2,864,797 warrants expired, unexercised.

On June 25, 2015, the Board of Directors of the Company appointed John Gildea as the Company's Chief Executive Officer and on that same date, Mr. Gildea resigned as the Company's Chief Operating Officer.

The Company and Mr. Gildea have entered into an oral arrangement pursuant to which Mr. Gildea will receive a monthly compensation of $8,000 for acting in such capacity. In addition, Mr. Gildea will receive an initial grant of common stock in the amount of 500,000 shares, and he will receive a quarterly common stock grant of 200,000 shares, subject to Board of Directors approval.

Effective August 13, 2015 we entered into Separation agreements with Messrs Serrat and Figueredo, our former Director of Mexican Operations and Chief Technology Officer, respectively, whereby we issued each of them 1 million shares of our common stock and 1.25 million, five year stock options with an exercise price of $0.07 in full and final settlement of any and all balances owed to them by the Company.

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Liquidity and Capital Resources

As shown in the accompanying financial statements, we have experienced continuing losses since Inception (January 21, 1998), and as at August 31, 2015, have a working capital deficit of $4,281,586, accumulated losses of $56,079,871, 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, 2015, we were in default on repayment of convertible promissory notes with principal balances of $550,000 together with accrued interest of $511,382 totaling $1,091,096.

As at August 31, 2015 and as of the date of this report, while we have made the mining rights payment to the Mexican government in respect of our Solidaridad I concession, we have not made the payment (approximately $90,000) for the remaining concessions which were due on July 31, 2015. Consequently we are now in default under the terms of these mineral concessions

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, pay the outstanding and overdue mining rights payments  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, 2015 and 2014, 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 2015 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. Significant dilution may result due to our current and future financings.

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, 2015, we sold 12,226,785 shares of our common stock, together with warrants to buy 6,113,393 shares of our common stock for proceeds of $545,500. The warrants had terms of 12 months and exercise prices of $0.05 or $0.23.We further issued three new convertible notes for net proceeds of $219,000. We also received $39,583 from the exercise of 316,668 warrants with an exercise price of $0.125.

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.

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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, 2015 COMPARED TO THE THREE MONTHS ENDED AUGUST 31, 2014

Revenue

We earned no revenue in either the three months ended August 31, 2015 or 2014 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, 2015, we incurred general and administrative expenses of $1,263,568, compared to the $1,432,394 incurred in the three months ending August 31, 2014, a decrease of $168,826.

During the three months ended August 31, 2015, we incurred $781,453 in exploration cost relating to our new drilling campaign, compared to $0 during the three months ended August 31, 2014.However, this increase was more than offset by a $671,495 decrease in remuneration, a $149,548 decrease in consulting fees and a $129,235 decrease in other expenses.

The $671,495 decrease in remuneration related primarily to the fact that in 2014 issued 2,250,000 shares of our common stock valued at $494,000, as compensation to our nine directors while we made no such issuance in in 2015 and in 2014 we accrued $162,834 in respect of potential labor dispute relating to our Mexican operations. The $149,548 decrease in consulting fees related primarily to the issuance of 1 million stock option shat we issued to a consultant in 2014 while we made no such issuance in 2015.The $129, decrease in other expenses arose due to an exchange gain on our Mexican assets and a significant decrease in travel and office costs following our change in management.

Gain and Loss on Settlement of Liabilities

During the three months ended August 31, 2015 we recognized gains on settlements of liabilities of $1,131,205 compared to $0 during the three months ended August 31, 2014.

Effective August 13, 2015 we entered into Separation agreements with Messrs Serrat and Figueredo, our former Director of Mexican Operations and Chief Technology Officer, respectively, whereby we issued each of them 1 million shares of our common stock and 1.25 million, five year stock options with an exercise price of $0.07 in full and final settlement of any and all balances owed to them by the Company. The 2 million shares issued under this agreement we valued at $160,000 and the 2.5 million options issued were valued at $427,288 and accordingly we recognized a gain of $944,965 on the settlement of accrued compensation of $1,562,252 due to these individuals.

We recognized further gains on the payment of certain drilling expenses in shares of our common stock ($87,899) and on the partial settlement of certain principal balance of notes payable, accrued interest, debt discount and derivative liabilities ($88,341), even after taking into consideration the repayment penalties applicable to such repayments.

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We made no such settlements and made no such gains or losses during the three months ended August 31, 2014.

Change in derivative liability

During the three months ended August 31, 2015, we recognized a gain on revaluation of derivative liabilities of $581,986, compared to the loss of $34,151 incurred in the three months ending August 31, 2014, an increase of $616137. The increase arose due to the increase in the number, value and maturity value of the derivative liabilities outstanding between the two periods

Interest expense (net)

During the three months ended August 31, 2015, we incurred interest expense (net) of $550,729 compared to $173,211 during the three months ended August 31, 2014, an increase of $377,518.

The increase reflects the increased level of Company's borrowings between the two periods.

Net loss

The net loss for the three months ended August 31, 2015 was $101,106 compared to $1,639,756 during the three months ended August 31, 2014, a decrease of $1,538,650 due to the factors discussed above.

CASH FLOW INFORMATION FOR THE THREE MONTHS ENDED AUGUST 31, 2014 COMPARED TO THE THREE MONTHS ENDED AUGUST 31, 2013

Net cash flow used in operations in the three months ended August 31, 2015 was $506,007 compared to $439,396 for the three months ended August 31, 2014, an increase of $66,611.

In the three months ended August 31, 2015, our net loss was $101,106 was increased for cash flow purposes by $1,010,955 in non- cash items and decreased for cash flow purposes by an increase in our net operating liabilities of $606,053 to arrive at net cash used in operations of $506,007. By comparison, in the three months ended August 31, 2014, our net loss was $1,639,756 which was offset by $857,930 in non- cash items and an increase in our net operating liabilities of $342,429 to arrive at net cash used in operations of $439,396.

No cash flow was provided by, or used in, investing activities during the three months ended August 31, 2015 or 2014.

Net cash flow generated from financing activities was $444,083 in the three months ended August 31, 20145compared to $382,000 for the three months ended August 31, 2014, an increase of $62,083.

In the three months ended August 31, 2015, we received $545,500 from the sale of shares of our common stock and warrants, $219,000 from the issuance of convertible notes payable and $39,583 from the exercise of warrants, while we paid $137,000 principal payments and prepayment penalties in respect of convertible notes payable and transferred $222,500 to an escrow accounts reserved for future repayment of notes payable. By comparison, in the three months ended August 31, 2014, we received $455,975 from the sale of shares of our common stock and warrants and $15,000 from the exercise of warrants

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.

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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, 2015.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, 2015. Specifically, we concluded that we had identified a significant deficiency with respect to the operation of our internal controls relating to the documentation and authorization procedures of certain travel and entertaining expenses incurred by certain directors, officers and non-Company individuals as of August 31, 2015.

Changes in Internal Control over Financial Reporting.

During the fiscal quarter ended August 31, 2015, 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

Termination of RTC Agreement

August 8, 2015, we were served with a lawsuit by Resource Technology Corporation ("RTC").

The Lawsuit was filed in the 11th Judicial Circuit Court, Dade County, Florida (Case: 2015-017057-CA-01). The Plaintiff, RTC, contends that the Restructuring Agreement does not allow for the unilateral termination of the agreement, rescission of the Certificate of Designations relating to the Preferred Stock nor the cancellation of the Preferred Stock. It further states that the obligations of PTH were not intertwined with that of RTC, and therefore the Company's termination of the agreement and cancellation of the Preferred Stock was inappropriate and ineffective, and further the Company's sole remedy would be to seek judgment against PTH for its default under the Promissory Note. The action seeks declaratory relief from the Court: (i) to declare that the Company did not have the legal right to terminate the Restructuring Agreement and rescind the Series A Preferred Stock, (ii) to determine that the unilateral actions by the Company in terminating the Restructuring Agreement and rescinding the Series A Preferred Stock is without merit, (iii) to enter a final judgment directing the issuance of the Preferred Stock to Plaintiff, (iv) to enter an order finding that any shareholder vote that have taken place without Plaintiff be declared null and void, (v) alternatively, if it is held that the Company did have the right to terminate the Restructuring Agreement and rescind the Series A Preferred Stock, to declare that the original Share Exchange Agreement with RTC be reinstated along with an extension of performance time periods (for RTC) as determined by the Court, and (vi) be awarded attorney's fees and court costs. In addition, the action asserts that the Company converted the Series A Preferred Stock, which was property of Plaintiff. The Plaintiff demands a judgment of $20,000,000 plus interest and court costs, and seeks a trial by jury.

The Company has retained outside counsel to vigorously defend its position in this matter and avail itself of all legal and equitable rights and remedies against PTH, RTC and all other culpable parties in this matter.

On September 4, 2015, the Company filed a Notice of Removal to United Stated District Court, Southern District of Florida. 

On September 25, 2015, we filed our Answer, Affirmative Defenses, Counterclaims and Third Party Complaint.

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Answer, Affirmative Defenses, Counterclaims and Third Party Claims

Answer and Affirmative Defenses

In our Answer, we denied Plaintiffs claims for Specific Performance, Declaratory Relief and Conversion. In addition, we asserted numerous affirmative defenses, including among others that RTC obtained the Company's consent through fraud, deceit or misrepresentation and RTC failed to satisfy certain conditions under the Restructuring Agreement.

Counterclaims and Third Party Complaint

In our responsive pleadings, we asserted numerous counterclaims against RTC and by way of a Third Party Complaint, we asserted third party claims against Gennaro (Jerry) Pane ("Pane"), Chad Altieri ("Altieri"), Barrington (Barry) Schneer and Joseph Spano ("Individual Defendants") and PTH.

The Company's counterclaims against RTC include, among others, breach of contract, fraudulent inducement to enter into the Share Exchange Agreement and the Restructuring Agreement based in part on the misrepresentations of Pane and Altieri, rescission of the Restructuring Agreement based on the misrepresentations of Pane and Altieri and the failure of consideration, and RTC's unjust enrichment. The Company's third party claims include, among others, fraud against all of the third party defendants, the breach of fiduciary duty and negligent misrepresentation against Pane and Altieri. In addition, we have alleged the third party defendants conspired to defraud the Company to issue the Preferred Stock.

Key allegations in our Counterclaims and Third Party Claims include the following:

• RTC/PTH and the Individual Defendants misrepresented that they had the necessary permits to legally operate their plasma facility in the City of Twentynine Palms, California; when in fact RTC/PTH could not legally operate the plasma facility because they did not have, among other things, the necessary Conditional Use Permit and Certificate of Occupancy required by the City of Twentynine Palms.

• RTC and PTH, through the Individual Defendants, provided financial statements and information to the Company that we allege were false and materially misleading.

• RTC /PTH and the Individual Defendants misrepresented their technical expertise and ability to operate a plasma facility.

• RTC/PTH and the Individual Defendants since October 2013 continually misrepresented that PTH had received the necessary funding, or that funding was imminent, to improve its plasma facility in Twentynine Palms. In reality, in October 2014, PTH had received only a fraction of the necessary funding.

 The Company has demanded a judgment against RTC and the third party defendants for compensatory damages, punitive damages, interest, taxable costs, attorneys' fees and any such other and further relief as the Court deems just and proper. Shareholders should be aware that the cost of litigation may prove expensive and, in this regard, the Company will be required to raise additional funds, which may result in significant dilution to existing shareholders.

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

During the three months ended August 31, 2015, we received $545,000 from the sale of 12,226,785 units. Each unit consist of one share of its common stock consists of one share of our common stock, and one half of a warrant. The warrants had terms of 12 months and exercise prices of $0.05 or $0.23. 11,662,500 of these units carried a ratchet provision whereby if the Company's stock close at a price of less than $0.04 on April 1, 2016, the Company will issue additional shares of common stock to the Subscriber so that the average share price per share (including the initial shares issued) equals 80% of the closing price on such date.

Between September 2 and September 18, 2015 we received $115,500 from the sale 2,887,500 units. Each unit consist of one share of its common stock consists of one share of our common stock, and one half of a warrant. The warrants had terms of 12 months and exercise prices of $0.05. These shares carried a ratchet provision whereby if the Company's stock close at a price of less than $0.04 on April1, 2016, the Company will issue additional shares of common stock to the Subscriber so that the average share price per share (including the initial shares issued) equals 80% of the Closing price.

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From July 1, 2015 through the date of the issuance of this report, we have issued four convertible promissory notes with the following terms:

i) On July 14 2015, we issued a additional convertible debenture to a lender F for $105,000 under which we received net proceeds of $96,000, net of original debt discount of $9,000. The convertible debenture had a 12 month term and was bears interest at 10%. The convertible debenture could be prepaid with prepayments penalties ranging between 120% and 150%.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 40% discount to the lowest intraday trading price of the prior 20 trading days

ii) On July 21 2015, we issued an additional convertible debenture to a lender G for $52,500 under which we received net proceeds of $48,000, net of original debt discount of $4,500. The convertible debenture had a 12 month term and was bears interest at 10%. The convertible debenture could be prepaid with prepayments penalties ranging between 120% and 150%.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 40% discount to the lowest intraday trading price of the prior 20 trading days

iii) On August 28, 2015, we issued an additional convertible debenture to lender A in the amount of $83,333, bearing interest at 12% and is due and payable on August 28, 2018. The principal and interest on the note can be converted to common stock at a 40% discount to the lowest trading price for the prior 25 days. The Company received proceeds in the amount of $75,000 (after an original issue discount of $8,333),

iv) On October 9, 2015, we issued and additional convertible debenture to lender H in the amount of $50,000 under which we received $49,000, net of fees of $1,000. The convertible debenture has a 6 month term and was bears interest at 12%. The convertible debenture could be prepaid with prepayments penalties of 150%, subject to approval of the lender.  At any time after the issuance date of the convertible loan, the lender has the right to convert the balance into shares of the common stock at a 42.5% discount to the lowest intraday trading price of the prior 20 trading days

All these 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 each 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, 2015, we were in default on repayment of convertible promissory notes with principal balances of $550,000 together with accrued interest of $11,382 totaling $1,091,096.

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, 2015 and, 2014, 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, 2015 and 2014.

ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS.

Exhibit Number	Exhibit Description	Incorporation by Reference				Filed herewith
		Form	File Number	Exhibit	File Date
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.

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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/ John Gildea
	Name: John Gildea
	Title: Chief Executive Officer
	Date: October 20, 2015

U.S. Precious Metals, Inc.
By:	/s/ David J Cutler
	Name: David J Cutler
	Title: Chief Financial Officer
	Date: October 20, 2015

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