Summary of U S PRECIOUS METALS INC

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

Liquidity and Capital Resources

We were formed as a mineral exploration company on January 21, 1998. We are an exploration stage company. There is no assurance that commercially viable mineral deposits exist in sufficient amounts in our areas of exploration to justify exploitation. Further exploration will be required before a final evaluation as to the economic and legal feasibility of the concessions can occur. Because we are still in our exploration stage, we have no revenues and have had only losses since our inception. Accordingly, a comparison of our financial information for accounting periods would likely not be meaningful or helpful in making an investment decision regarding our Company. Our plan of operations for the next twelve months is to continue the drilling campaign as more fully described in the Company's Current Report on Form 8-K filed on January 23, 2009, provided that we receive sufficient funding to do so. However, we have made no commitments for capital expenditures over the next 12 months. Our management estimates that approximately $1,335,000 will be required over the next 12 months to maintain our current status. This amount does not include any additional exploration. We estimate these expenses to include approximately $350,000 for salaries, outsourced labor and consulting services, $600,000 for professional services, including work undertaken by the independent accountant and legal fees, $50,000 for rent, maintenance, and utilities, $130,000 for permits and expenses required to maintain the concessions, $105,000 for taxes and insurance, $80,000 for office expenses, and $20,000 for other miscellaneous expenses, including marketing and investor relations expenses.

We may attempt to interest an operating company to enter into a joint venture to undertake exploration work on the Solidaridad Concessions (as defined in the Company's Amended Form 10-K/A), or we may attempt to access the public or private debt or equity markets to move toward the production phase, or even consider an outright sale.

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

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

During the three month period ending August 31, 2008, we invested approximately $327,205 in our exploration drilling campaign and the development of our Mexican operations. Michael Floersch, the CEO of Applied Minerals, Inc., was engaged in February 2008 by the Company to advise us regarding our drilling program, initiate and maintain the chain of custody procedure for the core samples from the drill site to the assayer in Kellogg, Idaho and assume responsibility for quality control in the drilling campaign. During the first fiscal quarter of 2009, we have continued to explore an area of about five acres of the 37,000 acre concessions, leaving approximately 99.9% of the holdings unexplored. If we are able to raise sufficient financing to do so, the company expects to continue to explore and develop the property over the next 12 months to determine the proven and probable reserves on a more significant portion of the property.

We previously reported that we anticipated completion of an on-site metallurgical and chemistry laboratory with operations to begin in 2009. General construction of the lab has been completed; however the lab is not yet functional. The Company has suspended additional improvements until such time as it receives sufficient funding to move forward. Additionally, the lab is currently expected to function as a support facility rather than a main processing facility under our current business plan.

We must obtain additional financing to continue our operations. There can be no guarantee that we will be able to obtain additional funding on terms that are favorable to the Company or at all. As an exploration stage company, the Company has no current ability to generate revenue and no plans to do so in the foreseeable future. Our assets consist of cash and cash equivalents, prepaid expenses, nominal equipment and certain mineral property interests. There can be no assurance that we will obtain sufficient funding to continue operations, or if we do receive funding, to generate revenues in the future or to operate profitably in the future. We have incurred net losses in each fiscal year since inception of our operations.

The Company had total assets in the amount of $968,638 with a cash balance of $658,971 as of August 31, 2008, vs. $897,681 in total assets and a cash balance of $623,017 as of May 31, 2008.

Since we do not anticipate generating any revenue for the foreseeable future, we will have to continue to seek additional funding from outside sources. However, we are facing declining and volatile financial markets that may make it difficult to satisfy our need for additional capital to finance our plan of operations for fiscal 2009 through either debt or equity. As a result, we continue to seek appropriate opportunities that are likely to provide the Company with adequate fiscal resources to execute its plan of operations in the current fiscal year and beyond.

Because of the exploratory nature of our current business plan, we anticipate incurring operating losses for the foreseeable future. Our future financial results are also uncertain due to a number of factors, some of which are outside our control. These factors include, but are not limited to:

(i) our ability to raise sufficient additional funding;

(ii) the results of our proposed exploration programs on the mineral properties; and

(iii) assuming significant mineral deposits, our ability to be successful in commercially producing mineral deposits, find joint venture partners for the development of our property interests or find a purchaser for the property interests or finding a purchaser for the property interests.

Results of Operations for the Three Month Periods Ending August 31, 2008 and 2007.

We did not earn any revenues and have had only losses since our inception, including during the three month periods ending in August 31, 2008 and 2007.

We incurred operating expenses in the amount of $1,310,408 during the three month period ended August 31, 2008, $776,150 of which was a non-cash expense related to stock and option grants to company directors, officers and consultants and $6,531 of which was a non-cash expense related to depreciation. We incurred cash operating expenses in the amount of $253,132 during the three month period ended August 31, 2007.

We granted options and shares in lieu of compensation valued at $776,150 during the three month period ended August 31, 2008 compared to no grants in the comparable period for 2007. We also paid $167,921 in geological expenses, up from $7,500 in the comparable three month period. Our payroll and consulting cash expenses increased by $34,014 over the comparable three month period. Additional office expenses, depreciation, insurance, and other related expenses in Mexico caused an increase of $79,191 over the expenses for the period ended August 31, 2007.

Off Balance Sheet Arrangements

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