Summary of U S PRECIOUS METALS INC

ITEM 7. 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 mining rights we own 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 12 months is to continue the drilling campaign as more fully described in the Company's Current Report, 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 our mining rights, $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 properties for which we own mineral rights, 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. As of May 31, 2008, we had 4,767,500 warrants outstanding, the exercise of which would provide us with $1,566,875 in gross proceeds. However, we have no control of whether the warrants will be exercised by the holders of the warrants. The exercise of the warrants is completely dependent upon the actions of a third party that may be influenced by many factors including, without limitation, the trading price of our common stock and the exercise price of the warrant. If we are not able to obtain additional funding, we will not be able to continue our drilling campaign or execute our current plan of operation.

Because the exploration phase of our business plan is essentially a research and development activity, the results of our exploration activities will have a significant effect on our future business model. This model can change substantially based upon our exploration activities, liquidity position or other factors. Accordingly, estimating expenditures is an imprecise process, made even more so by the unpredictable nature of our business plan. We believe it would, therefore, not be helpful to estimate beyond the next 12 months. Even these estimates are subject to change depending on our ability to raise additional capital and execute our business plan in accordance with our estimates.

To date, we have raised capital through the sale of shares of stock. For the fiscal year ended May 31, 2008, we sold common stock with an aggregate purchase price of $1,417,500 in outright stock purchases and $80,000 in warrant exercises. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock, through loans from our directors or principal shareholders or otherwise to meet our obligations over the next 12 months.

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.

At May 31, 2007, we had total assets of $363,265 consisting of cash in the amount of $277,917 and various other assets of $85,348.

As of the fiscal year ended May 31, 2008, we had total assets of $897,681 consisting of cash in the amount of $623,017 and other various assets totaling $274,664.

Results of Operations for Years Ending May 31, 2007 and May 31, 2008.

Financial Information from Comparative Years

We did not earn any revenues and have had only losses since our inception, including during the years ending May 31, 2007 and 2008. We do not anticipate earning revenues until such time, if any, that we are able to begin exploitation of minerals from the land related to our mining rights. We do not anticipate that this will occur in fiscal year 2009 and cannot guarantee that we will ever be in a position to begin exploitation operations. Although the exploration drilling campaign has been ongoing and the limited results we have obtained to date have been positive, we can provide no assurance that we will discover minerals in sufficient quantities and of sufficient quality that we can obtain funding to monetize the minerals in the mine through additional funding for exploitation, joint venture, sale or otherwise.

We incurred operating expenses in the amount of $899,427 in the year ended May 31, 2007, $238,841 of which were non-cash expenses related to stock grants and depreciation and $5,051,733 in the year ended May 31, 2008, $4,128,516 of which were non-cash expenses related to stock grants, depreciation and bad debt write off.

The major expenses driving the increase from fiscal year 2007 to 2008 are (1) consulting fees in the amount of $1,522,027, part of which the Company paid by issuing shares of common stock valued at $750,500, an aggregate increase of $1,344,792; (2) Employee awards consisting of shares of common stock granted to employees for their services rendered to the Company valued at $1,652,000, an aggregate increase of $1,652,000; and (3) Director awards consisting of shares of common stock granted to directors for their services rendered to the Company valued at $900,500, an aggregate increase of $900,500, or a net increase of $3,897,292 as compared to year 2007. We also increased the number of staff in our corporate office, some of whom received stock as part of their compensation. Consulting fees include payments for geologists, engineers, and other assaying and drilling services. There was a net increase of $255,014 in the remaining expense items from fiscal year 2007 to 2008. Drilling activity related to exploration increased substantially in the first and second quarter of this fiscal year in connection with the Company's determination to pursue exploration more aggressively. In addition, the Company recorded $109,259 in bad debt expense. This bad debt expense is related to loans of $106,275 made to a company which had certain directors in common with the directors of this Company and is likely to be deemed controlled by a former director of this Company. This loan may be deemed to have been made in violation of Section 402 of the Sarbanes-Oxley Act of 2002.

We have not achieved profitability and since our business plan does not include activities that will produce revenues for the foreseeable future, we do not anticipate achieving profitability in the foreseeable future. This means we are completely dependent upon obtaining additional financing to pursue our exploration activities.

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.

Critical Account Policies and Estimates

The Company has determined from the significant accounting policies disclosed in Note 2 of the Company's financial statements, that the following three disclosures are critical accounting policies.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Mineral Development Costs

Mine development costs include engineering and metallurgical studies, drilling and other related costs to delineate an ore body, the removal of overburden to initially expose an ore body at open pit surface mines and the building of access ways, shafts, lateral access, drifts, ramps and other infrastructure at underground mines. Costs incurred before mineralization is classified as proven and probable reserves are expensed and classified as mine development costs.

Revenue Recognition Policy

Revenue will be recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, no obligations remain and collectability is considered probable. The passing of title to the customer is based on terms of sales contracts.