U S PRECIOUS METALS INC - FORM 10-K/A

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EX-31 - U S PRECIOUS METALS INC	ex31a.htm
EX-32 - U S PRECIOUS METALS INC	ex32a.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

Amendment No. 2

(Mark One)

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

		For the fiscal year ended: May 31, 2013

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period:
		Commission file number: 000-50703

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

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

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

	(732) 851-7707
	(Registrant’s telephone number, including area code)
	(Former name, former address and former fiscal year, if changed since last report)

Securities registered under Section 12(b) of the Exchange Act:			None
Securities registered under Section 12(g) of the Exchange Act:			Common Stock $0.00001 par value
			(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. o Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer	o		Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s as of the last business day of the registrant’s most recently completed second fiscal quarter: $24,032,444 at November 30, 2012.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. The registrant had 123,681,244 shares of common stock issued and outstanding as of September 6, 2013.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933, as amended (the “Securities Act”): None

Preliminary Note

This Form 10-K/A (Amendment No. 2) is filed in response to a Comment Letter received from the Staff of the Securities and Exchange Commission (“Commission”) dated January 28, 2014 with respect to our Form 10-K/A (Amendment No. 1) filed with the Commission on February 13, 2014 (“Original Filing Date”). Included herein are Item 9A. Controls and Procedures and the Audit Report dated September 12, 2013 from Jeffrey and Company, together with our consolidated audited financial statements for fiscal years ended May 31, 2013 and 2012 (“Audited Financial Statements”).

The Item 9A. Controls and Procedures contained herein supersedes in its entirety the same Item in the earlier Form 10-K/A, and the Audit Report dated September 12, 2013 from Jeffrey and Company contained herein supersedes in its entirety the Audit Report contained in the earlier filing. The Audited Financial Statements included herein were not changed from the earlier filing.

Except to the extent expressly set forth herein, this Amendment No. 2 speaks as of the Original Filing Date of and has not been updated to reflect events occurring subsequent to the Original Filing Date other than to correct the stated deficiency. Accordingly, this Amendment No. 2 should be read in conjunction with our filings made with the Commission subsequent to the filing of the original Form 10-K and Form 10-K/A (Amendment No. 1).

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

The Company maintains disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures are designed to ensure that information required to be disclosed in an issuer’s reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Exchange Act.

Based on such evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures are not effective.

Management’s Annual Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Securities Exchange Act of 1934 defines internal control over financial reporting in Rules 13a-15(f) and 15d-15(f) as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

-	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and any disposition of our assets;
-	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

-	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of the end of fiscal year May 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework . Our management has concluded that as of May 31, 2013, our internal control over financial reporting was not effective based on these criteria. 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 as of May 31, 2013.

However, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and may not be detected.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

U.S. Precious Metals, Inc.

We have audited the accompanying consolidated balance sheets of U. S. Precious Metals, Inc. (an exploration stage company) as of May 31, 2013 and 2012 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended and for the period from January 21, 1998 (date of Inception of exploration stage) to May 31, 2013. These financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of U.S. Precious Metals, Inc. and subsidiary at May 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended, and for the period from January 21, 1998 (date of Inception of exploration stage) to May 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that U.S. Precious Metals, Inc. and subsidiary will continue as a going concern. As more fully described in Note 3, at May 31, 2013 the Company had no established source of revenues, a working capital deficit of $3,844,147 and had accumulated losses of $28,977,046 since Inception (January 21, 1998). These conditions raise substantial doubt about the ability of the Company to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ Jeffrey & Company, Certified Public Accountants

Wayne, New Jersey

September 12, 2013

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

	May 31, 2013			May 31, 2012
ASSETS
Current Assets:
Cash	$	28,691		$	116,669
Prepaid and other current assets		8,762			14,117
Total current assets		37,453			130,786

Fixed Assets, net		35,653			45,762

Other Assets:
Investment in mining rights		155,331			155,331
Deposits		2,090			4,423
Total other assets		157,421			159,754

Total Assets	$	230,527		$	336,302

LIABILITES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses	$	2,950,677		$	2,357,575
Convertible notes payable		930,923			838,923
Total current liabilities		3,881,600			3,196,498

Commitments and Contingencies
Stockholders' Deficit:
Preferred stock: authorized 10,000,000 shares of $0.00001 par value: no shares issued or outstanding		-			-

Common stock: authorized 150,000,000 of $0.00001 par value , issued and outstanding 121,781,244 and 103,307,633 shares, respectively		1,218			1,033
Additional paid in capital		25,325,355			21,689,400
Deficit accumulated during exploration stage		(28,977,646	)		(24,550,629	)
Total stockholders' deficit		(3,651,073	)		(2,860,196	)

Total Liabilities and Stockholders' Deficit	$	230,527		$	336,302

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Years Ended May 31,						January 21, 1998 (Date of Inception of Exploration Stage) to May 31,
	2013			2012			2013

Revenues	$	-		$	-		$	-

Expenses		4,213,963			2,453,863			28,131,929
Debt reduction through legal settlements		-			-			(692,315	)
Operating Loss		(4,213,963	)		(2,453,863	)		(27,439,614	)

Other Income (Expense):
Interest income		-			-			17,960
Interest expense		(213,054	)		(432,716	)		(1,555,992	)
Net other expense		(213,054	)		(432,716	)		(1,538,032	)

Loss before income taxes		(4,427,017	)		(2,886,579	)		(28,977,646	)
Provision for income taxes		-			-			-
Net Loss	$	(4,427,017	)	$	(2,886,579	)	$	(28,977,646	)

Net Loss per Share - Basic and Diluted	$	(0.04	)	$	(0.03	)
Weighted Average Number of Shares Outstanding - Basic and Diluted		107,467,729			92,563,149

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

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

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

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

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

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

Sales of common stock		1,880,000			19			229,981						230,000
Shares issued for services		2,910,000			29			88,721						88,750
Cancellation of shares		(400,000	)		(4	)		4						0
Net loss for the period											(313,127	)		(313,127	)

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

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

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

CONTINUED

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

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

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

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

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

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

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

CONTINUED

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

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

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

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

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

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

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

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

CONTINUED

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

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

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

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

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

CONTINUED

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

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

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

CONCLUDED


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

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

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

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

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

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

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

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

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

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

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

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended May 31,						January 21, 1998 (Date of Inception of Exploration Stage) to May 31,
	2013			2012			2013
Operating Activities:
Net Loss	$	(4,427,017	)	$	(2,886,579	)	$	(28,977,646	)
Adjustments required to reconcile net loss net cash issued by operating activities:

Charges not requiring the use of cash:
Depreciation		10,109			20,702			98,739
Shares and warrants issued for services		315,000			345,000			8,457,555
Share and option based compensation		2,686,933			1,164,619			8,048,208
Amortization of debt discount		-			157,996			358,400
Debt reductions through legal settlements		-			-			(692,315	)
Bad debt expense		-			-			109,259
Accrued interest on convertible notes		115,107			199,099			977,217

Changes in operating assets and liabilities:
Prepaid expenses and other assets		5,355			13,394			(90,651	)
Deposits		2,333			905			(2,136	)
Accounts payable and accrued expenses		593,104			161,232			3,804,220
Net Cash Used in Operating Activities		(699,076	)		(823,632	)		(7,909,150	)

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

Financing Activities:
Proceeds from sales of common stock		587,474			615,000			5,192,724
Proceeds from exercises of warrants		23,624			138,750			429,872
Proceeds from convertible notes		-			-			2,757,500
Loan from affiliated company		-			-			70,000
Repayment of loan from affiliated company		-			-			(68,000	)
Loans from officers		-			-			117,700
Repayment of loans from officers		-			-			(117,700	)
Net Cash Provided by Financing Activities		611,098			753,750			8,382,096

Net increase (decrease) in cash balance		(87,978	)		(69,882	)		28,691
Cash balance, beginning of period		116,669			186,551			-

Cash balance, end of period	$	28,691		$	116,669		$	28,691

The accompanying notes are an integral part of these financial statements

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

1.	ORGANIZATION AND BUSINESS

Organization of Company

U.S. Precious Metals, Inc. (the “Company”) was incorporated in the State of Delaware on January 21, 1998 as a wholly owned subsidiary of American International Ventures, Inc. (“American International”). On May 9, 2002, the board of directors of American International declared a dividend, in the form of our common stock to be issued to its shareholders of record on that date. On the record date of such dividend, American International had 274 shareholders of record. The ratio of common stock of the Company received by each American International shareholder was one share of Company common stock for each 10 shares of American International common stock held. A total of 1,961,184 shares of common stock were issued to shareholders of American International on the record date. These shares represented all of the issued and outstanding capital stock of the Company on that date. American International did not retain any shares of our common stock.

In March 2002, the Company entered into an oral arrangement with the owners of a mining property located in Mexico known as the Solidaridad mining claims. At the time, little geological information was known to American International about the property other than information collected by local residents. Based upon available information, the board of directors of American International determined that they were more interested in identifying mineral properties in the United States that had proven or probable resources, and were not interested in properties outside the United State requiring significant exploration work. Consequently, the board of directors of American International determined to separate the two companies by declaring the stock dividend discussed above so that each company could focus exclusively on its respective business.

On March 5, 2003, the Company formed a subsidiary, U.S. Precious Metals de Mexico, S.A. de C.V., a Mexican corporation (the “Mexican Sub”). Since the formation of the Mexican Sub, the Company has acquired the mineral rights to approximately 37,000 acres of property. Virtually all of our activities take place in Mexico through the Mexican Sub.

The Company’s common stock began trading on the OTC Bulletin Board under the symbol “USPR” on January 15, 2006. The Company’s common stock now trades on the OTC-QB under the symbol “USPR.”

Business

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 (also known as 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.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

1.	ORGANIZATION AND BUSINESS CONT.

Business cont.

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 rights 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.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. 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. From Inception (January 21, 1998) to May 31, 2013, the Company has been in the exploration stage and all its efforts have been devoted to acquiring mining rights, drilling, mapping, and assaying. No revenue had been realized through May 31, 2013. The Company has incurred cash and non-cash losses to May 31, 2013 of $28,977,646.

b. Consolidated Statements

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

c. Cash Equivalents

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONT.

d. 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.

e. 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.

f. Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, which include cash, accounts payable, and convertible notes payable, approximate their fair values at May 31, 2013. The carrying amount of convertible notes payable approximates their fair value due to their short term maturities.

g. Fixed Assets

Fixed assets are recorded at cost. Depreciation is calculated on the straight line basis, based on the useful or productive lives of assets, ranging from three years for computer equipment to seven years for machinery and equipment.

h. 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.

i. 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 May 31, 2013, none of the mine concessions met the requirements for qualification as having proven reserves.

j. Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is expected to be realized. At May 31, 2013 and 2012, based upon its evaluation, the Company had a full valuation allowance against its deferred tax assets.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONT.

j. Income Taxes cont.

The Company files an income tax return in the U.S. federal jurisdiction and Florida. Tax returns since fiscal 2009 remain open for examination. The Company accounts for uncertainty in income taxes in accordance with ASC Topic 740, “Income Taxes”. The Company’s estimate of the potential outcome of any uncertain tax issues is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. The Company uses a more likely than not threshold for financial statement recognition and measurement of tax position taken or expected to be taken in a tax return. To the extent that our assessment of such tax position changes, the change in estimate is recorded in the period in which the determination is made. At May 31, 2013 and 2012, there were no unrecognized tax benefits. Interest and penalties related to uncertain tax positions will be recognized in income tax expense. As of May 31, 2013 and 2012, no interest and penalties related to uncertain tax positions had been accrued.

k. 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.

l. Advertising Costs

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

m. Net Income (Loss) Per Share

The Company computes net income (loss) per common share in accordance with topic 23 of the Accounting Standards Codification, ("ASC"), 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. At May 31, 2013 and 2012 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 has incurred losses from operations. At May 31, 2013 and 2012, there were 24,327,180 and 20,746,549 options and warrants to purchase common stock.

n. Segment Reporting

Management treats the operation of the Company as one segment.

o. 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 years ended May 31, 2013 and 2012, the Company did not have any gains and losses resulting from activities or transactions that resulted in comprehensive income or loss.

p. Foreign Currency Translation

The assets of the Mexican Sub are in Mexico. The Mexican Sub 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 Sub 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.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONT.

p. Foreign Currency Translation cont.

The accounts of the Mexican Sub are remeasured in US dollars as follows:

(a) 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.

r. Impairment

The Company performs a review for potential impairment of long-lived assets whenever an event or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

s. 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.

t. 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 May 31, 2013, have a working capital deficit of $3,844,147, accumulated losses of $28,977,646 since Inception (January 21, 1998), recurring negative cash flows from operations and presently do not have sufficient resources to meet our outstanding liabilities or accomplish our objectives during the next twelve months.

As at May 31, 2013, we were in default on repayment of convertible promissory notes with principal balances of $575,000 together with accrued interest of $355,923 totaling $930,923.

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

3.	GOING CONCERN AND LIQUIDITY CONT.

We have failed to make this schedule payment on December 1, 2012. Thus, our former attorneys have the ability to avail themselves of all rights and privileges under the existing agreements with us and under the laws of Mexico and the United States. The total balance due to our former attorneys, including accrued interest, at May 31, 2013 was $1,696,253.

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

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

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

In our audited financial statements for the fiscal years ended May 31, 2013 and 2012, contained in our Annual Report, the Report of the Independent Registered Public Accounting Firm 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.

4.	SUPPLEMENTAL CASHFLOWS INFORMATION

	Year Ended May 31,
	2013		2012

Income taxes paid	$	-	$	-
Interest paid	$	-	$	-

Liabilities settled for shares of common stock

77,024 shares of common stock issued on conversion of:
convertible note payable	$	15,000	$	-
accrued interest		8,107		-
13,960,588 shares of common stock issued on conversion of:
convertible note payable		-		2,142,500
accrued interest		-		588,886

Total liabilities settled for shares of common stock	$	23,107	$	2,731,386

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

5.	FIXED ASSETS

As at May 31, 2013 and 2012, fixed assets consisted of the following:

	May 31, 2013			May 31, 2012
Vehicles	$	41,877		$	41,877
Machinery and equipment		92,515			92,515
Total fixed assets - cost		134,392			134,392
Less accumulated depreciation		(98,739	)		(88,630	)
Total fixed assets - net	$	35,653		$	45,762

Depreciation expense was $10,109 and $20,702 for the twelve months ended May 31, 2013 and 2012 respectively.

6.	CONVERTIBLE NOTES PAYABLE

	Principal Balance			Loan Discount			Accrued Interest			Total
May 31, 2011	$	2,717,500		$	(157,996	)	$	653,710		$	3,213,214
Issued in period		-			-			-			-
Converted into shares of common stock		(2,142,500	)		-			(588,886	)		(2,731,386	)
Accretion of debt discount		-			157,996			-			157,996
Interest accrued		-			-			199,099			199,099

May 31, 2012		575,000			-			263,923			838,923
Adjustment		15,000			-			7,239			22,239
Converted into shares of common stock		(15,000	)		-			(8,107	)		(23,107	)
Accretion of debt discount		-			-			-			-
Interest accrued		-			-			92,868			92,868
May 31, 2013	$	575,000		$	-		$	355,923		$	930,923

The Notes bear simple interest at an annual rate of 16%. The Notes 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.

As at May 31, 2013, we were in default on repayment of convertible promissory notes with principal balances of $575,000 together with accrued interest of $355,923 totaling $930,923.

7.	INCOME TAXES

The Company has experienced losses since inception. As a result, it has incurred no income tax. 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 Mexican equivalent of the Internal Revenue Code allows NOL's to be carried forward for ten years. The total of these NOL's at May 31, 2012 was $3,358,381 in Mexico and $25,575,447

in the U.S. The potential benefit of these NOL's has been recognized on the books of the Company, but it has been offset by valuation allowances.

Under provisions of pronouncements of the FASB, recognition of deferred tax assets is permitted unless it is more likely than not that the assets will not be realized. The Company has recorded noncurrent deferred tax assets as presented below. This valuation allowance increased during 2013 by $1,401,889 in the U.S., and by $91,153 in Mexico, the result of adding the potential benefit losses of the year ended May 31, 2013.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

7.	INCOME TAXES CONT.

	U.S.			MEXICO
Deferred Tax Assets	$	8,695,363		$	1,020,394
Valuation Allowance		(8,695,363	)		(1,020,394	)
Balance Recognized	$	-		$	-

If not used, these carryforwards will expire during years ended May 31, as listed below:

	U.S.		MEXICO
2014	$		$	67,322
2015				48,610
2016				60,203
2017				140,009
2018				457,312
2019				497,434
2020				500,548
2021				915,800
2022				367,300
2023		156,754		303,843
2024		245,805
2025		177,483
2026		219,811
2027		840,457
2028		4,195,302
2029		6,577,826
2030		4,353,164
2031		2,167,277
2032		2,519,279
2033		4,123,174

A reconciliation of the taxes calculated using statutory rates to pretax losses with the provisions for income taxes is presented below.

	2013			2012
Taxes calculated using statutory rate	$	1,493,032		$	(966,745	)
Tax effect of net operating losses		(1,493,032	)		966,745
Provision for income taxes	$	-		$	-

A Tax Reform Act of 1986 contains provisions that may limit the NOL carryforwards available for use any given year upon the occurrence of certain events, including significant changes in ownership interest. Consequently in the event we completed the Share Exchange Agreement with RTC, our ability to use these losses would be substantially restricted by the impact of section 382 of the Internal Revenues Code.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

8.	COMMITMENTS AND CONTINGENCIES

During the first fiscal quarter of 2012, we relocated our headquarters from Lithia, Florida to Odessa, Missouri, the premises of one of our directors and our then President. The space was rent free based on an oral arrangement between the parties. Again, if rent were charged, the amount would not be material.

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

Leases – Mexican Operation

The Company leases a warehouse (storage) facility in the city of Morelia, Michoacán, Mexico. This lease expired February 1, 2013 and effective February 1, 2013 we extended the lease for a one year term to February 1, 2014 at a monthly rental payment of $2,234.

Mining rights

The Company is required to make payments to the Mexican government on a semi-annual basis to maintain its mining concessions. In the twelve months ended May 31, 2013 the Company made payments of $106,394 to the Mexican government to maintain its mining concessions. It is anticipated that these payments will increase in the twelve months ending May 31, 2014.

Legal

Title Dispute

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

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

8.	COMMITMENTS AND CONTINGENCIES CONT.

Legal cont.

Title Dispute cont.

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

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

9.	SHAREHOLDERS’ 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.

The Company has not assigned any specific rights to the preferred stock, nor has any preferred stock been issued in the period from Inception (January 21, 1998) to May 31, 2013.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

9.	SHAREHOLDERS’ DEFICIT CONT.

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.

The following shares of common stock and warrants were issued and warrants cancelled in the twelve months ending May 31, 2013 and 2012:

	Common Stock			Warrants
May 31, 2011		78,100,646			5,546,549
Issued for cash proceeds of $615,000		6,221,429			3,110,715
Issued to directors as compensation valued at $175,000		1,750,000			-
Issued on the exercise of stock options – cashless exercise		350,000			-
Issued to consultants as compensation valued at $345,000		1,450,000			-
Issued on conversion of notes payable with principal balances of $2,142,500 and accrued interest of $588,856		13,960,558			-
Warrant issued to existing shareholder		-			500,000
Warrants exercised at $0.05 and $0.25 for $138,750		1,475,000			(1,475,000	)
Warrants expired, unexercised		-			(1,874,099	)

May 31, 2012		103,307,663			5,808,165

Issued for cash consideration of $587,474		6,750,000			3,375,000
Issued to directors at a value of $315,000		1,750,000			-
Issued on the exercise of stock options – cashless exercise		740,571			-
Issued to consultants as compensation valued at $2,260,000		12,000,000			-
Recession of shares previously issued for services		(3,000,000	)		-
Issued on conversion of notes payable with principal balances of $15,000 and accrued interest of $8,107		77,024			-
Warrants exercised at $0.16 and $0.25 for $23,625		155,986			(155,985	)
Warrants expired, unexercised					(1,200,000	)
May 31, 2013		121,781,244			7,827,180

During the year ended December 31, 2013:

i)	we issued 1,000,000 shares of our common stock valued at $240,000 to a financial institution to assist us in fund raising. These shares were subsequently cancelled during the year,

ii)	we issued warrants to acquire 14,168,772 shares of our common stock valued at $3,228,097 to a financial institution to assist us in fund raising. These warrants were subsequently cancelled during the year, and

iii)	we extended the term of 4 existing warrants for a total of 3,785,715 shares by 12 months as an incentive for exiting investors to make further investments in the Company.

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

Exercise Price		Warrants Outstanding		Weighted Average Life of Outstanding Warrants in Months
	$0.075		666,666		4.7
	$0.10		1,480,000		3.4
	$0.125		503,334		5.4
	$0.15		2,775,001		2.4
	$0.16		924,797		26.9
	$0.20		66,667		9.0
	$0.22		125,000		0.3
	$0.25		1,285,715		1.3
			7,827,180		5.7

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

9.	SHAREHOLDERS’ DEFICIT CONT.

Stock Options

In August 2008, the shareholders of the Company 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.

The following schedule presents the activity of Company options during the years ended May 31, 2013 and 2012:

	# of Options			Weighted-Average Exercise Price
Options outstanding, May 31, 2011		11,000,000		$	0.06
Granted		6,500,000			0.17
Exercised		(561,534	)		(0.06	)
Cancelled or forfeited		(2,000,000	)		0.06
Options outstanding, May 31, 2012		14,938,466		$	0.11
Granted		3,000,000			0.19
Exercised		(1,438,466	)		(0.065	)
Cancelled or forfeited		-			-
Options outstanding, May 31, 2013		16,500,000		$	0.13
Options vested at May 31, 2013		16,500,000		$	0.13

The following table summarizes information about stock options outstanding at May 31, 2013:

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		6,000,000	$	750,000		2.8
	$0.07		1,000,000		120,000		2.3
	$0.12		1,000,000		70,000		4.3
	$0.16		3,500,000		105,000		3.9
	$0.18		1,500,000		15,000		3.7
	$0.185		1,000,000		5,000		3.4
	$0.19		1,000,000		-		5.0
	$0.20		500,000		-		3.3
	$0.25		1,000,000		-		5.0
			16,500,000	$	1,065,000		3.5

Based on closing share price of $0.19 at close of business on May 31, 2013

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

9.	SHAREHOLDERS’ DEFICIT CONT.

The total fair value of options issued during the years ended May 31, 2013 and 2012 were $535,677 and $1,059,999 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 twelve months ending May 31, 2013:


Weighted-average risk-free interest rate	0.59 – 1.05%
Weighted-average expected life	5 yrs
Weighted-average expected volatility	180% - 401%
Weighted-average expected dividends	$ 0

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

10.	RELATED PARTY TRANSACTIONS

On September 4, 2013, we appointed Mr. Hans H. Hertell as the Company’s President, and in connection with such appointment, Daniel Moon resigned as the Company’s President. In addition, on that same date, our Board of Directors approved an Employment Agreement with Mr. Hertell and a Consulting Agreement with Hertell Group, LLC. (“Hertell Group”). Mr. Hertell is the sole officer and member of Hertell Group. The effective date of both agreements is August 28, 2013.

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.

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

During the year ended May 31, 2013, the Company issued to its directors a total of 1,750,000 shares of common stock, valued at $315,000, and 2,000,000 stock options, valued at $420,995. Each director received 250,000 shares of common stock. In addition, 1,000,000 fully vested stock options were issued to each of two newly appointed directors (2,000,000 in total). The Company also issued 1,000,000 fully vested stock options valued at $114,682 to a newly appointed officer of the Company.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

On March 19, 2013 Mr. Gennoro Pane, our Chief Executive Officer and a director of the Company, advanced to us $50,000 by way of loan. The loan was unsecured, interest free and repayable on demand.

The loan was repaid as follows: $10,000 of the loan was repaid on March 25, 2013, $20,000 of the loan was repaid on April 15, 2013 and the remaining $20,000 balance of the loan was repaid on April 19, 2013.

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 RTC shareholders are Wolz International, LLC (“Wolz”), Titan Productions, Inc. (“Titan”), and Mercury6, LP (“Mercury6”). Assuming a completion of the transaction without a proportionate reduction in the USPR Shares, Wolz, Titan and Mercury each will receive 150 million shares, 75 million shares and 75 million shares, of common stock of USPR, respectively. Mr. Gennaro Pane, our Chairman and Chief Executive Officer, is the sole officer and member of Wolz (and will own approximately 51% of such shares), and Chad Altieri, our Board member, is the sole owner of Mercury. In addition, Messrs Pane and Altieri own or control limited partnership interests in PP LP. On September 10, 2013, the Company amended its Share Exchange Agreement with RTC and the RTC shareholders. Under the amendment, the parties agreed to reduce the number of “Exchange Shares” as defined in Section 4.01 of the Agreement (issuable to the RTC shareholders) from 300,000,000 shares of USPR common stock to 290,000,000 shares of USPR common stock.

On May 22, 2013, the Company issued 10,000,000 shares of its common stock valued at $1.9 million to a company in connection with the exploration, and potentially the development, of a portion of our Solidaridad Property. In addition, in 2013, we issued 1,000,000 fully vested stock options valued at $114,682 to the principal of this company as consideration for acting as Director of Security of our Solidaridad Property.

During the year ended May 31, 2012, the Company issued to its directors a total of 1,750,000 shares of common stock, valued at $175,000, and 2,500,000 stock options, valued at $419,999. Each director received 250,000 shares of common stock, except that the Chairman, who received 500,000 shares of common stock. In addition, 1,000,000 fully vested stock options were issued to each of two newly appointed directors (2,000,000 in total) and 500,000 fully vested stock options were issued to an officer who is also a director. The Company further issued 3,000,000 stock options, valued at $480,000, to three newly appointed officers of the Company, 2,500,000 of these options vested immediately, the remaining 500,000 options will vest in 2013.

The Plasma Plant and Plasma Processing.

PP LP owns the right to operate a plasma processing facility located in 29 Palms, California. The plant took three years to build and is permitted to process ore concentrate. The parties believe that initial upgrades to the facility will commence within 90 to 120 days which will enable the facility to process concentrates at the rate of approximately 9 tons/day. PP LP expects to make further upgrades to the facility which would increase its capacity to approximately 27 tons/day.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

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

Ore Supply Agreements .

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

Plasmafication ™ Toll Processing Agreement .

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

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

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

Share Exchange Agreement .

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

The RTC shareholders are Wolz International, LLC (“Wolz”), Titan Productions, Inc. (“Titan”), and Mercury6, LP (“Mercury6”). Assuming a completion of the transaction without a proportionate reduction in the USPR Shares, Wolz, Titan and Mercury each will receive 150 million shares, 75 million shares and 75 million shares, of common stock of USPR, respectively. Mr. Gennaro Pane, our Chairman and Chief Executive Officer, is the sole officer and member of Wolz (and will own approximately 51% of such shares), and Chad Altieri, our Board member, is the sole owner of Mercury. In addition, Messrs Pane and Altieri own or control limited partnership interests in PP LP.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

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

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

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

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

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

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

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

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

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

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

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

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

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

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

In addition to the consideration stated above, as a further inducement for Contractor to enter into the Mining Services Agreement, the Company’s Chairman has agreed to issue to Contractor an additional 5 million shares of our common stock held by the Chairman.

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

The Mining Services Agreement contains extensive terms and obligations regarding the performance of the mining services by Contractor. Accordingly, the descriptions of the Mining Services Agreement is not complete, and is qualified in their entirety by reference to each agreement which are filed as an exhibit hereto and incorporated herein for all purposes.

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

The Company cannot predict the results of the satellite imaging to be undertaken by Contractor. If the results of such imaging are such that Contractor elects not to proceed with Phase 2 and/or Phase 3, such event will have a negative impact on the Company.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company has no established source of revenues, experienced continuing losses, a working capital deficit of $3,844,147 accumulated losses of $28,977,646 since Inception (January 21, 1998), recurring negative cash flows from operations, and does not presently have sufficient resources to accomplish its objectives during the next twelve months. We are in default on repayment of our convertible note obligations ($930,923) and a past due liability to our former attorneys ($1,696,253) which collectively total $2,627,176. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation. The Company’s present plans, the realization of which cannot be assured, to overcome these difficulties include, but are not limited to, the continuing effort to raise capital in the public and private markets.

11.	SUBSEQUENT EVENTS

On July 9, 2012, the Company’s Board of Directors approved and recommended that the Company increase its authorized shares of common stock from 150,000,000 to 475,000,000 and that the proposed action be submitted to a vote of its shareholders. The purpose of the action is to enable to Company to complete the Share Exchange Agreement with Resource Technology Corporation pursuant to which the Company will be required to issue 300,000,000 shares of its common stock to the shareholders of Resource Technology Corporation (“RTC Transaction”) (See Company’s Form 8-K filed with the Securities and Exchange Commission on May 17, 2013). The Share Exchange Agreement was previously approved by an independent committee of Directors, however subject to subsequent approval of the Company’s shareholders. The record date established by the Board of Directors was July 9, 2013, however, it was subsequently changed by the Board of Directors to September 16, 2013 (“Record Date”).

The Company intends to seek the written consent of stockholders as of September 16, 2013 holding in excess of a majority of the voting stock to affect the Proposed Actions. If the proposed action were not adopted by written consent, it would have been required to be considered by the Company’s stockholders at special stockholders meeting.

The Company intends to file a notice to non-voting stockholders in the form of a Schedule 14C Information Statement. Pursuant to Section 228 of the DGCL, no advance notice is required to be provided to the other stockholders; who have not consented in writing to such action, of the taking of the stated corporate action without a meeting of stockholders. No additional action will be undertaken pursuant to such written consents, and no dissenters’ rights under the DGCL are afforded to the company stockholders as a result of the action to be taken.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

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

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

On July 17, 2013, we entered into a convertible loan note for $100,000. The loan note has a 12 month term, bears interest of 12% and, after six months from issuance is convertible into shares of the Company’s common stock at a 42% discount to the lowest closing price of the prior 20 trading days.

In July and August 2013, the Company paid a total of $125,000 to a company controlled by Mr. George Mesa, our Director of Security, and owner of Mesa Acquisitions Group LLC. Mr. Mesa had previously advanced a like amount of funds which were used by Resource Technology Corp. (“RTC”) in connection with the transportation of ore supply, and related costs. As mentioned above in Note 10 Related Party Transactions , in May 2013, we entered into a Share Exchange Agreement with RTC and its shareholders, which includes our Chairman and a director, to acquire the issued and outstanding shares of RTC from the RTC shareholders.

On July 31, 2013, we entered into a convertible loan note for $100,000. The loan note has a 12 month term, bears interest of 12% and, after six months from issuance is convertible into shares of the Company’s common stock at a 42% discount to the lowest closing price of the prior 20 trading days. We paid commissions to a FINRA broker/dealer in the amount of $8,000 in respect of this loan.

U.S. PRECIOUS METALS, INC.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

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

On September 10, 2013, the Company amended its Share Exchange Agreement with RTC and the RTC shareholders. Under the amendment, the parties agreed to reduce the number of “Exchange Shares” as defined in Section 4.01 of the Agreement (issuable to the RTC shareholders) from 300,000,000 shares of USPR common stock to 230,000,000 shares of USPR common stock.

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 May 31, 2013 for which disclosure is required.

SIGNATURES

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


	U.S. Precious Metals, Inc. By: /s/ Gennaro(Jerry) Pane Name: Gennaro (Jerry) Pane Title: Chief Executive Officer Date: February 14, 2014

	By:	/s/ David Cutler
		Name: David cutler
		Title: Chief Financial Officer
		Date: February 14, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Daniel J Moon	Director	February 11, 2014
Daniel J Moon

/s/ David W. Burney	Director	February 13, 2014
David W. Burney

/s/ Sheldon Baer	Director	February 11, 2014
Sheldon Baer

/s/ Gennaro (Jerry) Pane	Chief Executive Officer and Director	February 14, 2014
Gennaro (Jerry) Pane

/s/ Daniel H. Luciano	Director	February 14, 2014
Daniel H. Luciano

/s/ John Gildea	Director	February 12, 2014
John Gildea

/s/ Chad Altieri	Director	February 12, 2014
Chad Altieri

/s/ Edgar Choueiri	Director	February 12, 2014
Edgar Choueiri

/s/ Michael Volkov	President and Director	February 18, 2014
Michael Volkov

U S PRECIOUS METALS INC - FORM 10-K/A - February 18, 2014

Attached files

U S PRECIOUS METALS INC Reports