UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 2003
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission file number:333-97187
STERLING GROUP VENTURES, INC.
(Exact name of small business issuer in its charter)
| Nevada | 72-1535634 |
| (State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) |
| organization) | |
| 12880 Railway Avenue, Unit 35 | |
| Richmond, British Columbia | V7E 6G4 |
| (Address of principal executive offices) | (Zip Code) |
| Issuer’s telephone number: | (604) 644-5139 |
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Issuer's classes of common stock, as of the latest practicable date. 11,360,000 common shares, $0.001 par value, issued and outstanding as of December 29, 2003
Transitional Small Business Format. Yes ¨ No x
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
STERLING GROUP VENTURES, INC.
(A Development Stage Company)
Condensed Balance Sheet
(Unaudited)
November 30, 2003
| Assets | |||
| Cash | $ | 5,709 | |
| Liabilities and Shareholders’ Equity | |||
| Liabilities: | |||
| Accounts payable and accrued expenses | $ | 800 | |
| Total liabilities | 800 | ||
| Commitment and contingency (Note 5) | — | ||
| Shareholders’ equity (Note 4): | |||
| Common stock, $.001 par value; authorized 500,000,000 shares, | |||
| issued and outstanding 11,360,000 shares | 11,360 | ||
| Additional paid-in capital | 71,040 | ||
| Deficit accumulated during the development stage | (76,908 | ) | |
| Cumulative translation adjustment | (583 | ) | |
| Total shareholders' equity | 4,909 | ||
| $ | 5,709 | ||
See accompanying notes to condensed financial statements
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STERLING GROUP VENTURES, INC.
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
| September 13, | |||||||||||||||
| 2001 | |||||||||||||||
| (Inception) | |||||||||||||||
| Three Months Ended | Six Months Ended | Through | |||||||||||||
| November 30, | November 30, | November 30, | |||||||||||||
| 2003 | 2002 | 2003 | 2002 | 2003 | |||||||||||
| Costs and expenses: | |||||||||||||||
| General and administrative | $ | 12,726 | $ | 6,328 | $ | 16,307 | $ | 10,659 | $ | 41,302 | |||||
| Unproven mineral interest exploration | |||||||||||||||
| costs (Note 5) | 29,528 | — | 29,528 | — | 29,528 | ||||||||||
| Rent contributed by affiliate (Note 2) | 300 | 300 | 600 | 600 | 2,600 | ||||||||||
| Services contributed by officer (Note 2) | 50 | 550 | 100 | 1,100 | 1,300 | ||||||||||
| Office expense, related party (Note 2) | — | — | — | — | 678 | ||||||||||
| Stock-based compensation (Note 2): | |||||||||||||||
| Organization expenses | — | — | — | — | 1,500 | ||||||||||
| 42,604 | 7,178 | 46,535 | 12,359 | 76,908 | |||||||||||
| Loss before income taxes | (42,604 | ) | (7,178 | ) | (46,535 | ) | (12,359 | ) | (76,908 | ) | |||||
| Income tax provision (Note 3) | — | — | — | — | — | ||||||||||
| Net loss | $ | (42,604 | ) | $ | (7,178 | ) | $ | (46,535 | ) | $ | (12,359 | ) | $ | (76,908 | ) |
| Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||
| Weighted average common shares outstanding | 11,360,000 | 10,300,000 | 10,688,095 | 10,300,000 | |||||||||||
See accompanying notes to condensed financial statements
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STERLING GROUP VENTURES, INC.
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
| September 13, | |||||||||
| 2001 | |||||||||
| (Inception) | |||||||||
| Six Months Ended | Through | ||||||||
| November 30, | November 30, | ||||||||
| 2003 | 2002 | 2003 | |||||||
| Net cash used in | |||||||||
| operating activities | $ | (49,203 | ) | $ | (12,486 | ) | $ | (70,708 | ) |
| Cash flows from financing activities: | |||||||||
| Proceeds from the sale of common stock | 53,000 | — | 87,000 | ||||||
| Payments for offering costs | — | (10,000 | ) | (10,000 | ) | ||||
| Net cash provided by (used in) | |||||||||
| financing activities | 53,000 | (10,000 | ) | 77,000 | |||||
| Effect of exchange rate changes on cash | (603 | ) | — | (583 | ) | ||||
| Net change in cash | 3,194 | (22,486 | ) | 5,709 | |||||
| Cash, beginning of period | 2,515 | 30,373 | — | ||||||
| Cash, end of period | $ | 5,709 | $ | 7,887 | $ | 5,709 | |||
| Supplemental disclosure of cash flow information: | |||||||||
| Cash paid during the period for: | |||||||||
| Income taxes | $ | — | $ | — | $ | — | |||
| Interest | $ | — | $ | — | $ | — | |||
See accompanying notes to condensed financial statements
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STERLING GROUP VENTURES, INC.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The condensed financial statements presented herein have been prepared by the Company in accordance with the accounting policies in its audited financial statements for the period ended May 31, 2003 as filed in its Form 10-KSB and should be read in conjunction with the notes thereto. The Company is in the development stage in accordance with Statement of financial Accounting Standards No. 7.
In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim period presented have been made. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the year.
Interim financial data presented herein are unaudited.
NOTE 2: RELATED PARTY TRANSACTIONS
An affiliate contributed office space to the Company for all periods presented. The office space was valued at $100 per month based on the market rate in the local area and is included in the accompanying financial statements as “rent contributed by affiliate” with a corresponding credit to “additional paid-in capital”.
An officer contributed services to the Company during the six months ended November 30, 2003. The services are recorded in the accompanying financial statements based on the prevailing rates for such services, which equaled $50 per hour based on the level of services performed. The services are reported as “services contributed by officer” with a corresponding credit to “additional paid-in capital”.
An Officer organized the Company, raised the initial seed capital and negotiated an agreement in exchange for 1,500,000 shares of the Company’s common stock. The transaction was valued based on the costs for such services in the local area.
On May 17, 2002, the Company and its president entered into a trust agreement whereby the president of the Company will hold the Mineral Claims (see Note 5) on behalf of the Company until the initial exploration program is completed.
The Company reimbursed an affiliate $678 for office expenses used during the period from September 13, 2001 through May 31, 2002.
NOTE 3: INCOME TAXES
The Company records its income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. The Company incurred net operating losses during the periods shown on the condensed financial statements resulting in a deferred tax asset, which was fully allowed for; therefore, the net benefit and expense result in $-0- income taxes.
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STERLING GROUP VENTURES, INC.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
NOTE 4: SHAREHOLDERS’ EQUITY
The Company’s Form SB-2 registration statement, which offered for sale up to 2,000,000 shares of the Company’s common stock at $.05 per share, was declared effective by the Securities and Exchange Commission on April 14, 2003. During the six months ended November 30, 2003, the Company sold 1,060,000 shares of its common stock for proceeds totaling $53,000. The Company closed the offering on September 25, 2003.
Following is a schedule of changes in shareholders’ equity for the six months ended November 30, 2003:
| Deficit | |||||||||||||||||
| Accumulated | |||||||||||||||||
| Additional | During the | Cumulative | |||||||||||||||
| Common stock | Paid-In | Development | Translation | ||||||||||||||
| Shares | Par Value | Capital | Stage | Adjustment | Total | ||||||||||||
| Balance, June 1, 2003 | 10,300,000 | $ | 10,300 | $ | 28,400 | $ | (30,373 | ) | $ | 20 | $ | 8,347 | |||||
| Sale of common stock, less $ 10,000 | |||||||||||||||||
| of offering costs | 1,060,000 | 1,060 | 41,940 | - | - | 43,000 | |||||||||||
| Office space contributed by affiliate | - | - | 600 | - | - | 600 | |||||||||||
| Services contributed by officer | - | - | 100 | - | - | 100 | |||||||||||
| Comprehensive loss: | |||||||||||||||||
| Net loss | - | - | - | (46,535 | ) | (46,535 | ) | ||||||||||
| Cumulative translation adjustment | - | - | - | - | (603 | ) | (603 | ) | |||||||||
| Comprehensive loss | - | - | - | - | - | (47,138 | ) | ||||||||||
| Balance, November 30, 2003 | 11,360,000 | $ | 11,360 | $ | 71,040 | $ | (76,908 | ) | $ | (583 | ) | $ | 4,909 | ||||
NOTE 5: OPTION AGREEMENT ON UNPROVEN MINERAL INTEREST
On May 17, 2002, the Company and Mayan Minerals Ltd., a British Columbia corporation, (Mayan), entered into an Option to Purchase and Royalty Agreement (the “Option Agreement”) which was amended on August 30, 2002. A Trust Agreement and Amendment thereof between Sterling and its president (see Note 2) was established to avoid having to pay additional fees and establish a subsidiary at this early stage of the Company’s corporate development. The Trust Agreement was amended on September 20, 2002. Under the terms of the Option Agreement, Mayan granted to the Company the sole and exclusive right and option to acquire an undivided 100 percent of the right, title and interest of Mayan in the unproven Bell 1-4 Mineral Claims, subject to Mayan receiving annual payments and a royalty, in accordance with the terms of the Agreement, as follows:
The Company must pay Mayan $100,000 in Canadian funds by January 1, 2004;
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STERLING GROUP VENTURES, INC.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Upon exercise of the Option, the Company is required to pay to Mayan, commencing January 1, 2005, the sum of $100,000 in Canadian funds per annum.
During the six months ended November 30, 2003, the Company incurred $29,528 (CDN$40,000) in exploration expenditures.
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Item 2. Management’s Discussion and Analysis or Plan of Operation.
Cautionary Statement Regarding Forward-Looking Statements
This annual report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. Some discussions in this report may contain forward-looking statements that involve risk and uncertainty. A number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us in this report. Forward-looking statements are often identified by words like: “believe”, “expect”, “estimate”, “anticipate”, “intend”, “project” and similar expressions or words which, by their nature, refer to future events.
In some cases, you can also identify forward-looking statements by terminology such as “may”, “will”, “should”, “plans”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “CA $” refer to Canadian Dollars and all references to "common shares" refer to the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our", and "Sterling" mean Sterling Group Ventures, Inc., unless otherwise indicated.
Sterling is an exploration stage company. There is no assurance that commercially viable mineral deposits exist on the claims that we have under option. Further exploration will be required before a final evaluation as to the economic and legal feasibility of the claims is determined.
Glossary of Exploration Terms
The following terms, when used in this report, have the respective meanings specified below:
| Diamond drill | A type of rotary drill in which the cutting is done by abrasion rather than percussion. The cutting bit is set with diamonds and attached to the end of the long hollow rods through which water is pumped to the cutting face. The drill cuts a core of rock, which is recovered in long cylindrical sections. |
| Exploration | The prospecting, trenching, mapping, sampling, geochemistry, geophysics, diamond drilling and other work involved in searching for mineral bodies. |
| Mineral | A naturally occurring inorganic element or compound having an orderly internal structure and characteristic chemical composition, crystal form and physical properties. |
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| Mineralization | Rock containing an undetermined amount of minerals or metals. |
Foreign Currency and Exchange Rates
Dollar costs of Sterling’s property acquisition and planned exploration costs are in Canadian Dollars. For purposes of consistency and to express United States Dollars throughout this report, Canadian Dollars have been converted into United States currency at the rate of US $1.00 being approximately equal to CA $1.33 or CA $1.00 being approximately equal to US $0.7500 which is the approximate average exchange rate during recent months and which is consistent with the incorporated financial statements.
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF THE COMPANY FOR THE PERIOD ENDING NOVEMBER 30, 2003 SHOULD BE READ IN CONJUNCTION WITH THE COMPANY’S CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO CONTAINED ELSEWHERE IN THIS FORM 10-QSB
Overview
Sterling Group Ventures, Inc. ("Sterling") was incorporated in the State of Nevada on September 13, 2001 and established a fiscal year end of May 31. Our statutory registered agent's office is located at 251 Jeanell Drive, No. 3, Carson City, Nevada 89703 and our business office is located at 12880 Railway Avenue, Unit 35, Richmond, British Columbia, Canada V7E 6G4. Our telephone number is (604) 644-5139. There have been no material reclassifications, mergers, consolidations or purchases or sales of any significant amount of assets not in the ordinary course of business since the date of incorporation. We are a start-up, exploration stage company engaged in the search for gold and related minerals. There is no assurance that a commercially viable mineral deposit, a reserve, exists in our claims or can be shown to exist until sufficient and appropriate exploration is done and a comprehensive evaluation of such work concludes economic and legal feasibility.
On May 17, 2002, Brian C. Doutaz, our President and a member of the board of directors, acting as Trustee on our behalf, optioned one mineral property containing four mining claims in British Columbia, Canada by entering into an Option To Purchase And Royalty Agreement and Amendment thereof with Mayan Minerals Ltd., the beneficial owner of the Claims, title of which is held by Angel Jade Mines Ltd., each being private arms-length British Columbia companies, to acquire the Claims by making expenditures and carrying out exploration work on the Claims. A Trust Agreement between Sterling and Mr. Doutaz was established to avoid having to pay additional fees and establish a subsidiary at this early stage of our corporate development.
Under the terms of the option agreement and the amendment thereof, Mayan granted to Sterling the sole and exclusive right and option to acquire an undivided 100 percent of the right, title and interest of Mayan in the Bell 1-4 Mineral Claims, subject to Mayan receiving annual payments and a royalty, in accordance with the terms of the agreement, as follows:
- Sterling must incur exploration expenditures on the Claims of a minimum of $29,500 by November 30, 2003;
- Sterling must pay Mayan $75,000 by January 1, 2004;
- Sterling must incur exploration expenditures on the Claims of a further $75,000 (for aggregate minimum exploration expenses of $104,500) by November 30, 2004; and
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- Upon exercise of the option, Sterling is required to pay to Mayan, commencing January 1, 2005, the sum of $75,000 per annum.
If the results of the first phase of the exploration program are unsuccessful, we will terminate the option agreement and will not be obligated to make the above or any subsequent payments. Similarly, if the results of any of the future phases are unsuccessful, we will terminate the option agreement and will not be obligated to make any subsequent payments.
The claims are held under a trust agreement and amendment thereof by Mr. Doutaz on behalf of Sterling. The terms of the trust agreement are as follows:
- the trustee holds the claims on behalf of Sterling until the initial three phase exploration program is completed and we are properly able to evaluate the merits of owning the claims in our own name or that of a subsidiary; and
- the agreement will terminate on:
- January 01, 2006, unless on or before that date, Sterling terminates in writing the option agreement; or
- the date on which Sterling incorporates a British Columbia subsidiary to hold Sterling’s interest in the Claims and transfers such interest to the subsidiary.
The names, tenure numbers, date of recording and expiration date of our four claims, which total approximately 250 acres and which were selected for acquisition due to cost, previously recorded exploration work, and because the Claims are not located in an environmentally sensitive region are as follows:
| Claim Name | Tenure Number | Recording Date | Expiry Date |
| Bell 1 | 362113 | April 24, 1998 | April 24, 2004 |
| Bell 2 | 362114 | April 24, 1998 | April 24, 2004 |
| Bell 3 | 362115 | April 24, 1998 | April 24, 2004 |
| Bell 4 | 362116 | April 24, 1998 | April 24, 2004 |
To date we have completed the physical work on the Claims as required under the phase I program of the exploration program at a cost of $29,500. However, we have not received the written report on the evaluation of the Claims and will not likely receive it until some time in early 2004. In addition, we have spent $332.00 on research and development activities such sum being paid for the printing and minor re-drafting of the Geological Report On The Bell 1-4 Mineral Claims which was originally written for another company. The report was then presented to Mr. Doutaz for review without any contractual obligations. On September 24, a work crew went to the site of the claims to commence phase I of the planned three phase exploration program. To date, we have advanced a total of $29,500 towards the cost of the first phase program. The crew completed their work on approximately October 12, 2003. Samples will be sent to a laboratory for geochemical analysis and the preparation of a new report on the work accomplished will then be commenced.
We engaged the services of Mr. R. T. Heard, P. Eng., author of the initial report, to perform the phase I work on the Claims. Mr. Heard is a registered Professional Engineer in good standing in the Association of Professional Engineers and Geoscientists of British Columbia. He is a graduate of Haileybury School of Mines, (1958) and of the Montana College of Mineral Science and Technology, Butte, Montana. He holds a B. Sc. in Geological Engineering, (1971) and has practiced his profession as an Exploration Geologist for over 40 years and as a Professional Engineer for the past 28 years.
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The Claims were originally staked in 1986 for Angel Jade. Angel Jade holds the mining rights to the Claims which thereby gives them or their designated agent, the rights to mine and recover all of the minerals contained within the surface boundaries of the lease continued vertically downward. In the event Angel Jade were to grant another deed which is subsequently registered prior to our deed, the third party would obtain good title and we would have nothing.
Mayan has granted an option to Sterling to allow Sterling to explore, mine and recover any minerals on the Claims. As with the preceding, if Mayan were to grant an option to another party, that party would be able to enter the Claims, carry out certain work commitments and earn right and title to the Claims; we would have little recourse as we would be harmed, will not own any Claims and would have to cease operations. However, in either event, Mayan would be liable to us for monetary damages for breach of the agreement. The extent of that liability would be for our out of pocket costs for expenditures on the Claims, if any, in addition to any lost opportunity costs if the Claims proved to be of value in the future.
Under British Columbia law, if the ownership of the Claims were to be passed to us and the deed of ownership were to be recorded in our name, we would have to pay a minimum of $500 and file other documents since we are a foreign company in Canada. We would also be required to form a British Columbia company that contains a board of directors, a majority of which would have to be British Columbia residents and obtain audited financial statements for that company. We have decided that if gold and silver is discovered on the Claims and it appears it might be economical to remove the gold and silver, we will record the deed of ownership, pay the additional tax and file as a foreign Company or establish a corporate subsidiary in British Columbia. The decision to record or not record is solely within our province.
The Claims are unencumbered and there are no competitive conditions which affect the Claims. Further, there is no insurance covering the Claims and we believe that no insurance is necessary since the Claims are unimproved and contains no buildings or improvements.
Sterling is an exploration stage company. There is no assurance that commercially viable mineral deposits exist on the Claims that we have under option. Further exploration will be required before a final evaluation as to the economic and legal feasibility of the Claims is determined.
None of the directors or officers has professional or technical accreditation in the exploration, development or operations of metal mines. During the past year, Mr. Doutaz has spent approximately 15% of his time (approximately 9 hours per week) on the affairs of Sterling and Mr. Hutchison has spent approximately 5% of his time (approximately 3 hours per week) on the affairs of our company. Those ratios and hours are expected to continue at that same level into the foreseeable future.
Employees
Initially, we are using the services of subcontractors for manual labour exploration work on our properties and Mr. R.T. Heard, to manage the exploration program as outlined in his report. Mr. Heard is not a consultant to Sterling; rather he is the author of the report on the Claims. On September 23, 2003, Mr. Heard lead a team onto the claims and commenced phase I of the work program as outlined in his report.
We intend to hire geologists, engineers and excavation subcontractors on an as needed basis. We have not entered into negotiations or contracts with any of them.
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At present, we have no employees, other than Messrs. Doutaz and Hutchison, our officers and directors. Messrs. Doutaz and Hutchison do not have employment agreements with us. We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt such plans in the future. There are presently no personal benefits available to any employees.
Offices
Our offices are located at 12880 Railway Avenue, Unit 35, Richmond, B.C. Canada V7E 6G4. Currently, these facilities are provided to us by Brian C. Doutaz, one of our directors and our President, without charge, but such arrangement may be cancelled at anytime without notice. As our business activities continue, we anticipate that we will be required to pay a pro rata share of the rent incurred for the facilities that we occupy. Specific direct expenses incurred such as telephone and secretarial services will be charged back to Sterling at cost on a periodic basis.
Risks
At present we do not know whether or not the Claims contain commercially exploitable reserves of gold or any other valuable mineral. Additionally, the proposed expenditures to be made by us in the exploration of the Claims may not result in the discovery of commercial quantities of ore. Problems such as unusual or unexpected formations and other conditions involved in mineral exploration often result in unsuccessful exploration efforts. In such a case, we would be unable to complete our business plan.
Currently we have sufficient financial resources to complete the first phase of our proposed exploration plan. However, in order to complete all phases of our proposed exploration program we will need to raise additional funding. Even if the first phase of our exploration program is successful there is no guarantee that we will be able to raise any additional capital in order to finance the second or third phases. Should we be unable to raise additional funding to complete the second and third phases of our exploration plan, we would have to cease business operations.
Finally, even if our exploration program is successful we may not be able to obtain commercial production. If our exploration program is successful and commercial quantities of ore are discovered we will require significant amounts of additional funds to place the Claims into commercial production. Should we be unable to raise additional funds to put the Claims into production we would be unable to see the Claims evolve into an operating mine and we would have to cease business operations.
Results of Operations
The Company was incorporated on September 13, 2001. Comparative periods for the three months and six months ended November 30, 2003 and November 30, 2002 are presented in the following discussion.
Since inception, we have used our common stock to raise money for exploration work on our optioned mining claims, for corporate expenses and to repay outstanding indebtedness. Net cash provided by financing activities from inception on September 13, 2001 to November 30, 2003 was $87,000 as a result of proceeds received from sales of our common stock.
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The Company did not generate any revenues from operations for the quarter or six months ending November 30, 2003 or the quarter or six months ended November 30, 2002.
During the quarter ended November 30, 2003, the Company incurred operating expenses of $42,604 as compared to $7,187 for the 2002 quarter ($46,535 for the six month period in 2003 versus $12,359 for the same period in 2002) and a total of $76,908 since inception. Costs were higher in the current year as a result of the expenditure of funds on the first phase of the planned three phase exploration program on Sterling’s optioned Claims. Expenses for the quarter consisted primarily of mineral exploration costs of $29,528 ($0 in all preceding periods), general and administrative expenses of $12,726 versus $6,328 for 2002 ($16,307 for the six month period in 2003 versus $10,659 for the same period in 2002), and contributed expenses of $350 versus $850 for 2002 ($700 for the six month period in 2003 versus $1,700 for the same period in 2002). Since inception, Sterling has expended $29,528 on unproven mineral interest exploration costs, $41,302 on general and administrative costs, $3,900 has been allocated to contributed services and rent, $678 was spent on office expenses incurred by a related party and $1,500 was charged to stock based compensation for organizational expenses.
During the preceding quarter, Sterling sold 200,000 shares of its common stock at a price of $0.05 to a total of eleven (11) places as part of its SB-2 registration statement offering for gross proceeds of $10,000. During the current quarter, Sterling sold an additional 860,000 shares of its common stock for proceeds of $43,000. The offering closed on September 25, 2003 with a total of 1,060,000 shares being sold to twenty-nine (29) placees for proceeds of $53,000. All of the placees are at arms-length to Sterling. Following the sale of shares, Sterling has 11,360,000 common shares issued and outstanding.
The Company continues to carefully control its expenses and overall costs as it moves forward with the development of its business plan. The physical portion of the first phase of the exploration program on the Bell Claims was completed during the current quarter year and a report on the work accomplished is expected to be received prior to the end of February, 2004. The Company does not have any employees and engages personnel through outside consulting contracts or agreements or other such arrangements, includes attorneys and all technical consultants.
Plan of Operation
Sterling believes it can satisfy its cash requirements through the fiscal year end of May 31, 2004, from a private placement of $34,000 received during September, October and November of 2001 and from the sale of shares under an SB-2 registration statement that closed on September 25, 2003 having received proceeds of $53,000. As of November 30, 2003, we had $4,909 in working capital.
For the balance of the current fiscal year we will concentrate our efforts on completion of the planned phase I exploration program on the Bell Claims which is currently underway and is expected to be completed with a report being received by the Board of Directors before February 28, 2004. If Phase I of the exploration program is successful, we will shift activities to prepare for proceeding with Phase II in the summer of 2004. Following industry trends and demands, we are also considering the acquisition of other properties to conduct exploration works for gold. In either situation, a new public offering might be needed during that period.
Phase 1 of the recommended geological exploration program cost $29,500 based on the report and is a reflection of local costs for the specified type of work. This cost was made up of wages
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and fees, grid materials (pickets, paint, flagging etc.), helicopter and EM survey costs, diamond drilling, geological and geochemical supplies, assaying, camp equipment and operation costs.
Phase 2 will not be carried out until the Summer of 2004 and will be contingent upon favourable results from phase 1 and any specific recommendations therefrom. It will be directed towards continuation of the diamond drilling. The second phase may require up to two weeks work and will cost approximately $70,000 comprised of wages, fees and camp operations, diamond drilling assays and related. The cost estimate is based on the report and is a reflection of local costs for the specified type of work. A further three months may be required for analysis and the preparation of a report and evaluation on the work accomplished.
We do not expect any changes or more hiring of employees since contracts are given to consultants and sub-contractor specialists in specific fields of expertise for the exploration works.
On July 26, 2002 Sterling filed a Form SB-2 registration statement with the Securities and Exchange Commission which became effective on April 14, 2003. As a result, Sterling became a reporting issuer under the Securities Exchange Act of 1934 and is now subject to the reporting requirements of the Exchange Act.
Liquidity and Capital Resources
As of end of the first quarter on November 30, 2003, we have yet to generate any revenues from our business operations.
Since inception, we have used our common stock to raise money for exploration costs on our optioned mineral claims, for corporate expenses and to repay outstanding indebtedness. Net cash provided by financing activities from inception on September 13, 2001 to November 30, 2003 was $87,000 as a result of proceeds received from sales of our common stock.
During the quarter, Sterling sold 860,000 shares of its common stock for proceeds of $43,000 under an SB-2 registration statement. The offering closed on September 25, 2003. Total proceeds from the sale of stock to the date of this report is $87,000.
We issued 5,000,000 shares of common stock through a Section 4(2) offering in September 2001 for cash consideration of $3,500 and as payment in lieu of $1,500 in cash for services rendered in organizing Sterling and negotiating an agreement.
We issued 2,500,000 shares of common stock through a Rule 504D offering in October, 2001 for cash consideration of $2,500.
We issued 2,800,000 shares of common stock through a Rule 504D offering in November, 2001 for cash consideration of $28,000.
We issued 1,060,000 shares of common stock through an SB-2 registration statement between July 10 and September 23, 2003 for cash consideration of $53,000.
As of November 30, 2003, our total assets which consist entirely of cash amounted to $5,709, and our total liabilities were $800. Working capital stood at $4,709.
For the quarter ended November 30, 2003, the net loss was $42,604 ($0.00375 per share). The loss per share was based on a weighted average of 11,360,000 common shares outstanding. For
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the same period for 2002 the comparative numbers were a net loss of $7,178 and a loss per share of $0.0007 based on a weighted average of 10,300,000 common shares outstanding. For the six months ended November 30, 2003, the cumulative net loss from inception was $76,908 and the loss per share for the entire period was $0.0072 per share based on a weighted average of 10,688,095 common shares outstanding.
For the current, third, quarter from December 01, 2003 to February 28, 2004 we plan on receiving a report on the results of phase I of the exploration program by R. T. Heard based on the findings of the physical work carried out in September and October, 2003. On September 25, 2003 we completed and closed our SB-2 offering having received proceeds of $53,000. During the last quarter of the year, March 01 to May 31, 2004, we plan to analyze the results of the first phase of the exploration program on the Bell Claims and determine if and how we are to proceed from that point.
If Phase I is not successful, we will terminate the Option on the Claims and cease exploration. If Phase I is successful we would then proceed to Phase II in 2004 at an estimated cost of $70,000 also based on the recommendations of Mr. Heard’s report, which costs are again a reflection of local costs for the type of work program planned. We will proceed to Phase II only if we are also successful in being able to secure the capital funding required to complete Phase II. Similarly, if Phase II is not successful, we will terminate the Option on the Claims.
If we decide to proceed to Phase II we will try to raise additional funds from a second public offering, a private placement, loans or the establishment of a joint venture whereby a third party would pay the costs associated with the Phase II and we would retain a carried interest. At the present time, we have not made any plans to raise additional money and there is no assurance that we would be able to raise additional money in the future. If we need additional money and can't raise it, we will have to suspend or cease business operations.
Inflation / Currency Fluctuations
Inflation has not been a factor during the recent quarter ended November 30, 2003. Inflation is moderately higher than it was during 2002 but the actual rate of inflation is not material and is not considered a factor in our contemplated capital expenditure program.
However, the relative rise in the Canadian Dollar, under which most of our expenditures are made, against the United States Dollar, will have an impact on our costs of operation. Phase I of the planned exploration program was expected to cost Sterling $25,000 using an exchange rate of CA $1.00 being approximately equal to US $0.6452 which was the approximate average exchange rate during the period we entered into the option agreement and the preparation of the report issued by Mr. Heard. As of November 30, 2003, the exchange rate had changed to CA $1.00 being approximately equal to US $0.7500. The effect on Sterling was to increase the cost of Phase I from $25,000 to $29,500 – an 18% increase. This situation will have a significant impact on later phases of exploration should the US Dollar not regain at least a modicum of its value against the Canadian currency.
Item 3. Controls and Procedures
The registrant's certifying officers are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and the Company’s Chief Executive Officer and Chief Financial Officer have:
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| a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; | |
| b) | evaluated the effectiveness of the our disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and | |
| c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
There have been no significant changes in the our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
The Corporation is and has not been party to any legal proceedings in the preceeding quarter.
Item 2. Changes in Securities
The Company had 11,360,000 shares of common stock issued and outstanding as of November 30, 2003 and December 29, 2003. Of these shares, 5,000,000 shares are held by an affiliate of the Company and none of those shares can be resold in compliance with the limitations of Rule 144 as adopted by the Securities Act of 1933, as amended (the “Securities Act”).
In general, under Rule 144, a person who has beneficially owned shares privately acquired directly or indirectly from us or from one of our affiliates, for at least one year, or who is an affiliate, is entitled to sell, within any three-month period, a number of shares that do not exceed the greater of 1% of the then outstanding shares or the average weekly trading volume in our shares during the four calendar weeks immediately preceding such sale. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us. A person who is not deemed to have been an affiliate at any time during the 90 days preceding the sale, and who has beneficially owned restricted shares for at least two years, is entitled to sell all such shares under Rule 144 without regard to the volume limitations, current public information requirements, manner of sale provisions or notice requirements.
The issuances discussed under this section are exempted from registration under Rule 504 of the Securities Act (“Rule 504”), Regulation S of the Securities Act (“Reg. S”) or Section 4 (2) of the Securities Act (“Section 4 (2)”), as provided. The issuance of 1,060,000 shares was made under Regulation SB through the filing of an SB-2 registration statement which became effective on April 14, 2003. All purchasers of the Company’s securities acquired the shares for investment purposes only and all stock certificates reflect the appropriate legends. No underwriters were involved in connection with the sale of securities referred to in this report.
Item 3. Defaults Upon Senior Securities
The have been no defaults upon Sterling’s senior or other securities in the preceeding quarter.
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Item 4. Submission of Matters to a Vote of Security Holders
No matter has been submitted to a vote of security holders during the preceeding quarter.
Item 5. Other Information
Use of Proceeds
Net cash provided by financing activities from inception on September 13, 2001 to November 30, 2003 was $87,000 as a result of proceeds received from sales of our common stock. During the period from inception on September 13, 2001 to November 30, 2003, the following table indicates how the use of those proceeds have been spent to date:
| General & Administrative Costs | $40,502 |
| Unproven Mineral Exploration Costs | 29,528 |
| Office Expenses | 678 |
| Other Costs | 1,500 |
| Total Use of Proceeds to November 30, 2003 | $72,208 |
Common Stock
During the three-month period ended November 30, 2003, we issued 860,000 shares for proceeds totaling $43,000. As of November 30, 2003, there were 11,360,000 shares issued and outstanding and as of December 29, there were 11,360,000 shares outstanding.
Options
No options were granted nor exercised during the three-month period ending November 30, 2003
Item 6. Exhibits and Reports on Form 8-K
The following reports on Form 8-K were filed during the quarter ended November 30, 2003: NIL
Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Sterling Group Ventures, Inc. | ||
| (Registrant) | ||
| Date: December 29, 2003 | By: | /s/ Brian C. Doutaz |
| Brian C. Doutaz | ||
| President, Chief Executive Officer, Principal Executive Officer, Director | ||
| Date: December 29, 2003 | By: | /s/ James M. Hutchison |
| James M. Hutchison | ||
| Secretary, Treasurer, Chief Financial Officer, Principal Financial Officer, Director | ||
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