UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 Or 15(d) Of The Securities Act Of 1934
For the quarterly period endedFebruary 29, 2008
Commission file number:000-51775
STERLING GROUP VENTURES, INC.
(Exact name of small business issuer as specified in its charter)
| Nevada | 72-1535634 |
| (State or other jurisdiction of | (IRS Employer Identification No.) |
| incorporation or organization) |
Suite 900 - 789 West Pender Street, Vancouver, B.C. V6C 1H2
(Address of principal executive offices)
(604) 893-8891
(Issuer's telephone number)
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 and Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the last
practicable date:
| Common Stock, $0.001 par value | 43,826,175 |
| (Class) | (Outstanding as of April 10, 2008) |
Transitional Small Business Disclosure Format (Check one): Yes ¨ No x
1
STERLING GROUP VENTURES, INC.
FORM 10-QSB
INDEX
2
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
INTERIM CONSOLIDATED BALANCE SHEETS
February 29, 2008 and May 31, 2007
(Stated in US Dollars)
(Unaudited)
| February 29, | May 31, | |||||
| 2008 | 2007 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash and cash equivalents - Note 5 | $ | 383,412 | $ | 289,330 | ||
| GST receivable | 4,365 | 9,128 | ||||
| Prepaid expenses | 15 | 1,964 | ||||
| Advance receivable - Notes 2 and 5 | 8,641 | 14,189 | ||||
| Total current assets | 396,433 | 314,611 | ||||
| Equipment - Note 4 | 2,186 | 2,911 | ||||
| Total Assets | $ | 398,619 | $ | 317,522 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current Liabilities | ||||||
| Accounts payable and other accrued liabilities - Note 5 | $ | 377,130 | $ | 272,456 | ||
| Stockholders' Equity | ||||||
| Common Stock : $0.001 Par Value | ||||||
| Authorized : 500,000,000 | ||||||
| Issued and Outstanding : 43,826,175 (May 31, 2007: 43,501,490) | 43,826 | 43,502 | ||||
| Additional Paid In Capital | 2,243,399 | 2,633,768 | ||||
| Warrants | 461,112 | 51,587 | ||||
| Accumulated Other Comprehensive Loss | (583 | ) | (583 | ) | ||
| Deficit accumulated during the exploration stage | (2,726,265 | ) | (2,683,208 | ) | ||
| Total Stockholders' Equity | 21,489 | 45,066 | ||||
| Total Liabilities and Stockholders' Equity | $ | 398,619 | $ | 317,522 |
See accompanying notes to consolidated financial statements
3
STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months and nine months ended February 29, 2008 and February 28, 2007 and
for the period from July 27, 1994 (date of inception) to February 29, 2008
(Stated in US Dollars)
(Unaudited)
| July 27, 1994 | |||||||||||||||
| Three months | Three months | Nine months | Nine months | (Date of | |||||||||||
| ended | ended | ended | ended | inception) | |||||||||||
| February 29, | February 28, | February 29, | February 28, | to February 29, | |||||||||||
| 2008 | 2007 | 2008 | 2007 | 2008 | |||||||||||
| Expenses | |||||||||||||||
| Accounting, audit and legal fees | $ | 6,518 | $ | 15,642 | $ | 19,917 | $ | 45,991 | $ | 296,109 | |||||
| Bank charges | 69 | 156 | 183 | 297 | 1,486 | ||||||||||
| Consulting fees - Note 5 | 29,883 | 27,988 | 88,544 | 87,766 | 535,115 | ||||||||||
| Depreciation | 445 | 732 | 1,289 | 1,976 | 7,160 | ||||||||||
| Filing fees and transfer agent | - | - | 1,198 | 2,288 | 34,061 | ||||||||||
| Foreign exchange loss (gain) | (4,652 | ) | (12 | ) | (1,651 | ) | (12,650 | ) | (15,034 | ) | |||||
| General and administrative - Note 5 | 6,422 | 5,376 | 20,197 | 14,441 | 72,444 | ||||||||||
| Mineral property costs - Notes 3 and 5 | 17,419 | 89,117 | 62,859 | 627,151 | 1,196,253 | ||||||||||
| Printing and mailing | - | - | - | - | 16,883 | ||||||||||
| Shareholder information and investor relations | - | - | - | - | 59,700 | ||||||||||
| Stock-based compensation | - | - | - | - | 368,641 | ||||||||||
| Travel and entertainment | 812 | 1,740 | 2,314 | 7,517 | 121,398 | ||||||||||
| (56,916 | ) | (140,739 | ) | (194,850 | ) | (774,777 | ) | (2,694,216 | ) | ||||||
| Other items | |||||||||||||||
| Interest income | 1,363 | 2,108 | 4,639 | 4,483 | 27,124 | ||||||||||
| Recovery of doubtful collection (Note 3(b)) | 54,923 | 14,630 | 147,154 | 27,464 | 187,535 | ||||||||||
| Allowance for doubtful collection | - | - | - | - | (246,708 | ) | |||||||||
| 56,286 | 16,738 | 151,793 | 31,947 | (32,049 | ) | ||||||||||
| Net loss for the period | $ | (630 | ) | $ | (124,001 | ) | $ | (43,057 | ) | $ | (742,830 | ) | $ | (2,726,265 | ) |
| Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.02 | ) | |||
| Weighted average number of shares outstanding | 43,826,175 | 43,377,800 | 43,649,613 | 41,999,828 |
See accompanying notes to consolidated financial statements
4
STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended February 29, 2008 and February 28, 2007 and
for the period from July 27, 1994 (date of inception) to February 29, 2008
(Stated in US Dollars)
(Unaudited)
| July 27, 1994 | |||||||||
| Nine months | Nine months | (Date of | |||||||
| ended | ended | inception) | |||||||
| February 29, | February 28, | to February 29, | |||||||
| 2008 | 2007 | 2008 | |||||||
| Cash flows from operating activities | |||||||||
| Net loss for the period | $ | (43,057 | ) | $ | (742,830 | ) | $ | (2,726,265 | ) |
| Adjustments to reconcile net loss to net cash | |||||||||
| provided by (Used in) operating activities | |||||||||
| Stock compensation expenses | - | - | 368,641 | ||||||
| Depreciation | 1,289 | 1,976 | 7,160 | ||||||
| Permit and engineering studies | - | - | 150,000 | ||||||
| Shareholder information and investor relations | - | - | 20,447 | ||||||
| Accounting, audit and legal fees | - | 49,000 | 49,000 | ||||||
| Translation adjustment | - | - | (106 | ) | |||||
| Changes in non-cash working capital items | |||||||||
| related to operations | |||||||||
| GST receivable | 4,777 | 5,295 | (4,351 | ) | |||||
| Prepaid expenses | 1,935 | (18,024 | ) | 21,524 | |||||
| Advance receivable | 5,548 | 20,885 | (8,641 | ) | |||||
| Accounts payable and accrued liabilities | 124,154 | 100,750 | 396,610 | ||||||
| Net cash from (used in) operating activities | 94,646 | (582,948 | ) | (1,725,981 | ) | ||||
| Cash flows from investing activities | |||||||||
| Advance on investment | - | - | (150,000 | ) | |||||
| Mineral property deposit | - | 124,600 | - | ||||||
| Additions to equipment | (564 | ) | (2,633 | ) | (9,346 | ) | |||
| Net cash flows from (used in) investing activities | (564 | ) | 121,967 | (159,346 | ) | ||||
| Cash flows from financing activities | |||||||||
| Net proceeds on issuance of common stock | - | 412,545 | 2,266,858 | ||||||
| Amounts contributed by director | - | - | 1,881 | ||||||
| Net cash flows provided by financing activities | - | 412,545 | 2,268,739 | ||||||
| Net increase (decrease) in cash and cash equivalents | 94,082 | (48,436 | ) | 383,412 | |||||
| Cash and cash equivalents - beginning of period | 289,330 | 349,954 | - | ||||||
| Cash and cash equivalents - end of period | $ | 383,412 | $ | 301,518 | $ | 383,412 | |||
| Cash and cash equivalents consist of: | |||||||||
| Cash | $ | 216,238 | $ | 122,417 | $ | 216,238 | |||
| Term deposits | 167,174 | 179,101 | 167,174 | ||||||
| $ | 383,412 | $ | 301,518 | $ | 383,412 | ||||
| Supplemental Information : | |||||||||
| Cash paid for : | |||||||||
| Interest | $ | - | $ | 19 | $ | - | |||
| Income taxes | - | - | - | ||||||
| Non-cash Transactions : | |||||||||
| Issuance of shares for commission paid to broker | |||||||||
| for private placement | $ | - | $ | 21,646 | $ | 72,396 | |||
| Issuance of shares for services rendered | 19,480 | 49,000 | 110,480 | ||||||
| Issuance of share purchase warrants for finder's fee | |||||||||
| paid to broker for private placement | - | 9,895 | 11,477 |
See accompanying notes to consolidated financial statements
5
STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
for the period from July 27, 1994 (date of inception) to February 29, 2008
(Stated in US Dollars)
(Unaudited)
| Deficit | ||||||||||||||||||||
| Accumulated | Accumulated | |||||||||||||||||||
| Stock | Additional | Other | During The | |||||||||||||||||
| Common | Amount At | Paid In | Comprehensive | Exploration | ||||||||||||||||
| Shares | Par Value | Capital | Warrants | Loss | Stage | Total | ||||||||||||||
| Balance, July 27, 1994 (Date of inception) | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||
| Common stock | 1 | 1 | - | - | - | - | 1 | |||||||||||||
| Amount contributed by director | - | - | 1,881 | - | - | - | 1,881 | |||||||||||||
| Net loss for the periods | - | - | - | - | - | (7,902 | ) | (7,902 | ) | |||||||||||
| Balance, May 31, 2001 | 1 | 1 | 1,881 | - | - | (7,902 | ) | (6,020 | ) | |||||||||||
| Net loss of the year | - | - | - | - | - | (1,860 | ) | (1,860 | ) | |||||||||||
| Balance, May 31, 2002 | 1 | 1 | 1,881 | - | - | (9,762 | ) | (7,880 | ) | |||||||||||
| Net loss of the year | - | - | - | - | - | (1,360 | ) | (1,360 | ) | |||||||||||
| Balance, May 31, 2003 | 1 | 1 | 1,881 | - | - | (11,122 | ) | (9,240 | ) | |||||||||||
| Reverse acquisition | (1 | ) | (1 | ) | (1,881 | ) | - | - | - | (1,882 | ) | |||||||||
| Issuance of common shares for reverse acquisition | 25,000,000 | 25,000 | (23,119 | ) | - | - | - | 1,881 | ||||||||||||
| Outstanding common shares of Company prior to | ||||||||||||||||||||
| acquisition | 11,360,000 | 11,360 | (10,883 | ) | - | (583 | ) | - | (106 | ) | ||||||||||
| Issuance of shares for cash pursuant to a private | ||||||||||||||||||||
| placement - at $0.50 | 1,766,000 | 1,766 | 881,234 | - | - | - | 883,000 | |||||||||||||
| Stock-based compensation | - | - | 368,641 | - | - | - | 368,641 | |||||||||||||
| Net loss of the year | - | - | - | - | - | (527,446 | ) | (527,446 | ) | |||||||||||
| Balance, May 31, 2004 | 38,126,000 | 38,126 | 1,215,873 | - | (583 | ) | (538,568 | ) | 714,848 | |||||||||||
| Issuance of shares for cash pursuant to a private | ||||||||||||||||||||
| placement - at $0.50 | 1,950,000 | 1,950 | 973,050 | - | - | - | 975,000 | |||||||||||||
| Issuance of shares for finder's fee of | ||||||||||||||||||||
| private placement | 101,500 | 102 | 50,648 | - | - | - | 50,750 | |||||||||||||
| Finders' fees | - | - | (50,750 | ) | (50,750 | ) | ||||||||||||||
| Fair value of share purchase warrants (finders' fees) | - | - | (40,110 | ) | 40,110 | - | - | - | ||||||||||||
| Issuance of shares for services rendered | 100,000 | 100 | 41,900 | - | - | - | 42,000 | |||||||||||||
| Net loss of the year | - | - | - | - | - | (818,954 | ) | (818,954 | ) | |||||||||||
| Balance, May 31, 2005 | 40,277,500 | 40,278 | 2,190,611 | 40,110 | (583 | ) | (1,357,522 | ) | 912,894 | |||||||||||
| Net loss for the year ended May 31, 2006 | - | - | - | - | - | (461,201 | ) | (461,201 | ) | |||||||||||
| Balance, May 31, 2006 | 40,277,500 | 40,278 | 2,190,611 | 40,110 | (583 | ) | (1,818,723 | ) | 451,693 | |||||||||||
| Issuance of shares for cash pursuant to a private | ||||||||||||||||||||
| placement - at $0.15 | 2,750,300 | 2,750 | 409,795 | - | - | - | 412,545 | |||||||||||||
| Issuance of shares for finder's fee of | ||||||||||||||||||||
| private placement | 123,690 | 124 | 21,522 | - | - | - | 21,646 | |||||||||||||
| Finders' fees | - | - | (21,646 | ) | (21,646 | ) | ||||||||||||||
| Share issuance costs | - | - | (3,687 | ) | - | - | - | (3,687 | ) | |||||||||||
| Fair value of share purchase warrants (finders' fees) | - | - | (9,895 | ) | 9,895 | - | - | - | ||||||||||||
| Revaluation of share purchase warrants | - | - | (1,582 | ) | 1,582 | - | - | - | ||||||||||||
| Issuance of shares for services rendered | 350,000 | 350 | 48,650 | - | - | - | 49,000 | |||||||||||||
| Net loss for the year ended May 31, 2007 | - | - | - | - | - | (864,485 | ) | (864,485 | ) | |||||||||||
| Balance, May 31, 2007 | 43,501,490 | 43,502 | 2,633,768 | 51,587 | (583 | ) | (2,683,208 | ) | 45,066 | |||||||||||
| Issuance of shares for services rendered - at $0.06 | 324,685 | 324 | 19,156 | 19,480 | ||||||||||||||||
| Revaluation of share purchase warrants - Note 6 | (409,525 | ) | 409,525 | - | ||||||||||||||||
| Net loss for the nine months ended February 29, 2008 | - | - | - | - | - | (43,057 | ) | (43,057 | ) | |||||||||||
| Balance, February 29, 2008 | 43,826,175 | $ | 43,826 | $ | 2,243,399 | $ | 461,112 | $ | (583 | ) | $ | (2,726,265 | ) | $ | 21,489 |
See accompanying notes to consolidated financial statements
6
STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2008
(Stated in US Dollars)
(Unaudited)
| Note 1 | Interim Reporting and Ability to Continue as a Going Concern |
While the information presented in the accompanying interim nine-month consolidated financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, result of operations and cash flows for the interim periods presented. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these consolidated financial statements be read in conjunction with the Company’s May 31, 2007 annual consolidated financial statements.
Operating results for the nine-month period ended February 29, 2008 are not necessarily indicative of the results that can be expected for the year ending May 31, 2008.
The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At February 29, 2008, the Company had working capital of $19,303 which may not be sufficient to sustain operations over the next twelve months, has not yet achieved profitable operations, has accumulated losses of $2,726,265 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available.
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Micro Express Holdings Inc., Micro Express Ltd., Huyana Ventures Limited., Makaelo Holdings Inc. and Makaelo Limited. All inter-company transactions and account balances have been eliminated.
| Note 2 | Advance Receivable- Note 5 |
Advance receivable is intended to be utilized against expenses in the year ended May 31, 2008.
7
Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Interim Consolidated Financial Statements
February 29, 2008
(Stated in US Dollars)
(Unaudited) –Page 2
| Note 3 | Mineral Properties |
| DXC | Jiajika | ||||||
| Salt Lake | Spodumene | ||||||
| Summary of mineral properties | Property | Property | |||||
| Three months ended February 29, 2008 | |||||||
| Administrative | $ | - | $ | - | |||
| Consulting fees | 15,509 | - | |||||
| Travel | 521 | - | |||||
| Legal fees | 1,389 | - | |||||
| $ | 17,419 | $ | - | ||||
| Three months ended February 28, 2007 | |||||||
| Administrative | $ | - | $ | - | |||
| Consulting fees | 81,775 | - | |||||
| Engineering studies | - | - | |||||
| Mining permit | - | - | |||||
| Topography measurement | - | - | |||||
| Travel | 7,342 | - | |||||
| Wages and benefits | - | - | |||||
| $ | 89,117 | $ | - | ||||
| Nine months ended February 29, 2008 | |||||||
| Administrative | $ | 706 | $ | - | |||
| Consulting fees | 45,131 | - | |||||
| Travel | 5,456 | - | |||||
| Legal fees | 11,566 | - | |||||
| $ | 62,859 | $ | - | ||||
| Nine months ended February 28, 2007 | |||||||
| Administrative | $ | 3,324 | $ | - | |||
| Consulting fees | 116,672 | - | |||||
| Engineering studies | 39,049 | - | |||||
| Mining permit | 382,920 | - | |||||
| Topography measurement | 15,001 | - | |||||
| Travel | 34,010 | 488 | |||||
| Wages and benefits | 35,687 | - | |||||
| $ | 626,663 | $ | 488 |
8
Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Interim Consolidated Financial Statements
February 29, 2008
(Stated in US Dollars)
(Unaudited) –Page 3
| Note 3 | Mineral Properties–(cont’d) |
| DXC | Jiajika | ||||||
| Salt Lake | Spodumene | ||||||
| Summary of mineral properties | Property | Property | |||||
| From Date of Inception (July 27, 1994) to February 29, 2008 | |||||||
| Balance, May 31, 2003 | $ | - | $ | - | |||
| Administrative | - | 471 | |||||
| Consulting fees | - | 9,263 | |||||
| Travel | - | 2,763 | |||||
| Balance, May 31, 2004 | - | 12,497 | |||||
| Administrative | - | 6,598 | |||||
| Consulting fees | - | 33,799 | |||||
| Feasibility study | - | 157,769 | |||||
| Exploration costs | - | - | |||||
| Permit costs | - | 150,000 | |||||
| Travel | - | 15,085 | |||||
| Balance, May 31, 2005 | - | 375,748 | |||||
| Administrative | 5,560 | 2,100 | |||||
| Consulting fees | 46,629 | 12,062 | |||||
| Engineering studies | 26,933 | - | |||||
| Feasibility study | 29,080 | - | |||||
| Geophysical study | 31,114 | - | |||||
| Legal fees | 623 | - | |||||
| Topography measurement | 32,266 | - | |||||
| Travel | 30,953 | 8,009 | |||||
| Wages and benefits | 33,601 | - | |||||
| Cost recovery | - | (309,058 | ) | ||||
| Balance, May 31, 2006 | 236,759 | 88,861 | |||||
| Administrative | 5,200 | - | |||||
| Consulting fees | 134,580 | - | |||||
| Engineering studies | 38,063 | - | |||||
| Mining permit | 382,920 | - | |||||
| Topography measurement | 15,001 | - | |||||
| Legal fees | 9,695 | - | |||||
| Travel | 53,262 | 488 | |||||
| Wages and benefits | 35,687 | - | |||||
| Balance, May 31, 2007 | 911,167 | 89,349 | |||||
| Administrative | 706 | - | |||||
| Consulting fees | 45,131 | - | |||||
| Travel | 5,456 | - | |||||
| Legal fees | 11,566 | - | |||||
| Balance, February 28, 2009 | $ | 974,026 | $ | 89,349 |
9
Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Interim Consolidated Financial Statements
February 29, 2008
(Stated in US Dollars)
(Unaudited) –Page 4
| Note 3 | Mineral Properties–(cont’d) |
| a) | Dangxiongcuo Salt Lake Project | |
On September 16, 2005, the Company, through its wholly owned subsidiary, Micro Express Holdings Inc. (“Micro”), signed an agreement (the “Agreement”) for the development of Dangxiongcuo salt lake property (“DXC Salt Lake”) in Nima county of Naqu district in Tibet, China. The Agreement follows a Letter of Intent signed between the parties on July 11, 2005. | ||
Pursuant to the Agreement, the parties have agreed to set up a Cooperative Company, (the “Cooperative”) to develop the DXC Salt Lake. The objective of the Cooperative is to use the funds provided by the Company and the skills and technology provided by the other party to produce lithium carbonate and borate from brine. The Company, through Micro, will own 65% of the Cooperative. It is anticipated that the total investment in the Cooperative will be approximately RMB240,000,000 (approximately $31,440,000). | ||
As of February 29, 2008, the Company has incurred a total of $974,026 in mineral property costs. | ||
On June 23, 2007, the Company entered into a consulting agreement with a Chinese company to assist the Company in obtaining certain government approvals to facilitate the establishment of a joint venture company that is required for the Company to continue the exploration and development of this project in Tibet. If the Chinese company is successful in its efforts, then it will be compensated by receiving from the Company an amount of shares equal to 10% of the Company’s then issued and outstanding capital. | ||
On July 3, 2007, Micro received a letter from the other party to the agreement stating that the agreement between Micro and the other party should be deemed terminated as a result of lack of progress in the approval for the establishment of the joint venture company and is considering a lawsuit against the Company and Micro. Micro has responded that the other party’s claim has no legal grounds as the lack of progress is not caused by Micro. As part of the agreement, the other Chinese party was obligated to get all necessary government approvals which have not been received plus provide technology. | ||
| b) | Jiajika Spodumene Property | |
On April 5, 2005, the Company, through its wholly-owned subsidiary Micro Express Ltd. (“MEL”), signed a joint venture contract with a Chinese partner for the establishment of a joint venture company, Jihai Lithium Ltd. and the development of the Jiajika lithium deposit in Kangding District, Sichuan Province, China. On March 3, 2006, both parties agreed to terminate the joint venture and the Chinese partner will pay back RMB2,480,000 ($309,058) incurred by MEL on the project. The Chinese partner shall pay RMB1,200,000 ($149,520) and RMB1,280,000 ($159,538) before April 15, 2006 and March 30, 2007, respectively. If the Chinese partner does not pay the RMB1,280,000, the amount will be converted into an interest in the Jiajika project based on the percentage of MEL’s investment as to the registered capital contribution in Jiajika project by the Chinese partner. As at May 31, 2006, the Company had received RMB500,000 ($62,350) and a receivable of RMB1,980,000 ($246,708) was recorded. As the Chinese partner has not paid the remaining RMB700,000 ($87,170) and the recoverability of the RMB1,280,000 ($159,538) was uncertain, the Company recorded an allowance for doubtful collection totaling $246,708 for the year ended May 31, 2006. |
10
Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Interim Consolidated Financial Statements
February 29, 2008
(Stated in US Dollars)
(Unaudited) –Page 5
| Note 3 | Mineral Properties–(cont’d) |
| b) | Jiajika Spodumene Property –(cont’d) | |
During the year ended May 31, 2007, the Company received RMB300,000 ($40,381) from the Chinese partner. | ||
During the nine-months ended February 29, 2008, the Company received RMB1,100,000 ($147,154), from the Chinese partner. | ||
These recoveries were recorded as a recovery of doubtful collection in the consolidated statements of operations. | ||
As at February 29, 2008, the Company had incurred $398,407 in the Jiajika Spodumene Property before the cumulative cost recovery of RMB1,900,000 ($249,885) up to February 29, 2008. |
| Note 4 | Equipment |
| February 29, 2008 | ||||||||||
| Accumulated | ||||||||||
| Cost | Depreciation | Net | ||||||||
| Computer equipment | $ | 9,346 | $ | 7,160 $ | 2,186 |
| May 31, 2007 | ||||||||||
| Accumulated | ||||||||||
| Cost | Depreciation | Net | ||||||||
| Computer equipment | $ | 8,782 | $ | 5,871 | $ | 2,911 |
The equipment is located in Canada and China.
| Note 5 | Related Party Transactions |
The Company was charged consulting fees during the three and nine month periods ended February 29, 2008 totalling $29,635 (2007: $27,744) and $87,817 (2006: $87,067) by companies controlled by two directors of the Company respectively.
The Company was charged rental fees included in General and Administrative during the three month and nine month periods ended February 29, 2008 totalling $5,308 (2007: $4,216) and $17,324 (2007: $9,459) by a company controlled by a director of the Company respectively.
The Company was charged mineral property costs - consulting during the three and nine month periods ended February 29, 2008 totalling $1,656 (2007: $4,885) and $4,846 (2007: $13,980) by the Vice President of Micro respectively.
11
Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Interim Consolidated Financial Statements
February 29, 2008
(Stated in US Dollars)
(Unaudited) –Page 6
| Note 5 | Related Party Transactions –(cont’d) |
The Company was charged mineral property costs - consulting during the three and nine month periods ended February 29, 2008 in the amount of $12,860 (2007: $10,769) and $37,377 (2007: $33,231) by a company controlled by a director of the Company respectively.
The Company was charged mineral property costs –rent during the three and nine month periods ended February 29, 2008 in the amount of $Nil and $665 (2007: $Nil) by a company controlled by a director of the Company.
Cash and cash equivalents at February 29, 2008 include $222,876 (May 31, 2007: $66,136) held in trust by a director of the Company.
Advance receivable is $8,641 (May 31, 2007: $14,189) advanced to the Vice-President of Micro. This is intended to be utilized against expenses in the year ended May 31, 2008.
Included in accounts payable is $316,234 (May 31, 2007: $219,501) which is due to the companies controlled by the directors of the Company for their services provided.
| Note 6 | Capital Stock |
Commitments:
| a) | Capital Stock | |
The Company planned a private placement of up to 5,000,000 units at $0.15 per unit for total proceeds of $750,000. Each unit consists of one common share and one share purchase warrant entitling the holder the right to purchase one common share at $0.18 per share expiring on December 29, 2006 (the Series “C”Share Purchase Warrants). As at May 31, 2007, the Company received total subscriptions of $412,545 for 2,750,300 units. The private placement was closed without issuing the remaining 2,249,700 units. Finder's fee of 7% totaling 123,690 units with the aforementioned terms were issued. | ||
During the period ended February 29, 2008, the Company issued 324,685 common shares at US$0.06 per share to settle accounts payable at CDN$19,481. | ||
| b) | Stock Options | |
On February 3, 2004, the Board of Directors of the Company approved the 2004 Stock Option Plan which allows the Company to grant up to 3,636,000 stock options as an incentive to directors, officers, employees and consultants. | ||
During the nine-month period ended February 29, 2008 and 2007, no stock options were granted, exercised or cancelled. | ||
As at February 29, 2008, there were a total of 3,636,000 stock options outstanding to directors and officers of the Company exercisable at $0.50 per share, expiring on February 3, 2009. |
12
Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Interim Consolidated Financial Statements
February 29, 2008
(Stated in US Dollars)
(Unaudited) –Page 7
| Note 6 | Capital Stock–(cont’d) |
| c) | Share Purchase Warrants | ||
During the nine-month period ended February 29, 2008, no warrant was exercised or cancelled during the period. | |||
As at February 29, 2008, the Company has a total of 3,817,500 and 2,873,990 Series “A”and “C”share purchase warrants outstanding, respectively. | |||
Each Series “A”warrant entitled the holder thereof the right to purchase one common share at $0.50 per share expiring on the earlier of: | |||
| i) | February 16, 2008; and | ||
| ii) | The 90th day after the day on which the weighted average trading price of the Company’s shares exceed $0.85 per share for 30 consecutive trading days. | ||
Upon exercise of the Series “A”Share Purchase Warrant at $0.50 each, the holder will receive one Common Share of the Company and a Series “B”Share Purchase Warrant exercisable at $1.00 expiring one year after the occurrence of either (i) or (ii) as described above. | |||
Each Series “C”warrant entitles the holder thereof the right to purchase one common share at $0.18 per share expiring February 29, 2008. | |||
On February 7, 2008, the Company extended the expiry date of the 3,817,500 Series “A”Share Purchase Warrants from February 16, 2008 to February 16, 2009. The exercise price of the warrants remains unchanged at $0.50 per share. The additional fair value of the 3,817,500 extended life Series “A”Share Purchase Warrants was estimated at $252,989, by using the Black-Scholes Option Pricing Model with the following weighted average assumptions: dividend yield of 0%, expected volatility of 218.52%, risk-free interest rates of 2.08%, and expected lives of 1 year. | |||
On February 7, 2008, the Company extended the expiry date of the 2,873,990 Series “C”Share Purchase Warrants from February 29, 2008 to February 27, 2009. The exercise price of the warrants remains unchanged at $0.18 per share. The additional fair value of the 2,873,990 extended life Series “C”Share Purchase Warrants was estimated at $156,536, by using the Black-Scholes Option Pricing Model with the following weighted average assumptions: dividend yield of 0%, expected volatility of 222.08%, risk-free interest rates of 2.08%, and expected lives of 1 year. | |||
| Note 7 | Foreign Currency Risk |
The Company is exposed to fluctuations in foreign currencies through amounts held in China in RMB:
- cash $222,876 (May 31, 2007 - $66,121).
- cost recovery receivable $59,173 (May 31, 2007 - $206,327).
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Note to U.S. Investors - The United States Securities and Exchange Commission permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use certain terms on this report, such as "measured", "indicated", and "inferred" "resources", been based on audits conducted under Chinese methods of calculation, which the SEC guidelines strictly prohibit U.S. registered companies from including in their filings with the SEC. U.S. Investors are urged to consider closely the disclosure on our Form 10-QSB which may be secured from us, or from the SEC's website at http://www.sec.gov/edgar.shtml.
Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995: Except for the statements of historical fact contained herein, the information constitutes "forward-looking statements" within the meaning of the Private Securities Litigation reform Act of 1995. Such forward looking statements, including but not limited to those with respect to the price of lithium, lithium carbonate, other metals and chemicals, the timing and amount of estimated production, costs of production, reserve determination and reserve conversion rates, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, among others, risks relating to the integration of the acquisition, risks that the company may not be able to raise the necessary capital, risks relating to international operations, risks relating to joint venture operations, the actual results of current exploration activities, the actual results of current reclamation activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, future prices of lithium, beryllium, niobium, tantalum, and other metals, as well as those factors affecting the mineral industry. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
INTRODUCTION
The information presented here should be read in conjunction with Sterling Group Ventures, Inc.'s (the "Company") financial statements and other information included in this Form 10-QSB. The Company has presented its quarterly financial statements, which should be read in conjunction with its annual financial statements and the notes thereto for the fiscal year ended May 31, 2007.
As used in this quarterly report, the terms "we", "us", "our", "our company", "Company" and “Sterling” mean Sterling Group Ventures, Inc. and its subsidiaries , unless otherwise indicated.
When used in this Form 10-QSB, the words "expects", "anticipates", "estimates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties, including those set forth below under "Risks and Uncertainties," that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.
PLAN OF OPERATIONS
Sterling is an exploration stage company and there is no assurance a commercially viable mineral deposit exists on any of the Company's properties. Further exploration will be required before final evaluation as to the economic and legal feasibility of the properties is determined.
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On January 20, 2004, the Company completed the acquisition of all of the issued and outstanding shares of Micro Express Ltd., a British Virgin Islands corporation (“Micro”) pursuant to an Acquisition Agreement, filed as an exhibit to a Form 8-K on January 29, 2004. Pursuant to the transaction, the Company issued an aggregate of 25,000,000 shares of common stock to the stockholders of Micro in exchange for 100% of the shares of Micro common stock. Micro Express Ltd. is a subsidiary of Micro Express Holdings Inc., which is a wholly owned subsidiary of Sterling.
Micro is a party to an agreement with Sichuan Province Mining Ltd. Under the terms of the agreement, Micro has the right to acquire at least 75% of the shares of a co-operative joint-venture company. The Joint-venture will hold the necessary mining licenses. The business of the joint-venture company is to develop the Jiajika spodumene property for the extraction of lithium, lithium salts, and other minerals. The initial registered capital is 56 million Chinese Yuan (US$6.8 million). Sichuan Province Mining Ltd. will contribute 14 million Chinese Yuan (about US$1.7 million) including the mining permits and previous works to hold 25% of the JV company. Micro will contribute 42 million Chinese Yuan (about US$5.1 million) to hold 75% of the JV company. An initial contribution of $150,000 has been made by the Company as part of the contribution to obtain the mining permit pursuant to the contract signed between our Chinese partner and Sichuan Bureau of Land and Resource.
On March 3, 2006, the Company, through its wholly owned subsidiary, Micro Express Ltd. (“Micro”), signed an agreement (the “Agreement”) with Sichuan Province Mining Ltd. (“SPM”) to terminate the joint venture and SPM will pay back RMB2,480,000 incurred by Micro on the project.
Pursuant to the Agreement, the parties have confirmed that Micro's early investment of 2.48 million Yuan (RMB) to the Sichuan Jiajika Spodumene project should be paid back 1.2 million Yuan (RMB) before April 15, 2006 and 1.28 million Yuan (RMB) before March 30, 2007. Payments shall be made directly to Micro by SPM. If SPM does not make the payment of 1.28 million to Micro before March 30, 2007, then 1.28 million yuan shall be converted into Micro's interest in Jiajika project of SPM using the formula: 1.28 million Yuan divided by registered capital contribution in Jiajika project by SPM, multiplied by 100%. Neither party shall have any other liabilities to the other party and the Agreement shall replace all previous signed agreements, contracts and MOU between Micro and SPM.
As at May 31, 2006, the Company had received RMB500,000 ($62,350) and a receivable of RMB1,980,000 ($246,708) was recorded. As the Chinese partner has not paid the remaining RMB700,000 ($87,170) and the recoverability of the RMB1,280,000 ($159,538) was uncertain, the Company recorded an allowance for doubtful collection totaling $246,708 for the year ended May 31, 2006.
During the year ended May 31, 2007, the Company received RMB300,000 ($40,381) from the Chinese partner.
During the nine months ended February 29, 2008, the Company received RMB 1,100,000 ($147,154) from the Chinese partner.
As of February 29, 2008, the Company had incurred $398,407 in the Jiajika Spodumene Property before the cumulative cost recovery of RMB1,900,000 ($249,885).
On September 16, 2005, the Company through its wholly owned subsidiary, Micro Express Holdings Inc. (“MEH”), signed an agreement with Beijing Mianping Salt Lake Research Institute (“Mianping”) for the development of Dangxiongcuo salt lake property in Nima county of Naqu district in Tibet, China. The Agreement follows a Letter of Intent signed between the parties on July 11, 2005.
Pursuant to the Agreement, the parties have agreed to set up a Cooperative Company, Tibet Saline Lake Mining High-Science & Technology Co. Ltd. (the “Cooperative”), to develop DXC Salt Lake. The objective of the Cooperative is to use the funds provided by Sterling through MEH and the skills and technology provided by Mianping to produce lithium carbonate (Li2CO3) and borate from brine. MEH is to own 65% and Mianping 35% of the Cooperative.
It is anticipated that the total investment in the Cooperative will be approximately 240 million RMB Yuan (or approximately US$31 million) and will result in the production of 5,000 tonnes per year of lithium carbonate and by products (sodium borate). Mianping guarantees the production cost of lithium carbonate will be less than 11,000 RMB yuan per tonne (or approximately US $1,500 per tonne).
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As of February 29, 2008, the Company has incurred a total of $974,026 in expenses relating to the DXC Salt Lake property costs.
On June 23, 2007, the Company entered into a consulting agreement with a Chinese company to assist the Company in obtaining certain government approvals to facilitate the establishment of a joint venture company that is required for the Company to continue the exploration and development of this project in Tibet. If the Chinese company is successful in its efforts, then it will be compensated by receiving from the Company an amount of shares equal to 10% of the Company's then issued and outstanding capital.
On July 3, 2007, MEH received a letter from the other party to the Agreement stating that the Agreement between MEH and the other party should be deemed terminated as a result of lack of progress in the approval for the establishment of the joint venture company and is considering a lawsuit against the Company and MEH. So far no action has been taken. MEH has responded that the other party's claim has no legal grounds as the lack of progress is not caused by MEH. As part of the Agreement, the other Chinese party was obligated to get all necessary government approvals which have not been received plus provide technology.
OUTLOOK
The Company is under going feasibility studies and engineering studies for the development of the DXC salt lake property in Tibet and seeking the approval for the establishment of Joint Venture Company from Tibet regulatory authorities. The Company is also seeking to identify undervalued mineral assets in China and other countries.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on Form 10-KSB for the fiscal year ended May 31, 2007 and should further be read in conjunction with the financial statements included in this report. Comparisons made between reporting periods herein are for the three and nine months ended February 29, 2008, as compared to the three and nine months ended February 28, 2007.
The Company had interest income of $1,363 for the quarter ended February 29, 2008 as compared to $2,108 for the quarter ended February 28, 2007. For the nine months ended February 29, 2008 the Company had interest income of $4,639 as compared to $4,483 for the nine months ended February 28, 2007.
The operating loss decreased to $630 for the quarter ended February 29, 2008, as compared to $124,001 for the quarter ended February 28, 2007. The operating loss for nine months ended February 29, 2008 decreased to $43,057 as compared to $742,830 for the nine months ended February 28, 2007.
For the three months ended February 29, 2008, relative to the same period in 2007, consulting services increased by $1,895. Consulting services increased by $778 for the nine months ended February 29, 2008 relative to the same period in 2007.
Accounting, audit and legal fees decreased by $9,124 for the three months ended February 29, 2008 when compared to the same period in 2007. Accounting, audit and legal fees decreased by $26,074 for the nine months ended February 29, 2008 when compared to the same period in 2007.
Mineral property costs decreased by $71,698 for the three months ended February 29, 2008 when compared to the same period in 2007. Mineral property costs decreased by $564,292 for the nine months ended February 29, 2008 when compared to the same period in 2007.
16
Travel expenses decreased by $928 for the three months ended February 29, 2008 when compared to the same period in 2007. Travel expenses decreased by $5,203 for the nine months ended February 29, 2008 when compared to the same period in 2007.
The Company expects the trend of losses to continue at an increasing rate until we can achieve commercial production on some of the mineral properties, of which there can be no assurance.
LIQUIDITY AND WORKING CAPITAL
As of February 29, 2008, the Company had total current assets of $ 396,433 and total liabilities of $377,130.
Stock Options
During the nine months ended February 29, 2008, no stock options were granted, exercised or cancelled.
As of February 29, 2008, there were 3,636,000 stock options outstanding exercisable at $0.50 per share, expiring on February 3, 2009.
Share Purchase Warrants
During the nine-month period ended February 29, 2008, no warrants were exercised or cancelled.
As at February 29, 2008, the Company has a total of 3,817,500 and 2,873,990 Series "A" and "C" share purchase warrants outstanding, respectively.
Each Series "A" warrant entitles the holder thereof the right to purchase one common share at $0.50 per share expiring on the earlier of:
i) February 16, 2008; or
ii) The 90th day after the day on which the weighted average trading price of the Company's shares exceeds $0.85 per share for 30 consecutive trading days.
Upon exercise of the Series "A" Share Purchase Warrant at $0.50 each, the holder will receive one Common Share of the Company and a Series "B" Share Purchase Warrant exercisable at $1.00 expiring one year after the occurrence of either (i) or (ii) as described above.
Each Series "C" warrant entitles the holder thereof the right to purchase one common share at $0.18 per share expiring February 29, 2008.
On February 7, 2008, the Company extended the expiry date of the 3,817,500 Series "A" Share Purchase Warrants from February 16, 2008 to February 16, 2009. The exercise price of the "A" warrants remains unchanged at $0.50 per share. The Company also extended the expiry date of the 2,873,990 Series "C" Share Purchase Warrants from February 29, 2008 to February 27, 2009. The exercise price of the "C" warrants remains unchanged at $0.18 per share.
The Company has no other capital resources other than the ability to use its common stock to raise additional capital or raise capital through the exercise of the options or the warrants by the unit holders.
17
RISK FACTORS
We have sought to identify what we believe to be the most significant risks to our business. However, we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our Common Stock. We provide the following cautionary discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed here could adversely affect us.
Lack of Technical Training of Management
The Management of our Company has academic and scientific experience related to mining issues but lacks technical training and experience exploring for, commissioning and operating a mine. With no direct training or experience in these areas, management may not be fully aware of many of the specific requirements related to working within this industry. The decisions and choices may not take into account standard engineering or managerial approaches mineral exploration companies commonly use. Consequently, operations, earnings and the ultimate financial success of the Company could suffer irreparable harm due to management’s lack of experience in this industry.
Exploration Risk
Development of mineral properties is contingent upon obtaining satisfactory exploration results. Mineral exploration and development involves substantial expenses and a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to adequately mitigate.
There is no assurance that commercial quantities of ore will be discovered on any of the Company’s exploration properties. There is also no assurance that, even if commercial quantities of ore are discovered, a mineral property will be brought into commercial production. The discovery of mineral deposits is dependent upon a number of factors not the least of which is the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, some of which are the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. In addition, assuming discovery of a commercial ore body, depending on the type of mining operation involved, several years can elapse from the initial phase of drilling until commercial operations are commenced. Most of the above factors are beyond the control of the Company.
The exploration process is conducted in phases. When each phase of a project is completed, and upon analysis of the results of that phase, the Company will make a decision whether to proceed with each successive phase of the exploration program. There is no assurance that projects will be carried to completion.
Limited Management Resource Development Experience
The Company does not have a track record of exploration and mining operation history. The Company's management has limited experience in mineral resource development and exploitation, and has relied on and may continue to rely upon consultants and others for development and operation expertise.
Limited Operating History; Anticipated Losses; Uncertainty of Future Results
Sterling is an exploration stage company and there is no assurance a commercially viable mineral deposit exists on any of the properties. Further exploration will be required before final evaluation as to the economic and legal feasibility is determined.
18
Sterling Group Ventures, Inc. has only a limited operating history upon which an evaluation of the Company and its prospects can be based. The Company's prospects must be evaluated with a view to the risks encountered by a company in an early stage of development, particularly in light of the uncertainties relating to the new and evolving distribution methods with which the Company intends to operate and the acceptance of the Company's business model. To the extent that such expenses are not subsequently followed by commensurate revenues, the Company's business, results of operations and financial condition will be materially adversely affected. There can be no assurance that the Company will be able to generate sufficient revenues from the sale of its products. If cash generated by operations is insufficient to satisfy the Company's liquidity requirements, the Company may be required to sell additional equity or debt securities. The sale of additional equity or convertible debt securities would result in additional dilution to the Company's stockholders.
Limited Financial Resources
Furthermore, the Company has limited financial resources with no assurance that sufficient funding will be available to it for future exploration and development or to fulfill its obligations under current agreements. There is no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favorable. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of its projects.
Limited Public Market, Possible Volatility of Share Price
The Company's Common Stock is currently quoted on the NASD OTC Bulletin Board under the ticker symbol SGGV. As of April 10, 2008, there were approximately 43,826,175 shares of Common Stock outstanding. There can be no assurance that a trading market will be sustained in the future.
Potential Fluctuations in Quarterly Results
Significant variations in our quarterly operating results may adversely affect the market price of our common stock. Our operating results have varied on a quarterly basis during our limited operating history, and we expect to experience significant fluctuations in future quarterly operating results. These fluctuations have been and may in the future be caused by numerous factors, many of which are outside of our control. We believe that period-to-period comparisons of our results of operations will not necessarily be meaningful and that you should not rely upon them as an indication of future performance. Also, it is likely that our operating results could be below the expectations of public market analysts and investors. This could adversely affect the market price of our common stock.
Dependence on Executive Officers and Technical Personnel
The success of our business plan depends on attracting qualified personnel, and failure to retain the necessary personnel could adversely affect our business. Competition for qualified personnel is intense, and we may need to pay premium wages to attract and retain personnel. Attracting and retaining qualified personnel is critical to our business. Inability to attract and retain the qualified personnel necessary would limit our ability to implement our business plan successfully.
Need for Additional Financing
The Company believes it has sufficient capital to meet its short-term cash needs, including the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934. However, if losses continue it may have to seek loans or equity placements to cover longer term cash needs to continue operations and expansion.
No commitments to provide additional funds have been made by management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover operation expenses.
If future operations are unprofitable, it will be forced to develop another line of business, or to finance its operations through the sale of assets it has, or enter into the sale of stock for additional capital, none of which may be feasible when needed. The Company has no specific management ability or financial resources or plans to enter any other business as of this date.
19
Political Risks
The market in China is monitored by the government, which could impose taxes or restrictions at any time which would make operations unprofitable and infeasible and cause a write-off of investment in the mineral properties. Other factors include political policy on foreign ownership, political policy to open the doors to foreign investors, and political policy on mineral claims and metal prices.
Market Risk
The Company does not hold any derivatives or other investments that are subject to market risk. The carrying values of any financial instruments, approximate fair value as of those dates because of the relatively short-term maturity of these instruments which eliminates any potential market risk associated with such instruments.
Other Risks and Uncertainties
The business of mineral deposit exploration and extraction involves a high degree of risk. Few properties that are explored are ultimately developed into production. At present, none of the Company’s properties has a known body of commercial mineral deposit. Other risks facing the Company include competition, reliance on third parties and joint venture partners, environmental and insurance risks, political and environmental instability, statutory and regulatory requirements, fluctuations in mineral prices and foreign currency, share price volatility, title risks, and uncertainty of additional financing.
The Company has sought to identify what it believes to be the most significant risks to its business, but cannot predict whether or to what extent any of such risks may be realized nor can there be any assurances that the Company has identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to the Company's stock.
ITEM 3. CONTROLS AND PROCEDURES
a. Evaluation of Disclosure Controls and Procedures:
The management of the company has evaluated the effectiveness of the issuer's disclosure controls and procedures as of the end of the period of the report, February 29, 2008 and have concluded that the disclosure controls, internal controls and procedures are effective based upon their evaluation as of the evaluation date.
b. Changes in Internal Control over Financial Reporting:
There were no significant changes in the small business issuers internal control over financial reporting identified in connection with the Company evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange act that occurred during the small business issuers last fiscal quarter that has materially affected or is reasonable likely to materially affect, the small business issuers internal control over financial reporting.
ITEM 3A(T). CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Rules 13a-15(e) or 240.15d-15(e) of the Securities Exchange Act of 1934, as amended, as of February 29, 2008. Based on that evaluation, management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures are effective. There has been no change in the internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of ss.240.13a-15 or ss.240.15d-15 of the Exchange Act that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Capital Stock
During the nine months ended February 29, 2008, the Company did not engage in any unregistered sales of equity securities.
Stock Options
During the nine months ended February 29, 2008, no stock options were granted, exercised or cancelled.
As of February 29, 2008, there were 3,636,000 stock options outstanding exercisable at $0.50 per share, expiring on February 3, 2009.
Share Purchase Warrants
During the nine-month period ended February 29, 2008, no warrants were exercised or cancelled.
As at February 29, 2008, the Company has a total of 3,817,500 and 2,873,990 Series "A" and "C" share purchase warrants outstanding, respectively.
Each Series "A" warrant entitles the holder thereof the right to purchase one common share at $0.50 per share expiring on the earlier of:
i) February 16, 2008; or
ii) The 90th day after the day on which the weighted average trading price of the Company's shares exceeds $0.85 per share for 30 consecutive trading days.
Upon exercise of the Series "A" Share Purchase Warrant at $0.50 each, the holder will receive one Common Share of the Company and a Series "B" Share Purchase Warrant exercisable at $1.00 expiring one year after the occurrence of either (i) or (ii) as described above.
Each Series "C" warrant entitles the holder thereof the right to purchase one common share at $0.18 per share expiring February 29, 2008.
On February 7, 2008, the Company extended the expiry date of the 3,817,500 Series "A" Share Purchase Warrants from February 16, 2008 to February 16, 2009. The exercise price of the "A" warrants remains unchanged at $0.50 per share. The Company also extended the expiry date of the 2,873,990 Series "C" Share Purchase Warrants from February 29, 2008 to February 27, 2009. The exercise price of the "C" warrants remains unchanged at $0.18 per share
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
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ITEM 6. EXHIBITS
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: April 14, 2008 | |
| STERLING GROUP VENTURES, INC. | |
| /s/ Raoul Tsakok | |
| Raoul Tsakok, Chairman & CEO |
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