Stallion 10K 2008 Annual report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2008

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________ to ______________

Commission file number:333-118360

THE STALLION GROUP
(Exact name of small business issuer in its charter)


Nevada	98-0429182
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)

604 – 700 West Pender Street,
Vancouver, British Columbia	V6C 1G8
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number:(604) 662-7901

Securities Registered Under Section 12(b) of the Exchange Act:None

Securities Registered Under Section 12(g) of the Exchange Act:Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.

Yes [ ] No [X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [ ] No [X ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 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 [ ]

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

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

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ](Do not check if a smaller reporting company) Smaller reporting company [X ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes [ ] No [X ]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $23,075,042 as at, November 30, 2007.

State the number of shares outstanding of each of the Issuer's classes of common stock, as of the
latest practicable date.72,109,508 common shares issued and outstanding as of May 31, 2008.

Form 10-K

Table of Contents

Part

Item No.

Note on Forward looking Statements

Glossary of Terms

Business

Properties

Legal Proceedings

Submission of Matters to a Vote of Security Holders

Market for Registrant’s Common Equity and Related Stockholder Matters

Selected Financial Data

Management’s Discussion and Analysis of Financial Condition and Results of Operation

Financial Statements and Supplementary Data

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Controls and Procedures

Other Information

III

Directors, Executive Officers and Corporate Governance

Executive Compensation

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Certain Relationships and Related Transactions and Director Independence

Principal Accountant Fees and Services

Exhibits

Signatures

Note Regarding Forward Looking Statements

This Form 10-K contains forward-looking statements, which may be identified as statements containing, including without limitation, the words believes, anticipates, intends, expects or similar words. These statements are based on our belief as well as assumptions we made using information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties and assumptions. Actual future results may differ significantly from the results discussed in the forwards-looking statements. Some, but not all, of the factors that may cause these differences include: risks related to political and economic uncertainties; risks related to the implementation of our business strategy; our ability to obtain financing on acceptable terms; competition in the oil and gas industry; and other uncertainties described else where herein. You should not place undue reliance on these forward-looking statements.

As used in this annual report, the terms "we", "us", "our", and "Stallion" mean The Stallion Group, unless otherwise indicated.

Glossary of Terms

Oil and gas exploration is a specialized industry. Many of the terms used to describe our business are unique to the oil and gas industry. The following glossary clarifies certain of these terms you that may be encountered while reading this annual report:

"Acquisition costs of properties"means the costs incurred to obtain rights to production of oil and gas. These costs include the costs of acquiring oil and gas leases and other interests. These costs include lease costs, finder's fees, brokerage fees, title costs, legal costs, recording costs, options to purchase or lease interests and any other costs associated with the acquisitions of an interest in current or possible production.

"Area of mutual interest" or “AMI”means, generally, an agreed upon area of land, varying in size, included and described in an oil and gas exploration agreement which participants agree will be subject to rights of first refusal as among themselves, such that any participant acquiring any minerals, royalty, overriding royalty, oil and gas leasehold estates or similar interests in the designated area, is obligated to offer the other participants the opportunity to purchase their agreed upon percentage share of the interest so acquired on the same basis and cost as purchased by the acquiring participant. If the other participants, after a specific time period, elect not to acquire their pro-rata share, the acquiring participant is typically then free to retain or sell such interests.

"Development costs" are costs incurred to drill, equip, or obtain access to proved reserves. They include costs of drilling and equipment necessary to get products to the point of sale and may entail on-site processing.

"Exploration costs" are costs incurred, either before or after the acquisition of a property, to identify areas that may have potential reserves, to examine specific areas considered to have potential reserves, to drill test wells, and drill exploratory wells. Exploratory wells are wells drilled in unproven areas. The identification of properties and examination of specific areas will typically include geological and geophysical costs, which include topological studies, geographical and geophysical studies, and costs to obtain access to properties under study. Depreciation of support equipment, and the costs of carrying unproved acreage, delay rentals, ad valorem property taxes, title defense costs, and lease or land record maintenance are also classified as exploratory costs.

“Frio Formation” or “Frio Geological Formation”means the geological formation in the area of Southwest Mississippi and North-Central Louisiana, being a very complex series of sands representing

marine transgressions and regressions and therefore the presence of varying depositional environments. Structurally, Frio gas accumulations are a function of local structure formed as a result of differential compaction with fluvial channels.

"Mcf" means thousand cubic feet, used in this annual report to refer to gaseous hydrocarbons.

“Gross" oil or gas well or "gross" acre is a well or acre in which we have a working interest.

"Net"oil and gas wells or "net" acres are determined by multiplying "gross" wells or acres by our percentage interest in such wells or acres.

"Oil and gas lease"or "Lease" means an agreement between a mineral owner, the lessor, and a lessee which conveys the right to the lessee to explore for and produce oil and gas from the leased lands. Oil and gas leases usually have a primary term during which the lessee must establish production of oil and or gas. If production is established within the primary term, the term of the lease generally continues in effect so long as production occurs on the lease. Leases generally provide for a royalty to be paid to the lessor from the gross proceeds from the sale of production.

"Production costs" means operating expenses and severance and ad valorem taxes on oil and gas production.

"Prospect" means a location where both geological and economical conditions favor drilling a well.

"Royalty interest" is a right to oil, gas, or other minerals that is not burdened by the costs to develop or operate the related property.

"Working interest" is an interest in an oil and gas property that is burdened with the costs of development and operation of the property.

PART I

Item 1. Business

We are engaged in the business of exploring for and producing oil and natural gas. Our involvement in the oil and natural gas business to date has been through our participating interest in an exploration program on the Wilcox formation located in Mississippi. We have participated in drilling six Frio wells and one Wilcox well to date, which has resulted in one producing well, two abandoned wells, one well that has been completed as a gas well and from which production is pending. We funded a total of $1,200,000 of the four hole drill program on the Wilcox formation. We also have a right to participate in a drill program on the Frio formation, which will consist of up to 16 drill holes. Our participation in the Frio formation drill program will require that we raise additional capital to meet our funding commitments. We have also participated in drilling one prospect well in Will ows Gas Field to date.

We previously held an interest in undeveloped mineral interests located in British Columbia known as the Bell Claims. We conducted operations and exploration activities on our undeveloped mineral properties during the fiscal year ended May 31, 2006. In August 2006, we began to focus our efforts on the acquisition and exploration of oil and gas properties. We acquired undeveloped oil and gas interests in Mississippi and Louisiana and commenced exploration activities on those interests.

Our plan of operations is to participate in the production of commercial quantities of oil and gas and to participate in drilling and testing the oil and gas productive capabilities of the oil and gas properties in which we have a participating interest.

Corporate Background

We were incorporated in the State of Nevada on January 9, 2004 and established a fiscal year end of May 31. On September 27, 2006 we amended our articles to effect a share split of our common stock on a three for one basis. On April 17, 2007 we further amended our articles to effect a further share split of our common stock on a two for one basis.

Our registered agent's office is located at 251 Jeanell Drive, No. 3, Carson City, Nevada 89703 and our executive and head offices are located at 604-700 W. Pender Street, Vancouver, British Columbia, Canada V6C 1G8.

Property Acquisitions

Mineral Property

On May 31, 2004, we optioned a mineral property containing four mining claims in British Columbia, Canada by entering into an Option To Purchase And Royalty Agreement (the “Option Agreement”) with Mayan Minerals Ltd. on behalf of Angel Jade Mines Ltd. (“Angel Jade”), the beneficial owner of the claims, each arms-length corporations, to acquire the claims by making certain expenditures and carrying out certain exploration work on the claims. We held the right to acquire a 100% interest in the claims subject to the expenditure of a total of CAD$120,000 through a three-phase exploration program.

We completed the on-site work of Phase I of the planned two-phase exploration program and have spent approximately CAD$35,000 on the claims. As a result of oil and natural gas activities, we have allowed the option to lapse.

Oil and Gas Property

On August 2, 2006 the Company entered into an agreement (the “Participation Agreement”) with Griffin & Griffin Exploration LLC (“G&G”) in connection with two drilling programs to be conducted by G&G. According to the Participation Agreement, the Company’s share of all costs was 30% (its “pro-rata share”), which entitled the Company to share in the following arrangement:

Wilcox wells:

G&G will be entitled to receive 25% of all net revenues

The Company will be entitled to receive its pro-rata share of seventy-five percent (75%) of all net revenues, being (23%) of such net revenues.

In the event that the first exploration well establishes commercial production, then any offsetting well within the limits of the same reservoir, at the option of G&G, will be at the cost of G&G; or, provide the Company an opportunity to participate at its pro-rata share in 100% of all net revenues until all costs, including costs associated to establish commercial production, before payout (BPO), after which G&G will be entitled to its 25% working interest after payout (APO).

Frio wells:

G&G will be entitled to 20% of all net revenues;

The Company will be entitled to receive its pro-rata share of 80% of all net revenues, being 24% of such net revenues.

The total costs associated with the above program are $1,200,000 and are described below:

The Company’s pro-rata share of $1,000,000 paid by August 15, 2006 which amounted to $300,000.

On or before November 16, 2006 the Company’s pro-rata share of $2,000,000 amounting to $600,000 which will be used to further the development of prospects on lands of interest in Mississippi and Louisiana.

On or before January 31, 2007 the Company’s pro-rata share of $1,000,000 amounting to $300,000, which will be used to further the development of prospects on lands of interest in Mississippi and Louisiana.

As at May 1, 2007, we incurred $1,200,000 in identifying and acquiring oil and natural gas interests, and for exploration costs.

Effective June 13, 2007, the Company increased its interest, and thus its pro-rata share of costs, in the drilling programs covered by the Participation Agreement to 40%. The Company is currently in the process of finalizing documentation to reflect such changes in connection with its interests in the Frio-Wilcox drilling programs.

Willows Gas Field

On February 15, 2008 the Company entered into a Farm Out Agreement with Production Specialties Company (“Production Specialties”) for participation in a natural gas prospect area located in the North Sacramento Valley, California. Production Specialties is currently involved in the generation and participation of various prospects encompassing 300 square miles of 3 dimensional seismic shot in the Sacramento Valley. The specific prospect area of Stallion's participation is within a previous producing field and it is expected that multiple prospects will be identified.

The Company drilled its first prospect well paying 12.5% of the costs of the first well to earn a 6.5% Working Interest. Thereafter, the Company will pay 6.5% of the costs of future wells to earn 6.5% Working Interest. The total costs of the first well were $193,638. The well has been connected to a nearby pipeline and revenue for the year ended May 31, 2008 was $34,216 (May 31, 2007: $0).

Employees

At present, we have no other employees, other than our officers and directors. Neither Chief Executive Officer/Chairman, Mr. Paton-Gay, or our Chief Financial Officer, Mr. Kulwant Sandher has an employment agreement with us.

We intend to hire employees and contractors on an as needed basis. We have entered into an operating agreement with Griffin & Griffin LLC to provide drilling and exploration services for the Company’s Frio-Wilcox property. We do not intend to hire employees at this time.

Item 2. Properties

Mississippi Frio-Wilcox Joint Venture

Location and Access

The Mississippi Frio-Wilcox Joint Venture is located on the border of southern Mississippi and Louisiana along the floodplain of the Mississippi river. The area is approximately 20 miles west of Woodville, Mississippi and approximately 50 miles northwest of Baton Rouge, Louisiana. The wells are located in Township 2 North, Ranges 4 & 5, in West Adams and Wilkinson Counties in the state of Mississippi. The area is accessible via Interstate 55 (approximately 100 miles south of Jackson, Mississippi) and then west via state highways. The drill locations are accessed by secondary gravel and dirt roads. Transporting natural gas to market will be accomplished via a series of pipelines which cross the project area.

Previous Operations and History

The Mississippi Frio-Wilcox Joint Venture is the successor to the Palmetto Point Project, a ten-well program in the same area. Griffin and Griffin Exploration, the operators for the Palmetto Point Project are also the operators for the Mississippi Frio-Wilcox Joint Venture. Griffin and Griffin Exploration has over 40 years of operations history in the Mississippi Frio-Wilcox Joint Venture area and has acquired substantial data and 3-D seismic for the Mississippi Frio-Wilcox Joint Venture. To date, Griffin and Griffin Exploration has drilled, owned or operated more than 100 Frio wells in the region.

Geology of the Project

The prospect wells are located to test the Frio Formation. Frio wells typically enjoy low finding costs. Griffin and Griffin Exploration has utilized seismic "bright spot" technology, which helps to identify gas reservoirs and to delineate reservoir geometry and limits. The term "bright spot" is used to describe a geophysical amplitude anomaly, which is simply a velocity change from a higher velocity to lower velocity. Sands that contain gas are predictable by this method because the gas will provide a slower velocity response giving an abnormally intense trough-peak reflections, therefore termed a "bright spot". The data evaluation in the Frio section gives a direct & nbsp;hydrocarbon indicator (HCI) allowing one to not only see gas seismically but also the lateral extent of each gas reservoir at various depths to include multiple horizons at some locations.

The gas targets at the Mississippi Frio-Wilcox Joint Venture occur at shallow depths and have minimal completion costs. The Frio in the area of Southwest Mississippi and North-Central Louisiana is a very complex series of sand representing marine transgressions and regressions and resulting in the

presence of varying depositional environments. Structurally, the Frio gas accumulations are a function of local structure and/or structural nose formed as a result of differential compaction features. However, stratigraphic termination (updip pinchout of sands within shales) also plays a role in most Frio accumulations. The stratigraphy is so complex that seismic HCL evaluations are the only viable exploratory tool for the Frio prospect.

Proposed Program of Exploration

Exploration activities on the Mississippi Frio-Wilcox Joint Venture has been delayed due to adverse weather conditions. We are currently evaluating the further exploration targets on the Mississippi Frio-Wilcox Joint Venture.

Willows Gas Field

The Company has participated in approximately 8 squares miles of a 3 dimensional seismic program located in Glenn County California in the northern Sacramento Valley. One well has been drilled completed tested and is currently selling gas at initial volumes of 1200 to 1500 Mcf/per day. There have been at least 12 other prospects generated from this seismic program and currently 3 additional wells have been permitted and approved to drill and there are 4 new wells going through the permit process. These are shallow wells, 2000'-4500' true vertical depth.

Cost Estimates Including Previous Work

As of May 31, 2008, we expended $1,896,557 in connection with the Mississippi Frio-Wilcox Joint Venture and the Willows Gas Field Joint Venture, including leasing, title, drilling, seismic, and casing.

Present Activities

We have drilled twelve Frio wells to date. We have abandoned eight of these wells. The four remaining wells have shown economically recoverable hydrocarbons: Redbug #1, Redbug #2, Faust #1, and Buffalo River F-33. We have drilled our first well in the Willows Gas Field and this has shown economically recoverable hydrocarbons.

Productive Gas Wells

The following summarizes our productive and shut-in gas wells as of May 31, 2007. Producing wells are wells producing natural gas or water, a pre-cursor to natural gas production. Shut-in wells are completed wells that are capable of production but are currently not producing. Gross wells are the total number of wells in which we have a working interest. Net wells are the sum of our fractional working interests owned in the gross wells.


	Gross	Net
Producing Gas Wells	4	1.26
Shut-in Gas Wells	1	0.4
Wells in Various Stages of Completion and Water Disposal Wells	0	0
TOTAL	5	1.5

Oil And Gas Reserve Quantities

The oil and gas interests in the Mississippi Wilcox Joint-Venture that we participate in are subject to an independent reserve report entitled Est. of Future Reserves and Revenues in Mississippi of Louisiana to the LDBTS Joint Venture as of May 31, 2008. We have calculated the reserve quantities using these reports.

Proved oil and gas reserves are the estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Due to inherent uncertainties and the limited nature of reservoir data, such estimates are subject to change as additional information becomes available. The estimates of reserves, future cash flows and present value are based on various assumptions, including those prescribed by the SEC, and are inherently imprecise. Although we believe these estimates are reasonable, actual future production, cash flows taxes, development expenditures,

operating expenses and quantities of recoverable oil and natural gas may vary substantially form these estimates. Also, the use of a 10% discount factor for reporting purposes may not necessarily represent the most appropriate discount factor, given actual interest rates and risks to which our business or the oil and natural gas industry in general are subject. Based on the Veazey Reserve Report, we had estimated total proved developed reserves of 107,920 MCF. We have not reported our reserves to any federal authority or agency. The following table sets forth certain information as of May 31, 2008 with respect to our estimated proved oil and gas reserves pursuant to SEC guidelines, and the present value of our proved oil and gas reserves.

ProvedReserves

Oil

Net Gas

(MCF)

Undiscounted Cash Flow

Discounted (10%) Cash Flow

Proved Developed

107,920

509,456

442,180

In accordance with applicable financial accounting and reporting standards of the SEC, the estimates of our proved reserves set forth herein are made using oil and gas sales prices estimated to be in effect as of the date of such reserve estimates and are held constant throughout the life of the properties. Estimated quantities of proved reserves and their present value are affected by changes in oil and gas prices. The average price utilized for the purpose of estimating our proved reserves and the present vale of proved reserves as of May 31, 2008 was $9.64 per MCF of gas.

Production for the twelve months ended May 31, 2008, our total net production, was approximately 21,800 MCF of natural gas. The average prices received for our natural gas sales was $7.40 per MCF. Our average cost per MCF was $1.86.

Oil and Gas Acreage

The following table sets forth the undeveloped and developed acreage, by area, in which we hold an interest as of May 31, 2008. Undeveloped acres are acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas, regardless of whether or not such acreage contains proved reserves. Developed acres are acres, which are spaced or assignable to productive wells. Gross acres are the total number of acres in which we have a working interest. Net acreage is obtained by multiplying gross acreage by our working interest percentage in the properties. The table does not include acreage in which we have a contractual right to acquire or to earn through future dril ling projects, or any other acreage for which we have not yet received registered interests.


	Undeveloped Acres		Developed Acres
	Gross	Net	Gross	Net
Mississippi	0	0	1,360	408
Louisiana	0	0	0	0
California	0	0	625	39
TOTAL	0	0	1,360	447

Drilling Activity

The following table sets forth drilling activity by the operator during the period ended May 31, 2008:


	Gross	Net
Exploratory Wells
Productive	5	1.66
Dry	8	3.2
Development Wells
Productive	0	0
Dry	0	0
TOTAL WELLS	13	4.86

Principal Products

The Company is actively pursuing oil and gas prospects and opportunities principally through its relationships with individuals and companies. Once prospective oil and gas opportunities are identified, the Company evaluates them to determine:

The degree of risk;

The commercial potential of a prospect;

The Company’s available financial capacity to undertake/participate in the opportunity in a timely and meaningful way under the best terms and conditions; and

The Company’s current portfolio of exploration, exploitation and development prospects consolidated risk profile.

The Company has developed a foundational strategy for success which includes careful analysis of every opportunity to determine how it fits with the overall strategic objectives of the Company. The strategic objectives is to develop proven energy rich areas of North America.

The Wilcox and Frio Wells are currently in production. As production of oil and gas products continue in Wilcox and Frio wells, we anticipate that generally they will be sold to purchasers in the immediate area where the products are produced. We expect that the principal markets for oil and gas will continue to be refineries and transmission companies that have facilities near our producing properties.

Market for Oil and Gas Production

The market for oil and gas production is regulated by both the state and federal governments. The overall market is mature and with the exception of gas, all producers in a producing region will receive the same price. The major oil companies will purchase all crude oil offered for sale at posted field prices. There are price adjustments for quality difference from the Benchmark. Benchmark is Saudi Arabian light crude oil employed as the standard on which OPEC price changes have been based. Quality variances from Benchmark crude results in lower prices being paid for the variant oil. Oil sales are normally contracted with a purchaser or gatherer as it is known in the industry who will pick-up the oil at the well site. In some instances there may be deductions for transportation from the well head to the sales point. At this time the majority of crude oil purchasers do not charge transportation fees, unless th e well is outside their service area. The service area is a geographical area in which the purchaser of crude oil will not charge a fee for picking upon the oil. The purchaser or oil gatherer as it is called within the oil industry, will usually handle all check disbursements to both the working interest and royalty owners. We are a working interest owner. By being a working interest owner, we are responsible for the payment of our

proportionate share of the operating expenses of the well. Royalty owners and over-riding royalty owners receive a percentage of gross oil production for the particular lease and are not obligated in any manner whatsoever to pay for the costs of operating the lease. Therefore, we, in most instances, are paying the expenses for the oil and gas revenues paid to the royalty and over-riding royalty interests.

Gas sales are by contract

The gas purchaser will pay the well operator 100% of the sales proceeds on or about the 25th of each and every month for the previous months sales. The operator is responsible for all checks and distributions to the working interest and royalty owners. There is no standard price for gas. Prices will fluctuate with the seasons and the general market conditions. It is our intention to utilize this market when ever possible in order to maximize revenues. We do not anticipate any significant change in the manner production is purchased, however, no assurance can be given at this time that such changes will not occur.

Distribution

The operator on the oil and natural gas properties in which we currently hold a participating interest has access to the following pipelines;

Tunica Pipeline, LLC –The Tunica Pipeline, LLC is a pipeline system running east-west across Wilkinson County, Mississippi, and ties into the Mid-Louisiana pipeline system. The Tunica Pipeline, LLC pipeline system and operations are exclusively controlled by the consortium partners. This line comprises 20 miles of 6-inch pipe with a 12.5-mile, 4-1/2 inch spur running due south and another 8-mile, 4-1/2 inch spur running north. The pipeline provides the option to take this line under the Mississippi River to serve any wells drilled in Louisiana. The nearest Louisiana pipeline is slightly over 40 miles to the west of the area of mutual interest under the Company’s agreement with G&G.

East Fork Pipeline, LLC - The East Fork Pipeline, LLC is a pipeline system running more or less east-west across Amite County, Mississippi, and ties into a pipeline system known as the TRANSCO system. The consortium partners control access to this pipeline. The line comprises 15 miles of 6-inch pipe. The line was acquired to service wells and potential 3D seismic areas.

Other area Pipelines - Other lines in this area include Duke, Mid-Louisiana, TRANSCO and Pinnacle. These lines have transportation rates of $0.11 to $0.50/Mcf (price does not include compression, dehydration or gas processing).

Competition

Oil and gas exploration, mineral exploration and acquisition of undeveloped properties are highly competitive and speculative businesses. We compete with a number of other companies, including major mining and oil and gas companies and other independent operators that are more experienced and which

have greater financial resources. We do not hold a significant competitive position in either the mining industry or the oil and gas industry.

Compliance with Government Regulation

In the United States, domestic development, production and sale of oil and gas are extensively regulated at both the federal and state levels. These regulations include requiring permits for drilling wells; maintaining prevention plans; submitting notification and receiving permits in relation to the presence, use and release of certain materials incidental to oil and gas operations; and regulating the location of wells, the method of drilling and casing wells, the use, transportation, storage and disposal of fluids and

materials used in connection with drilling and production activities, surface plugging and abandoning of wells and the transporting of production. Legislation affecting the oil and gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both federal and state, have issued rules and regulations binding on the oil and gas industry and its individual members, compliance with which is often difficult and costly and some of which carry substantial penalties for failure to comply. Inasmuch as new legislation affecting the oil and gas industry is commonplace, and existing laws and regulations are frequently amended or reinterpreted, the Company is unable to predict the future cost or impact of complying with these laws and regulations.

State statutes and regulations require permits for drilling operations, drilling bonds and reports concerning wells. Some states also have statutes and regulations governing conservation matters, including the unitization or pooling of oil and gas properties and establishment of maximum rates of production from oil and gas wells.

Our operations are also subject to extensive and developing federal, state and local laws and regulations relating to environmental, health and safety matters; petroleum; chemical products and materials; and waste management. Permits, registrations or other authorizations are required for the operation of certain of our facilities and for our oil and gas exploration and future production activities. These permits, registrations or authorizations are subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with these regulatory requirements, the provisions of required permits, registrations or other authorizations, and lease conditions, and violators are subject to civil and criminal penalties, including fines, injunctions or both. Failure to obtain or maintain a required permit may also result in the imposition of civil and criminal penalties. Third parties m ay have the right to sue to enforce compliance.

Our operations are also subject to various conservation matters, including the number of wells which may be drilled in a unit, and the unitization or pooling of oil and gas properties. In this regard, some states allow the forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands and leases, which may make it more difficult to develop oil and gas properties. In addition, state conservation laws establish maximum rates of production for oil and gas wells, generally limit the venting or flaring of gas, and impose certain requirements regarding the ratable purchase of production. The effect of these regulations is to limit the amounts of oil and gas we can produce from its wells and to limit the number of wells or the locations at which we can drill.

Our operations, as is the case in the petroleum industry generally, are significantly affected by federal tax laws. Federal, as well as state, tax laws have many provisions applicable to corporations which could affect our future tax liability.

Environmental Matters

Our exploration, development, and future production of oil and gas are subject to various federal, state and local environmental laws and regulations discussed below. Such laws and regulations can increase the costs of planning, designing, installing and operating oil and gas wells. We consider the cost of environmental protection a necessary and manageable part of its business. We have been able to plan for and comply with new environmental initiatives without materially altering its operating strategies.

Our activities are subject to a variety of environmental laws and regulations, including but not limited to, the Oil Pollution Act of 1990 (“OPA”), the Clean Water Act (“CWA”), the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the Resource Conservation and Recovery Act (“RCRA”), the Clean Air Act (“CAA”), and the Safe Drinking Water Act (“SDWA”), as well as state regulations promulgated under comparable state statutes. We are also subject to regulations governing the handling, transportation, storage, and disposal of naturally occurring radioactive materials that are found in its oil and gas operations. Civil and criminal fines and penalties may be imposed for

non-compliance with these environmental laws and regulations. Additionally, these laws and regulations require the acquisition of permits or other governmental authorizations before undertaking certain activities, limit or prohibit other activities because of protected areas or species, and impose substantial liabilities for cleanup of pollution.

Under the OPA, a release of oil into water or other areas designated by the statute could result in the us being held responsible for the costs of remediating such a release, certain OPA specified damages, and natural resource damages. The extent of that liability could be extensive, as set out in the statute, depending on the nature of the release. A release of oil in harmful quantities or other materials into water or other specified areas could also result in the Company being held responsible under the CWA for the costs of remediation, and civil and criminal fines and penalties.

CERCLA and comparable state statutes, also known as “Superfund” laws, can impose joint and several and retroactive liability, without regard to fault or the legality of the original conduct, on certain classes of persons for the release of a “hazardous substance” into the environment. In practice, cleanup costs are usually allocated among various responsible parties. Potentially liable parties include site owners or operators, past owners or operators under certain conditions, and entities that arrange for the disposal or treatment of, or transport hazardous substances found at the site. Although CERCLA, as amended, currently exempts petroleum, including but not limited to, crude oil, gas and natural gas liquids from the definition of hazardous substance, our operations may involve the use or handling of other materials that may be classified as hazardous substances under CERCLA. Furthermore, there can be no a ssurance that the exemption will be preserved in future amendments of the act, if any.

RCRA and comparable state and local requirements impose standards for the management, including treatment, storage, and disposal of both hazardous and non-hazardous solid wastes. We generate hazardous and non-hazardous solid waste in connection with its routine operations. From time to time, proposals have been made that would reclassify certain oil and gas wastes, including wastes generated during drilling, production and pipeline operations, as “hazardous wastes” under RCRA which would make such solid wastes subject to much more stringent handling, transportation, storage, disposal, and clean-up requirements. This development could have a significant impact on our operating costs. While state laws vary on this issue, state initiatives to further regulate oil and gas wastes could have a similar impact.

Item 3. Legal Proceedings

To the best of our knowledge, there are no legal actions pending, threatened or contemplated against us.

Item 4. Submissions of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Company’s shareholders during the fourth quarter of the fiscal year.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Market Information

Trades in our common shares are quoted on the Over-the-Counter Bulletin Board (OTC Bulletin Board) which is a quotation service administered by the Financial Industry Regulatory Authority (FINRA). Our trading symbol on this service is “SLGR”.

The OTC Bulletin Board has a limited and sporadic trading market and does not constitute an established trading market. The following table sets forth the range of high and low price information of the common

shares as reported on the OTC Bulletin Board for each fiscal quarter since trades in the stock commenced quotation on the OTC Bulletin Board on January 19, 2006, and the subsequent period ending May 31, 2007. The price information available reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.


Period Ended	High ($)	Low ($)

May 31, 2008	0.31	0.07
February 28, 2008	0.42	0.20
November 30, 2007	0.60	0.24
August 31, 2007	1.24	0.36
May 31, 2007⁽¹⁾	1.28	0.69
February 28, 2007	1.45	0.99
November 30,2006⁽²⁾	1.55	0.55
August 31, 2006	1.03	1.03
May 31, 2006	1.05	1.05
February 28, 2006	0.91	0.91

(1)

Reflects adjusted prices after a two for one share split effective April 17, 2007.

(2)

Reflects adjusted prices after a three for one share split effective September 30, 2006.

Holders of Record

As of May 31, 2008, there were 25 holders of record of our common stock holding a total of 72,109,508 shares, and an undetermined number of beneficial holders.

Dividend Policy

We have not paid dividends on our common shares since our inception. Dividends on common shares are within the discretion of the board of directors and are payable from profits or capital legally available for that purpose. It is our current policy to retain any future earnings to finance the operations and growth of our business. Accordingly, we do not anticipate paying any dividends on common shares in the foreseeable future.

Securities Authorized for Issuance Under Compensation Plans

The following table sets forth information as at May 31, 2008 respecting the compensation plans under which shares of the Company’s common stock are authorized to be issued.

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

(a)

Weighted-average exercise price of outstanding options, warrants and rights

(b)

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

(c)

Equity compensation plans approved by security holders

N/A


Equity compensation plans not approved by security holders	2,680,000	$0.5391	2,850,000
Total	2,680,000	$0.5391	2,850,000

Sales of Unregistered Securities

During the year ended May 31, 2007, Stallion has sold the following securities which were not registered under theSecurities Act of 1933, as amended:

During the year ended May 31, 2008, the Company issued 1,590,000 shares pursuant to an exercise of warrants at $0.10 per common for cash proceeds of $159,000. The shares were issued to non-US persons pursuant to Regulation S of the Securities Act of 1933.

On May 30, 2008, the Company issued 486,000 shares at $0.75 per share for cash proceeds of $364,500. The shares were issued to non-US persons pursuant to Regulation S of the Securities Act of 1933.

In February and March of 2007 we issued 1,055,294 units at $0.425 per unit for cash proceeds of $448,500. Each unit consists of a share in our common stock and a warrant. Each warrant may be exercised until December 1, 2008 to acquire an additional share of our common stock at an exercise price of $0.50 per share. The units were issued to non-U.S. persons pursuant to Regulation S of the Securities Act of 1933.

In October of 2006 we issued 9,305,160 units (adjusted for a subsequent two for one share split) at a price of $0.05 per unit for cash proceeds of $465,258. Each unit consists of a share in our common stock and a warrant. Each warrant may be exercised until August 1, 2008 to acquire an additional share of our common stock at an exercise price of $0.10 per share. The units were issued to non-U.S. persons pursuant to Regulation S of the Securities Act of 1933.

Purchases of Equity Securities by the Company and Affiliated Purchasers

Neither the Company nor an affiliate of the Company purchased common shares of the Company in the year ending May 31, 2008.

Item 6. Selected Financial Data

N/A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results 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 "common shares" refer to the common shares in our capital stock.

As used in this annual report, the terms "we", "us", "our", and "Stallion" mean The Stallion Group, unless otherwise indicated.

Stallion is an exploration stage company. There is no assurance that commercially viable mineral and/or oil and natural gas deposits exist on the claim that we have under option. Further exploration will be required before a final evaluation as to the economic and legal feasibility of the claim is determined.

Glossary of Exploration Terms

The following terms, when used in this report, have the respective meanings specified below:


Development	Preparation of a mineral deposit for commercial production, including installation of plant and machinery and the construction of all related facilities. The development of a mineral depositcan only be made after a commercially viable mineral deposit, a reserve, has been appropriately evaluated as economically and legally feasible.
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 is attached to the end of 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 an inch or more in diameter.
Exploration	The prospecting, trenching, mapping, sampling, geochemistry, geophysics, diamond drilling and other work involved in searching for mineral bodies.
Geochemistry	Broadly defined as all parts of geology that involve chemical changes or narrowly defined as the distribution of the elements in the earth’s crust; the distribution and migration of the individual elements in the various parts of the earth.
Geology	The science that deals with the history of the earth and its life especially as recorded in the rocks; a chronological account of the events in the earth’s history.


Geophysics	The science of the earth with respect to its structure, components and development.
Mineral	A naturally occurring inorganic element or compound having an orderly internal structure and characteristic chemical composition, crystal form and physical properties.
Mineral Reserve	A mineral reserve is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.
Mineralization	Rock containing an undetermined amount of minerals or metals.
Oxide	Mineralized rock in which some of the original minerals, usually sulphide, have been oxidized. Oxidation tends to make the mineral more porous and permits a more complete permeation of cyanide solutions so that minute particles of gold in the interior of the minerals will be more readily dissolved.

Bright Spot

Technology

Bright spot technology is a unique method by which 3-D seismic data is re-interpreted yielding enhanced amplitude shows pertaining to potential gas reserves.

Foreign Currency and Exchange Rates

Dollar costs of Stallion’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 $1.05 or CA $1.00 being approximately equal to US $0.95 which is the approximate average exchange rate during recent months and which is consistent with the incorporated financial statements.

Overview

We were incorporated in the State of Nevada on January 09, 2004 as The Stallion Group 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 604 – 700 West Pender Street, Vancouver, British Columbia V6C 1G8. Our telephone number is (604) 662-7901. 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. On September 27, 2006 we split our stock on a 3 for 1 basis and on April 17, 2007, we split our stock on a 2 for 1 basis. We are a start-up, exploration stage company engaged in the search for minerals including natural gas, oil and gold. There is no assurance that a commercially viable mineral deposit, a reserve, exists in our claim or can be shown to exis t until sufficient and appropriate exploration is done and a comprehensive evaluation of such work concludes economic and legal feasibility.

On May 31, 2004, we optioned a mineral property containing four mining claims in British Columbia, Canada by entering into an Option To Purchase And Royalty Agreement with Mayan Minerals Ltd. on behalf of Angel Jade Mines Ltd., the beneficial owner of the claims, each arms-length British Columbia corporations, to acquire the claims by making certain expenditures and carrying out certain exploration work on the claims. We can acquire a 100% interest in the claim subject to the expenditure of a total of $116,000 through a three-phase exploration program. In addition, the vendors retain a 3% net smelter royalty. After January 1, 2007 payments of $40,000 per year are to be made as advance royalty to Angel Jade so long as Stallion retains an interest in the claim. After careful review of this project, the

Company’s new management team decided to abandon this project and invest the Company’s funds in projects that has a higher likelihood of success and no further liability will accrue to the Company.

Mississippi Prospect

Wilcox wells:

G&G will be entitled to receive 25% of all net revenues

The Company will be entitled to receive its pro-rata share of seventy-five percent (75%) of all net revenues, being (23%) of such net revenues.

Frio wells:

G&G will be entitled to 20% of all net revenues;

The Company will be entitled to receive its pro-rata share of 80% of all net revenues, being 24% of such net revenues.

The total costs associated with the above program are $1,200,000 and are described below:

The Company’s pro-rata share of $1,000,000 paid by August 15, 2006 which amounted to $300,000.

As at May 1, 2007, we incurred $1,200,000 in identifying and acquiring oil and natural gas interests, and for exploration costs.

The CMR-USA-39-14 (Redbug #1) well, was drilled to a depth of 3,200 feet and encountered 24 feet of pay. The well is now connected to a nearby pipeline and has begun producing natural gas on December 23, 2006. The costs associated with this well were $105,376. The revenue produced from this well was $50,723 for the year ended May 31, 2008. (May 31, 2007: $17,221).

The second well in this program was the Dixon #1 well, which reached total depth of 8,650 feet, and reached the Wilcox formation. However, after testing, the well showed no hydrocarbons and ,therefore, was plugged and abandoned. The costs transferred to Proving properties amounted to $121,815.

TEC-1 closure (known as the Faust #1 well) has encountered the Frio gas formation and has been completed as a gas well. The well encountered significant gas reserves. The Operator has now completed gas flow testing and the production test rate was approximately 283 Mcf/day using a 6/64 choke. This well encountered pressures exceeding 800 psi. Stallion expects the production rate to normalize at 200 Mcf/day This well should be tied in during the 2009 fiscal year. The total costs for this well amounted to $129,223.

The CMR-USA-37-1 (Redbug #2) well was drilled to a depth of 3,220 feet. The well encountered 10 feet of net pay at a depth between 2,630 and 2,640 feet. The well is connected to the nearby pipeline and has begun producing natural gas. The revenue produced from this well was $34,788 for the year ended May 31, 2008. (May 31, 2007: $0).

The Buffalo River F-33 well was drilled to a depth of 3,837 feet. The well encountered 12 feet of net pay at a depth of between 3,152 and 3,165 feet, with estimated reserves of 0.226 BCF. The costs of this well amounted to $132,861. The revenue produced from this well was $73,836 for the year ended may 31, 2008, (May 31, 2007:$0).

The following table indicate the Net Reserves for those wells producing and estimated reserves for those wells awaiting connection to the nearby gas gathering system. It also shows those wells drilled and abandoned.


Well Name	Total Net Reserves at WI BCF	Suggested daily Flow Rate in Cubic Feet	Proved, Awaiting Tie-in, Producing or Abandoned
CMR USA 39-14 (Redbug #1)	0.230	140,000	Proved & Producing
TEC 1 Closure – Faust #1	0.319	175,000	Proved & Awaiting Tie-In
BR F-24	0.196	154,000	Abandoned
USA 37-1 Redbug #2	0.341	200,000	Proved & Producing
BR F – 33	0.226	194,000	Proved & Producing
PP F-111	-	-	Abandoned
Randall #1	-	-	Abandoned
PP F-90	-	-	Abandoned
PP F-91	-	-	Abandoned
PP F-100	-	-	Abandoned
PP F-83	-	-	Abandoned
PP F-6A	-	-	Abandoned

Willows Gas Field

On February 15, 2008, the Company entered into a Farm Out Agreement with Production Specialties Company (“Production Specialties”) for participation in a natural gas prospect area located in the North Sacramento Valley, California. Production Specialties is currently involved in the generation and participation of various prospects encompassing 300 square miles of 3 dimensional seismic shot in the Sacramento Valley. The specific prospect area of Stallion's participation is within a previous producing field and it is expected that multiple prospects will be identified.

The Company drilled its first prospect well paying 12.5% of the costs of the first well to earn a 6.5% Working Interest. Thereafter, the Company will pay 6.5% of the costs of future wells to earn 6.5% Working Interest. The exploration well encountered gas reserves that were economically viable. The total costs of the first well were $193,638. The well has been connected to a nearby pipeline and revenue for the year ended May 31, 2008 was $34,216 (May 31, 2007: $0).

Risks

At present we do not know whether or not the exploration wells contain commercially exploitable reserves of oil and/or natural gas or any other valuable mineral. Additionally, the proposed expenditures to be made by us in the exploration of the claim may not result in the discovery of commercial quantities of oil and/or natural gas. Problems such as unusual or unexpected formations and other unanticipated conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. In such a case, we would be unable to complete our business plan.

However, in order to complete future phases of our proposed exploration program we will need to raise additional funding. Even if the first phase of our exploration program is deemed to be 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 our exploration plan, we would have to cease operations.

Finally, even if our exploration program is successful we may not be able to obtain commercial production. If our exploration is successful and commercial quantities of minerals are discovered we will require a significant amount of additional funds to ensure commercial production. Should we be unable to raise the additional funds required, we would be unable to continue economic operations and may have to either sell our working interest to a third party or would have to cease operations.

Employees

Initially, we intend to use the services of subcontractors for manual labour exploration work on our claims and an engineer or geologist to manage the exploration program. Our only employees are Christopher Paton-Gay, Chairman/CEO and director and Kulwant Sandher, Chief Financial Officer and director.

At present, we have no other employees, other than our officers and directors. Neither Mr. Paton-Gay or Mr. Sandher has an employment agreement with us, however they do have contract for services agreements. 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 employees.

We intend to hire geologists, engineers, operators and excavation subcontractors on an as needed basis. We have entered into an operating agreement with Griffin & Griffin LLC to provide drilling and exploration services for the Company’s Mississippi’s play.

Offices

Our offices are located at 604 – 700 West Pender Street, B.C. Canada V6C 1G8. Currently, these facilities are provided to the Company by Hurricane Corporate Services Ltd., a company owned by two directors. The costs regarding accounting, office, secretarial and consulting services are paid on a fixed amount per month.

Results of Operations

Stallion was incorporated on January 09, 2004; comparative periods for the years ended May 31, 2008, May 31, 2007 and January 09, 2004 (inception) through May 31, 2008 are presented in the following discussion.

Since inception, we have used our common stock to raise money for our optioned acquisition and for corporate expenses. Net cash provided by financing activities (less offering costs) from inception on January 09, 2004 to May 31, 2008 was $2,595,434 as a result of proceeds received from sales of our common stock.

Revenues

REVENUE – Gross revenue for the year ended May 31, 2008 was $193,563 ($17,221 for the year ended May 31, 2007 and $210,784 for the period from inception to May 31, 2008).

COMMON STOCK – Since inception, we have used our common stock to raise money for our optioned acquisition and for corporate expenses. Net cash provided by financing activities during the year ended May 31, 2008 was $823,500 as compared to $1,673,134 for the year ended May 31, 2007 and $2,595,434 received for the period from inception on January 09, 2004 through to and including May 31, 2008.

Expenses

SUMMARY – Total expenses increased to $1,350,569 during the year ended May 31, 2008 from $1,220,250 in the corresponding year ended May 31, 2007. A total of $2,655,335 in expenses has been incurred since inception on January 09, 2004 through May 31, 2008. The increase in operating costs was caused by the following;

Cost of Revenue. The cost of revenue, including the write down of the carrying value of oil and properties and depletion, for the year ended May 31, 2008, has increased to $805,561 compared to $219,113 for the corresponding year. The increase is directly attributable to the success in the Company’s drilling programs as natural gas wells have begun producing. Excluding depletion and write down in the carrying value of oil and gas properties, the natural cost operating costs for the year ended May 31, 2008 were $42,157, compared to $1,846 to the corresponding year ended May 31, 2007. The write down in carrying value of oil and gas properties was caused by the Company’s calculation of the full cost ceiling test as mandated by the SEC.

Legal and Accounting Fees. A decrease in legal and accounting fees to $77,416 for the year ended May 31, 2008 (May 31, 2007: $92,591) was caused by the Company’s reduction in legal fees relating to the forward splits of the Company’s common stock and expenses for the registration statement SB-2 during the prior year.

Consulting Fees. A decrease in consulting fees to $355,369 for the year ended May 31, 2008 ( May 31, 2007: $654,976) was caused by a reduction in the stock based compensation charge of $240,189 (May 31, 2007: $610,372)

Office and Miscellaneous. Decreased to $18,397 for the year ended May 31, 2008 (May 31, 2007: $39,463) and was caused by the reduction in the cost of developing the Company’s website, stationary etc in the prior year.

Travel: Travel costs for the year ended May 31, 2008 was $8,498 (May 31, 2007: $63,945). The reduction was caused by Chairman limiting his travel to North America.

Investor relations costs decreased to $70,010 for the year ended May 31, 2008 (May 31, 2007 $134,861). The decrease was caused the cancellation of a contract with an investor relations firm in Germany and a reduction in conference costs associated with the presentation of the Company to new investors.

During the current year under review, Stallion has 72,109,508 common shares issued and outstanding. The increase in the number of issued shares was caused by a forward split of 3:1 in September 27, 2006 and a 2:1 forward split on April 17, 2007 together with issuances of common stock resulting from private placements.

Stallion continues to carefully control its expenses and overall costs as it moves forward with the development of its business plan. Stallion does not have any employees and engages personnel through outside consulting contracts or agreements or other such arrangements, including for legal, accounting and technical consultants.

Other Income

During the year ended May 31, 2008, the Company earned $0 in interest income from the funds on deposit during the period. (May 31, 2007: $5,657).

For the year ended May 31, 2008, the net loss was $1,157,006 ($0.02 per share). The loss per share was based on a weighted average of 71,665,177 common shares outstanding. For the same period ended May 31, 2007, the corresponding number was a loss of $1,197,372 ($0.02) based on 64,530,908 shares outstanding.

Plan of Operation

Stallion believes it can satisfy its cash requirements for the current fiscal year end of May 31, 2008, only by raising additional capital through private placements, equity financing, loans or the like. As of May 31, 2008, we had $101,948, excluding share subscriptions received, in unallocated working capital.

The Company has changed its focus to targeting natural gas and oil exploration opportunities. For the remainder of the current fiscal year to May 31, 2009, the Company intends to pursue its working interest obligations within its area of mutual interest on its controlled lands in California, Mississippi and Louisiana. The Company will likely fund its drilling obligations by way of issuing equity capital through the facilities of private placement exemptions. The Board of directors has authorised the exploration and development of the controlled lands over the next fiscal year. Further more it is the intention of the Company to continue to explore new opportunities for the exploration of hydrocarbons.

If it turns out that we have not raised enough money to complete our natural gas and oil exploration program, we will try to raise the funds by way of public offering, private placements, loans or the establishment of a joint venture whereby a third party would pay the costs associated with the exploration and we would retain a carried interest. At the present time, there is no assurance that we would be able to raise sufficient funds to complete our exploration program. If we raise the additional funds necessary to complete our exploration program, the Company may have to suspend operations.

We do not expect to hire a significant number of employees since contracts are given on an as needed basis to consultants and sub-contractor specialists in specific fields of expertise for the exploration works and the Company has the ability to source high quality consultants to facilitate the existing drilling programs.

Presently, our revenues are not sufficient to meet operating and capital expenses. We have incurred operating losses since inception, and this is likely to continue through fiscal 2008 – 2009.

As at May 31, 2008, we had a working capital surplus of $101,948, excluding share subscriptions received. We do not anticipate that we will be able to satisfy any of these funding requirements internally until we significantly increase our revenues.

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on the annual financial statements for the year ended May 31, 2008, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

There is substantial doubt about the Company’s ability to continue as a going concern as the continuation of the Company’s business is dependent upon obtaining further financing. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due.

Liquidity and Capital Resources

For the year ended May 31, 2008, the Company generated $193,563 in revenue from our business operations, however, this revenue is currently not sufficient to cover the Company’s operating cash expenses. Hence the Company used Net Cash of $ 281,171 (May 31, 2007: $336,478) in its operating activities.

Since inception, we have used our common stock to raise money for our optioned acquisition and for corporate expenses. Net cash provided by financing activities from inception on January 09, 2004 to May 31, 2008 was $2,595,434 as a result of gross proceeds received from sales of our common stock (less offering costs). We issued 5,000,000 shares of common stock through a Section 4(2) offering in February, 2004 for cash consideration of $5,000. We issued 4,000,000 shares of common stock through a Regulation S offering in May and June, 2004 for cash consideration of $40,000 to a total of 10 placees. We have also raised $69,300 from 43 investors through the sale of 306,500 shares at a price of $0.20 pursuant to a prospectus offering under Form SB-2 effective February 17, 2005. During the quarter ending August 31, 2006, the Company raised $447,520 via an issuance of shares at $0.60. During the quarter ended November 30, 2006, the Co mpany raised $897,000 via an issuance of shares at $0.85. During the quarter ended May 31, 2007, the Company raised $265,876 via an issuance of shares at $0.10 through an exercise of warrants. Also during the same quarter, the Company raised $45,000 via an exercise of options at $0.375. On May 30, 2008 the Company issued 486,000 shares pursuant to a private placement at $0.75 per share to raise $364,500. During the year the Company issued 1,590,000 pursuant to warrant exercises at $0.10 per share to raise $159,000.

As of May 31, 2008, our total assets which consist of cash, prepaid expenses and the Working Interest in the Mississippi and California Prospects amounted to $1,055,392 (May 31, 2007 $1,160,830) and our total liabilities were $332,734 (May 31, 2007 $46,173).

Inflation / Currency Fluctuations

Inflation has not been a factor during the year ended May 31, 2008. Inflation is moderately higher than it was during 2007 but the actual rate of inflation is not material and is not considered a factor in our contemplated capital expenditure program.

Item 8. Financial Statements and Supplementary Data.

The Company’s audited financial statements for the fiscal year ended May 31, 2008 are attached to this report following the signature page and Certifications.

Item 9. Changes In & Disagreements With Accountants on Accounting & Financial Disclosure

On September 14, 2006, Chisholm, Bierwolf & Nilson LLC, Certified Public Accountants, were engaged as our independent accountant. The change of accountant was approved by majority consent of the board of directors. At the same meeting, the Board of Directors approved the dismissal of Cordovano & Honeck LLC as its independent accountant effective immediately. There were no disagreements between us and Cordovano & Honeck LLC on any matter of accounting principles or practices, financial statements disclosures or auditing scope and procedures. The former accountant’s report on our financial statements does not contain any adverse opinions or disclaimers of opinions and is not qualified or modified as to uncertainty other than a going concern uncertainty, auditing scope or accounting principles. Prior to engaging the new accountant, we did not consult with them regarding any accounting or auditing concerns.

Item 9A. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms promulgated under such Act, and that such information is accumulated and communicated to management, including its President and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with this annual report, management carried out an evaluation, under the supervision and with the participation of the President and principal accounting officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, the President and principal accounting officer concluded that the Company’s disclosure controls and procedures are effective in connection with the filing of this Annual Report on Form 10-K as at May 31, 2008.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Information with respect to Items 10 through Item 14 is set forth in the definitive Proxy Statement to be filed with the Securities and Exchange Commission on or before September 28, 2008 and is incorporated herein by reference. If the definitive Proxy Statement cannot be filed on or before September 28, 2008, the issuer will instead file an amendment to this Form 10 K disclosing the information with respect to Items 10 through Item 14.

PART IV

Item 15. Exhibits

The following Exhibits are filed as part of this registration statement or are incorporated herein by reference.


Exhibit No.	Document Description
3.1⁽¹⁾	Articles of Incorporation
3.2⁽²⁾	Certificate of Change and Amended and Restated Articles of Incorporation
3.3⁽³⁾	Certificate of Change to Articles of Incorporation
3.4⁽¹⁾	Bylaws
10.1⁽⁴⁾	Memorandum agreement with Griffin & Griffin Exploration, LLC
10.2⁽⁵⁾	Operating Agreement with Griffin & Griffin Exploration, LLC
14.1⁽⁶⁾	Code Of Business Conduct & Ethics and Compliance Program


23.1*	Consent of Accountants
31.1*	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities Exchange Act of 1934.
31.2*	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities Exchange Act of 1934.
32.1*	Certification Pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) or 15a-14(b) of the U.S. Securities Exchange Act of 1934.
32.2*	Certification Pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) or 15a-14(b) of the U.S. Securities Exchange Act of 1934.

^* Filed herewith

(1) Incorporated by reference to the corresponding exhibits forming part of the Form SB-2 Registration Statement filed with the SEC on August 19, 2004 under file number 333-118360.

(2) Incorporated by reference to Exhibit 99.1 to the Form 8-K filed with the SEC on September 27, 2006.

(3) Incorporated by reference to Exhibit 99.1 to the Form 8-K filed with the SEC on April 17, 2007.

(4) Incorporated by reference to Exhibit 99.1 to the Form 8-K filed with the SEC on August 11, 2006.

(5) Incorporated by reference to Exhibit 10.2 to the Form SB-2 filed with the SEC on July 5, 2007.

(6) Incorporated by reference to Exhibit 99.1 to the Form 10-KSB filed with the SEC on August 3, 2006.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on September 5, 2008.

THE STALLION GROUP

By: _____/s/ Christopher Paton-Gay____

Christopher Paton-Gay

Chief Executive Officer

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

/s/ Christopher Paton -Gay____

Christopher Paton-Gay,

Chief Executive Officer, Chairman, and Director (Principal Executive Officer)

September 5, 2008

/s/ Kulwant Sandher____________

Kulwant Sandher,

Chief Financial Officer, Secretary, and Director (Principal Financial Officer)

September 5, 2008


THE STALLION GROUP
(An Exploration Stage Company)
Balance Sheets
May 31, 2008
				May 31,		May 31,
				2008		2007

ASSETS

Current assets:

	Cash and cash equivalents		$	6,022	$	162,266
	Accounts receivable (net of allwance of $0)			114,577		5,808
	Prepaid expense			-		4,585

		Total current assets		120,599		172,659

Capital assets, net				6,334		5,438

Other assets

	Oil and gas properties (Note 3)
	Proved properties net of amortization			550,483		90,679
	Unproved properties			377,976		892,054

		Total Other assets		928,459		982,733

		TOTAL ASSETS	$	1,055,392	$	1,160,830

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

	Accounts payable and accrued liabilities		$	9,063	$	45,896
	Due to related party			9,588		277
	Stock Deposits			300,000		-

		Total current liabilities		318,651		46,173

Long term liabilities:

	Asset retirement obligation			14,083		-

		Total Long Term Liabilities		14,083		-

		Total liabilities		332,734		46,173

Commitments				-		-

Stockholders' equity (Note 7)

	Common stock, $0.001 par value; 1,200,000,000 shares authorized
		72,109,508, 70,033,508 shares issued and outstanding respectively		72,110		70,034



	Additional paid-in capital			3,077,235		2,315,622

	Cumulative other comprehensive income			12,207		10,889

	Deficit accumulated during the exploration stage			(2,438,894)		(1,281,888)

		Total stockholders' equity		722,658		1,114,657

		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,055,392	$	1,160,830

Accompanying notes are an integral part of these financial statements


THE STALLION GROUP
(An Exploration Stage Company)
Statements of Operations

							January 9, 2004
							(Inception)
			For The Years Ended				Through
			May 31				May 31
			2008		2007		2008
Revenue
	Natural gas and oil revenue	$	193,563	$	17,221	$	210,784

Cost of revenue
	Natural gas and oil operating costs		40,648		1,846		42,494
	Depletion		155,660		42,956		198,616
	Accretion		1,509		-		1,509
	Writedown in carrying value of oil and gas property		607,744		174,311		782,055

Total Cost of Revenue			805,561		219,113		1,024,674

Gross profit			(611,998)		(201,892 )		(813,890)

Expenses
	Contributed rent		-		-		2,900
	Contributed administrative support		-		-		450
	Consulting (Note 8)		355,369		654,976		1,010,345
	Depreciation		2,439		831		3,270
	Investor relations services		70,010		134,861		204,871
	Mineral exploration and filing fees (Note 6)		10,824		9,826		48,403
	Legal and accounting		77,416		92,591		189,282
	Office and miscellaneous		18,397		39,463		73,421
	Organization costs		-		-		1,160
	Travel		8,498		63,945		82,387
	Business promotion		-		1,865		7,151
	Other		2,055		2,779		7,021

Total expenses			545,008		1,001,137		1,630,661

Loss from operations			(1,157,006)		(1,203,029)		(2,444,551)

Other income
	Interest income		-		5,657		5,657

Total other income			-		5,657		5,657

Net loss before Income Tax			(1,157,006)		(1,197,372)		(2,438,894)
Income Tax			-		-		-

Net loss		$	(1,157,006)	$	(1,197,372)	$	(2,438,894)

Basic and diluted loss per share		$	(0.02)	$	(0.02)	$	(0.04)

Basic and diluted weighted average


common shares outstanding			71,665,177		64,530,908		58,009,046

Comprehensive income/(loss)
Net loss		$	(1,157,006)	$	(1,197,372)	$	(2,438,894)
Other comprehensive income/(loss)
	Foreign currency translation		1,318		9,779		12,207

Comprehensive loss		$	(1,155,688)	$	(1,187,593)	$	(2,426,687)

Accompanying notes are an integral part of these financial statements


THE STALLION GROUP
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
FOR THE PERIOD FROM JANUARY 9, 2004 (inception) TO MAY 31, 2008


		Common Stock				Additional				Accumulated		Total
				Par		Paid-In		Accumulated		Comprehensive		Stockholders'
		Shares		Value		Capital		Deficit		Income (Loss)		Equity

Balance at January 9, 2004 (inception)		-	$	-	$	-	$	-	$	-	$	-

February 2004, common stock sold to an officer
	($0.001/share)	30,000,000		30,000		(25,000)		-		-		5,000
April 2004 through May 2004, common stock
	sold in private placement offering
	($0.01/share) (Note 7)	19,200,000		19,200		12,800						32,000
Office space and administrative support
	contributed by an officer	-		-		550		-		-		550
Net loss, period ended May 31, 2004		-		-		-		(4,859)		-		(4,859)

Balance at May 31, 2004		49,200,000		49,200		(11,650)		(4,859)		-		32,691

June 2004, common stock sold in private
	placement offering ($0.01/share)(Note 7)	4,800,000		4,800		3,200		-		-		8,000
May 2005, common stock sold in public offering,
	net of offering costs of $7,500 ($0.2/share)
	($0.2/share) (Note 7)	1,839,000		1,839		51,961						53,800
Office space and administrative support
	contributed by an officer	-		-		1,400		-		-		1,400

	Net loss, year ended May 31, 2005	-		-		-		(20,353)		-		(20,353)
	Cumulative translation adjustment	-		-		-		-		(387)		(387)


Balance at May 31, 2005		55,839,000		55,839		44,911		(25,212)		(387)		75,151

Office space and administrative support
	contributed by an officer	-		-		1,400		-		-		1,400

	Net loss, year ended May 31, 2006	-		-		-		(59,304)		-		(59,304)
	Cumulative translation adjustment	-		-		-		-		1,497		1,497


Balance, May 31, 2006		55,839,000	$	55,839	$	46,311	$	(84,516)	$	1,110	$	18,744

Common stock sold to the director at
	$0.1 per share (post forward split)
	on September 14, 2006	360,000		360		17,640		-		-		18,000
Issuance of common stock for cash at
	$0.1 per share (post forward split)
	on October 17, 2006	8,945,160		8,946		438,312		-		-		447,258
Issuance of common stock for cash at
	$0.85 per share on February 28, 2007	2,110,588		2,110		894,890		-		-		897,000
Exercise of option at $0.375 per share
	by the Director	120,000		120		44,880		-		-		45,000


Exercise of warrant at $0.1 per share		2,658,760		2,659		263,217		-		-		265,876
Stock-based compensation on
	options granted	-		-		610,372		-		-		610,372

	Net loss, year ended May 31, 2007	-		-		-		(1,197,372)		-		(1,197,372)
	Cumulative translation adjustment	-		-		-		-		9,779		9,779


Balance, May 31, 2007		70,033,508	$	70,034	$	2,315,622	$	(1,281,888)	$	10,889	$	1,114,657

Exercise of warrant at $0.1 per share		1,590,000		1,590		157,410		-		-		159,000
Issuance of common stock for cash at
	$0.75 per share on May 30, 2008	486,000		486		364,014		-		-		364,500
Stock-based compensation on
	options vested	-		-		240,189		-		-		240,189

	Net loss, year ended May 31, 2008	-		-		-		(1,157,006)		-		(1,157,006)
	Cumulative translation adjustment	-		-		-		-		1,318		1,318


Balance, May 31, 2008		72,109,508	$	72,110	$	3,077,235	$	(2,438,894)	$	12,207	$	722,658



Accompanying notes are an integral part of these financial statements


THE STALLION GROUP
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS

									January 9, 2004
									(Inception)
					For The Years Ended				Through
					May 31,				May 31,
					2008		2007		2008
Cash flows provided (used) by operating activities:

	Net loss			$	(1,157,006)	$	(1,197,372)	$	(2,438,894)

	Adjustments to reconcile net loss to net cash used in operating activities:
		Office space and administrative support contributed by an officer			-		-		3,350
		Stock based compensation (Note 8)			240,189		610,372		850,561
		Depletion			155,660		42,956		198,616
		Accretion			1,509		-		1,509
		Write down in carrying value of oil and gas properties			607,744		174,311		782,055
		Depreciation			2,439		831		3,270

		Changes in operating assets and liabilities:
			(Increase)/Decrease in Accounts receivable		(108,769)		(5,808)		(114,577)
			(Increase)/Decrease in Prepaid expenses		4,585		(4,141)		-
			Increase/(Decrease) in Accounts payable		(36,833)		45,896		9,063
			Increase/(Decrease) in Accrued liabilities		-		(3,800)		-
			Increase in amounts due to related party		9,311		277		9,588

			Net cash used by operating activities		(281,171)		(336,478)		(695,459)

Cash flows used by investing activities:

	Oil and gas properties acquisition (Note 3)				(696,556)		(1,200,000)		(1,896,556)
	Purchase of furniture and computer equipment				(3,335)		(6,269)		(9,604)

			Net cash used by investing activities		(699,891)		(1,206,269)		(1,906,160)

Cash flows provided (used) by financing activities:

	Proceeds from sales of common stock				364,500		1,362,258		1,833,058
	Proceeds from exercise of options and warrants				159,000		310,876		469,876
	Payment of offering costs				-		-		(7,500)
	Stock Deposits				300,000		-		300,000

			Net cash provided by financing activities		823,500		1,673,134		2,595,434

Effect of exchange rate changes on cash					1,318		9,779		12,207

Increase in cash and cash equivalents					(156,244)		140,166		6,022

Cash and cash equivalents, beginning of period					162,266		22,100		-

Cash and cash equivalents, end of period				$	6,022	$	162,266	$	6,022


Supplemental Cash Flow Information
Cash Paid For:
	Interest	$	-	$	-	$	-
	Income taxes	$	-	$	-	$	-


Accompanying notes are an integral part of these financial statements

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Stallion Group (“the Company”) was incorporated in the state of Nevada on January 9, 2004.

The Company is an exploration stage, independent natural gas and oil company engaged in the exploration, development and acquisition of natural gas and oil properties in the United States.

Exploration Stage Activities

The Company is a exploration stage enterprise engaged in the exploration for and production of natural gas and oil in the United States. Since August 2, 2006, the Company agreed to participate in the two proposed drilling programs to be conducted by Griffin & Griffin Exploration, L.L.C. In December 2007, the company entered into a Farm Out Agreement with Production Specialties Company.

The Company is subject to several categories of risk associated with its development stage activities. Natural gas and oil exploration and production is a speculative business, and involves a high degree of risk. Among the factors that have a direct bearing on the Company’s prospects are uncertainties inherent estimating natural gas and oil reserves, future hydrocarbon production, and cash flows, particularly with respect to wells that have not been fully tested and with wells having limited production histories; access to additional capital; changes in the price of natural gas and oil; availability and cost of services and equipment; and the presence of competitors with greater financial resources and capacity.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As shown in the accompanying financial statements, the Company has incurred an accumulated loss of $2,438,894 since inception. To achieve profitable operations, the Company requires additional capital for obtaining producing oil and gas properties through either the purchase of producing wells or successful exploration activity. Management believes that sufficient funding will be available to meet its business objectives including anticipated cash needs for working capital and is currently evaluating several financing options. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

development of and, if successful, to commence the sale of its products under development. As a result of the foregoing, there is substantial doubt that the Company has the ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Principles of Accounting

These financials statements are stated in U.S. dollars and have been prepared in accordance with U.S. generally accepted accounting principles.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates with regard to these financial statements include the estimate of proved natural gas and oil reserve quantities and the related present value of estimated future net cash flows therefrom.

Natural Gas and Oil Properties

The Company accounts for its oil and gas producing activities using the full cost method of accounting as prescribed by the United States Securities and Exchange Commission (“SEC”). Accordingly, all costs associated with the acquisition of properties and exploration with the intent of finding proved oil and gas reserves contribute to the discovery of proved reserves, including the costs of abandoned properties, dry holes, geophysical costs, and annual lease rentals are capitalized. All general corporate costs are expensed as incurred. In general, sales or other dispositions of oil and gas properties are accounted for as adjustments to capitalized costs, with no gain or loss recorded. Amortization of evaluated oil and gas properties is computed on the units of production method based on all proved reserves on a country-by-country basis. Unevaluated oil and gas properties are assesse d at least annually for impairment either individually or on an aggregate basis. The net capitalized costs of evaluated oil and gas properties (full cost ceiling limitation) are not to exceed their related estimated future net revenues from proved reserves discounted at 10%, and the lower of cost or estimated fair value of unproved properties, net of tax considerations. These properties are included in the amortization pool immediately upon the determination that the well is dry.

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Unproved properties consist of lease acquisition costs and costs on well currently being drilled on the properties. The recorded costs of the investment in unproved

properties are not amortized until proved reserves associated with the projects can be determined or until they are impaired.

Revenue Recognition

The Company uses the sales method of accounting for natural gas and oil revenues. Under this method, revenues are recognized upon the passage of title, net of royalties. When sales volumes exceed the Company’s entitled share, an overproduced imbalance occurs. To the extent the overproduced imbalance exceeds the Company’s share of the remaining estimated proved natural gas reserves for a given property, the Company records a liability. At May 31, 2008, the Company had no overproduced imbalances.

Cash and Cash Equivalent

Cash and cash equivalent consists of cash on deposit with high quality major financial institutions, and to date has not experienced losses on any of its balances. The carrying amounts approximated fair market value due to the liquidity of these deposits. For the purpose of the statement of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Environmental Protection and Reclamation Costs

The operations of the Company have been, and may be in the future be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restorations costs. Both the likelihood of new regulations and their overall effect upon the Company may vary from region to region and are not predictable.

The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures. Environmental expenditures that relate to ongoing environmental and reclamation programs will be charged against statements of operations as incurred or capitalized and amortized depending upon their future economic benefits. The Company does not currently anticipate any material capital expenditures for environmental control facilities because all property holdings are at early stages of exploration. Therefore, estimated future removal and site restoration costs are presently considered minimal.

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign Currency Translation

United States funds are considered the Company’s functional currency. Transaction amounts denominated in foreign currencies are translated into their United States

dollar equivalents at exchange rates prevailing at the transaction date. Monetary assets and liabilities are adjusted at each balance sheet date to reflect exchange rates prevailing at that date, and non-monetary assets and liabilities are translated at the historical rate of exchange. Gains and losses arising from restatement of foreign currency monetary assets and liabilities at each year-end are included in statements of operations.

Capital Assets

Computer equipment and furniture are stated at cost. Provision for depreciation is calculated using the straight-line method over the estimated useful life of three years for computer equipment and five years for furniture.


		For the Years Ended
		May 31,	May 31,
		2008		2007
Furniture and Equipment	$	9,604	$	6,269
Less: Accumulated Amortization		(3,270)		(831)
Net Capital Assets	$	6,334	$	5,438

Impairment of Long-Lived Assets

In the event that facts and circumstances indicate that the costs of long-lived assets, other than oil and gas properties, may be impaired, and evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value is required. Impairment of oil and gas properties is evaluated subject to the full cost ceiling as described under Oil and Gas Properties.

Loss Per Share

In February 1997, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS 128”). Under SFAS 128, basic and diluted earnings per share are to be presented. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares.

Income Taxes

The Company follows the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of (i) temporary differences between the tax bases of assets and liabilities, and their reported amounts in the financial statements, and (ii) operating loss and tax credit carryforwards for tax purposes. Deferred tax assets are reduced by a valuation allowance when, based upon management’s estimates, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period.

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalent, accounts receivable, accounts payable and accrued liabilities, and shares subscription received.

It is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments is approximate their carrying values.

Stock-Based Compensation

The Company adopted SFAS No. 123(revised), "Share-Based Payment", to account for its stock options and similar equity instruments issued. Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. SFAS No. 123(revised) requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid.

q) Asset Retirement Obligations

The Company follows Statement of Financial Accounting Standards No. 143 (“SFAS 143”), “Accounting for Asset Retirement Obligations”, which requires that asset retirement obligations (“ARO”) associated with the retirement of a tangible long-lived asset, including natural gas and oil properties, be recognized as liabilities in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated assets. The cost of tangible long-lived assets, including the initially recognized ARO, is depleted, such that the cost

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

of the ARO is recognized over the useful life of the assets. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted cash flows are accreted to the expected settlement value. The fair value of the ARO is

measured using expected future cash flow, discounted at the Company’s credit-adjusted risk-free interest rate of 12%. Management has determined that the accretion expense for the year ended May 31, 2008 is $1,509 and the ARO of $14,803 is recorded as at May 31, 2008.

Concentration Of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and accounts receivable. The Company maintains cash at one financial institution. The Company periodically evaluates the credit worthiness of financial institutions, and maintains cash accounts only in large high quality financial institutions, thereby minimizing exposure for deposits in excess of federally insured amounts. The Company believes that credit risk associated with cash and cash equivalents to be minimal.

The Company has recorded trade accounts receivable from the business operations. Management periodically evaluates the collectability of the trade receivables and believe that the receivables to be fully collectable and the risk of loss to be minimal.

Comprehensive Loss

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. The Company is disclosing this information on its Statement of Stockholders’ Equity and Comprehensive Income.

Accounts Receivable

Accounts receivable consists of revenues receivable from the operators of the oil and gas projects for the sale of oil and gas by the operators on their behalf and are carried at net receivable amounts less an estimate for doubtful accounts. Management considers all accounts receivable to be fully collectible at May 31, 2008 and 2007, accordingly, no allowance for doubtful accounts or bad debt expense has been recorded.


		May 31, 2008		May 31, 2007
Accounts receivable	$	114,577	$	5,808
Less: allowance for doubtful accounts		-		-
	$	114,577	$	5,808

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS – AN AMENDMENT OF ARB NO. 51. This statements objective is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require ownership interests in the subsidiaries held by parties other than the parent be clearly identified. The adoption of SFAS 160 did not have an impact on the Company’s financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised), BUSINESS COMBINATIONS. This revision statements objective is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its effects on recognizing identifiable assets and measuring goodwill. The adoption of SFAS 141 (revised) did not have an impact on the Company’s financial statements.

In January 2008, Staff Accounting Bulletin (“SAB”) 110, “Share-Based Payment” was issued. Registrants may continue, under certain circumstances, to use the simplified method in developing estimates of the expected term of share options as initially allowed by SAB 107, “Share-Based Payment”. The adoption of SAB 110 should have no effect on the financial position and results of operations of the Company.

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS 161”), which is effective January 1, 2009. SFAS 161 requires enhanced disclosures about derivative instruments and hedging activities to allow for a better understanding of their effects on an entity’s financial position, financial performance, and cash flows. Among other things, SFAS 161 requires disclosures of the fair values of derivative instruments and associated gains and losses in a tabular formant. SFAS 161 is not currently applicable to the Company since the Company does not have derivative instruments or hedging activity.

In May 8, 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 162, The Hierarchy of Generally Accepted Accounting Principles, which will provide framework for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. With the issuance of SFAS No. 162, the GAAP hierarchy for nongovernmental entities will move from auditing literature to accounting literature. The Company is currently assessing the impact of SFAS No. 162 on its financial position and results of operations.

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

RECENT ACCOUNTING PRONOUNCEMENTS (continued)

The FASB has issued Statement of Financial Accounting Standards No. 163, Accounting for Financial Guarantee Insurance Contracts. SFAS No. 163 clarifies how SFAS No. 60, Accounting and Reporting by Insurance Enterprises, applies to financial guarantee insurance contracts issued by insurance enterprises, and addresses the recognition and measurement of premium revenue and claim liabilities. It requires expanded disclosures about contracts, and recognition of claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also requires disclosure about (a) the risk-management activities used by an insurance enterprise to evaluate credit deterioration in its insured financial obligations, and (b) the insurance enterprise's surveillance or watch list. The Company is currently evaluating the impact of SFAS No. 163.

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

3. OIL AND GAS PROPERTIES

(a) Proved property

Property

May 31, 2007

Addition

Depletion for the year

Write down in carrying value

May 31, 2008

U.S.A. – Proved property

90,679

1,223,208

(155,660)

(607,744)

550,483

(b) Unproved property

Property

May 31, 2007

Addition

Cost added to capitalized cost

May 31, 2008

U.S.A. – Unproved property

892,054

696,556

(1,210,634)

377,976

Description

i. Mississippi II, Mississippi, U.S.A.

On August 2, 2006, the Company agreed to participate in the two proposed drilling programs to be conducted by Griffin & Griffin Exploration, L.L.C., thirty percent of which shall be funded by the Company. On August 21, 2006, the Company paid an amount of $300,000 to Griffin & Griffin Exploration, L.L.C. The Memorandum with Griffin & Griffin Exploration L.L.C. provides for the following payments:

On, or before October 1, 2006 the Company shall pay $600,000 for further development of prospects on lands of interest in Mississippi and Louisiana.

On, or before November 1, 2006 the Company shall pay $300,000 for further development of prospects on lands of interest in Mississippi and Louisiana.

Due to delays in drilling and agreement with the operator, the Company paid $600,000 on November 16, 2006 and $300,000 on March 26, 2007.

On January 19, 2007, the well, Dixon#1, was deemed non-commercial and plugged as no show of oil and/or gas. The cost of $121,815 was added to properties subject to depletion.

On June 2, 2007, the well, Randall#1, was deemed non-commercial and plugged as only two feet of gas on water. The cost of $80,754 was added to properties subject to depletion.

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

3. OIL AND GAS PROPERTIES (continued)

On or before November 30, 2007, the Company paid $96,282 for PP F-111, $67,484 for PP F-90, and $81,484 for PP F-100. These three wells were plugged and the cost was added to properties subject to depletion.

On or before February 29, 2008, the well, BR F-33 and USA 1-37 started producing gas, Faust #1 was found to be proven and F-24 was plugged. The Company also paid $98,834 for PP F-83 and $98,834 for PP F-6A. These two wells were plugged and the cost was added to proven properties subject to depletion.

ii. Willows Gas Field, California, U.S.A

On October 15, 2007, the Company agreed to participate in the drilling program to be conducted by Production Specialties Company (“PSC”). The Company shall pay for the initial test well, 12.5% of 100% of all costs and expenses of drilling, completing, testing and equipping the Wilson Creek #1-27, to earn 6.25% working interest. As of May 31, 2008, the Company has expended $193,638 for the costs of Wilson Creek #1-27 and $60,000 for 3D seismic in the prospect area. Wilson Creek #1-27 started producing natural gas from April 2008.

4. RELATED PARTY TRANSACTIONS

During the year ended May 31, 2008, the Company paid $38,475 (May 31, 2007 - $36,499) for accounting and administrative services, $580 for legal and filing services (May 31, 2007 - $1,231) to a Company controlled by a director.

During the year ended May 31, 2008, the Company paid $55,980 (May 31, 2007 - $28,000) as a consulting fee to the Chairman of the Company. As at May 31, 2008, $9,588 was payable to the Chairman relating to travel expenses.

During the year ended May 31, 2008, the Company paid $57,366 (May 31, 2007 - $18,438) as a consulting fee to the CFO of the Company. All amounts were paid during the year.

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

5. EARNINGS/ (LOSS) PER SHARE

The computation of earnings per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements.


		Income/(Loss)	Shares		Per-Share
		(Numerator)	(Denominator)		Amount
For the year ended May 31, 2008:
Basic EPS
Income/(Loss) to common stockholders	$	(1,157,006)	71,665,177	$	(0.02)
For the year ended May 31, 2007:
Basic EPS
Income/(Loss) to common Stockholders	$	(1,197,372)	64,530,908	$	(0.02)

The Company excluded 2,230,000 options and 7,166,988 warrants from the Fully Diluted Earnings Per Share calculation as the Company considered the inclusion of these amounts would be anti-dilutive.

6. OPTION ON UNPROVEN MINERAL INTERESTS

Mayan Minerals Ltd. Option Agreement

On May 31, 2004, the Company entered into an option agreement to acquire 100 percent of the right, title and interest in a mineral claim located in the Omineca Mining District, British Columbia, Canada. Under the terms of the Option Agreement, the Company is required to:

Make option exploration expenditures as follows:


Exploration Expenditures			Due Date
CDN	$	35,000.00	August 31, 2005
		85,000.00	August 31, 2006
CDN	$	120,000.00

Make annual payments of CDN$50,000, commencing January 1, 2007, as long as the Company held any interest in the claim. In addition to the above terms, the optionor is to retain a three percent net smelter royalty. The Company has decided to abandon this property during the year ended May 31, 2007.

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

7. STOCKHOLDERS’ EQUITY

(a)

A Forward Stock Split

On September 27, 2006 the Company amended its Articles of Incorporation through the implementation of a forward split of the Company’s Common Stock on the basis of three (3) new shares for each old share, based on a resolution of the Directors dated August 31, 2006 and a consent resolution of the shareholders dated September 8, 2006 signed by the holders of greater than 51% of the issued and outstanding shares of the Company. Prior to the split, the Company had 9,306,500 shares outstanding; post forward split, there will be 27,919,500 shares issued.

On April 18, 2007 the Company amended its Articles of Incorporation and increased its issued and outstanding shares of common stock on the basis of two (2) new shares for every one (1) old share. Post forward split, the Company has 67,254,748 issued and outstanding shares of common stock. The financial statements have been retroactively adjusted for all stock splits.

(b)

Authorized Stock

After a forward split, the amount of the total authorized capital stock of the Company is six hundred thousand dollars ($600,000) consisting of six hundred million (600,000,000) shares of common stock of the par value of $0.001 each.

After a second forward split on April 17, 2007, the Company increased its authorized capital from 600,000,000 shares of common stock to 1,200,000,000 shares of common stock, all of the shares of the Company being of the same class and without preference or distinction.

(c)

Share Issuances

Between April 2004 and June 2004, the Company offered for sale 4,000,000 shares of its common stock at a price of $0.01 per share. The Company closed the offering after selling all 4,000,000 shares for gross proceeds of $40,000. The offering was made in reliance on an exemption from registration of a trade in the United States under Rule 903 of regulation S of the United States Securities Act of 1933, as amended.

Between February and May 2005, the Company offered for sale a minimum of 250,000 shares and a maximum of 500,000 shares of its common stock at a price of $0.20 per share. The Company closed the offering after selling 306,500 shares for gross proceeds of $53,800, net of $7,500 offering costs. The offering was made under an SB-2 offering registered by Regulation S-B under the United States Security Act of 1933, as amended.

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

7. STOCKHOLDERS’ EQUITY (continued)

The Company has received paid subscriptions for 1,550,860 common shares at $0.30 in August 2006 prior to the split; post forward split on September 27, 2006 and April 17, 2007, there are 9,305,160 shares issued for $465,258 ($0.050/share). The share certificates were issued on October 17, 2006. The warrants price of the share was $0.60 prior to the split and $0.10 post forward split.

On February 28, 2007, the Company issued 1,055,294 common shares pursuant to a private placement for $897,000 at $0.85 per share prior to the split; post forward split on April 17, 2007, there are 2,110,588 shares issued ($0.425/share). The warrants price of the share was $1 prior to the split and $0.50 post forward split.

On May 31, 2008, the Company issued 486,000 common shares pursuant to a private placement for $364,500 at $0.75 per share.

During the year ended May 31, 2008, the Company received shares subscriptions of $300,000 for common shares to be issued at $0.75 per share. These shares have not been issued as at May 31, 2008.

(d) Common Stock Share Purchase Warrants

Between March and July 2007, the Company has received $424,876 for exercising 4,248,760 share purchase warrants at an exercise price of $0.10 per share. As at May 31, 2008, share purchase warrants outstanding for the purchase of common shares are as follows:


	Warrants Outstanding
Exercise Price	Number of Shares		Expiry Date
$0.10	5,056,400	August 15, 2008
$0.50	2,110,588	September 29, 2008

The Company has issued warrants to non-employees under various agreements expiring through September 29, 2008. A summary of the status of warrants granted at October 2006 and February 2007, and changes during the years then ended is as follows:

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

7. STOCKHOLDERS’ EQUITY (continued)


	For the Year Ended May 31, 2008			For the Year Ended May 31, 2007
	Shares		Weighted Average Exercise Price	Share		Weighted Average Exercise Price
Outstanding at beginning of year	8,756,988	$	0.20	-		-
Granted	-		-	11,415,748	$	0.17
Exercised	(1,590,000)		(0.10)	(2,658,760)		(0.10)
Forfeited	-		-	-		-
Expired	-		-	-		-
Outstanding at end of year	7,166,988	$	0.22	8,756,988	$	0.20
Exercisable at end of year	7,166,988	$	0.22	8,756,988	$	0.20

8. STOCK OPTIONS

Compensation expense related to stock options granted is recorded at their fair value as calculated by the Black-Scholes option pricing model. Compensation expense of $240,189 was recorded during the year ended May 31, 2008 related to options vested during the period.

The changes in stock options are as follows:

Number

Weighted Average Exercise Price

Balance outstanding, May 31, 2007

2,230,000

0.571

Granted

Exercised

Balance outstanding, May 31, 2008

2,230,000

0.571

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

8. STOCK OPTIONS (continued)

The following table summarized information about the stock options outstanding as at May 31, 2008:


		Options Outstanding		Options Exercisable
Range of Exercise Price	Weighted Average Exercise Price	Number of Shares	Remaining Contractual Life (Years)		Number of Shares
$0.375	$0.375	280,000	1.30		280,000
$0.375	$0.375	200,000	1.70		200,000
$0.600 $0.685 $0.950	$0.600 $0.685 $0.950	1,400,000 300,000 50,000	1.70 1.83 1.96		1,400,000 300,000 50,000
Total	$0.571	2,230,000			2,230,000

The following table summarized information about the stock options outstanding as at May 31, 2007:


Options Outstanding			Options Exercisable
Exercise Price	Number of Shares		Remaining Contractual Life (Years)		Number of Shares
$0.375	280,000		2.30		180,000
$0.375	200,000		2.70		150,000
$0.600 $0.685 $0.950	1,400,000 300,000 50,000		2.70 2.83 2.96		1,050,000 150,000 12,500
Total		2,230,000		1,542,500

9. 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.

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

9. INCOME TAXES (continued)

A reconciliation of the U.S. statutory federal income tax rate to the effective tax rate is as follows:


	For the Years Ended
	May 31,
	2008		2007
U.S. statutory federal rate	16.37	%	16.37	%
Contributed rent and services	-0.39	%	-0.39	%
Net operating loss for which no tax
benefit is currently available	-15.98	%	-15.98	%
Total	0.00	%	0.00	%
	For the Years Ended
	May 31,
	2008		2007
Deferred tax assets	389,735		201,810
Deferred tax liabilities	-		-
Valuation Allowance	(389,735	)	(201,810	)
Total	-		-

At May 31, 2008, deferred tax assets consisted of a net tax asset of $389,735, due to operating loss carry forwards of $2,438,894, which was fully allowed for, in the valuation allowance of $389,735. The valuation allowance offsets the net deferred tax asset for which there is no assurance of recovery. The change in the valuation allowance for the years ended May 31, 2008 and 2007 totaled $187,925and $188,845 respectively. The net operating loss carry forward expires through the year 2028.

The valuation allowance will be evaluated at the end of each year, considering positive and negative evidence about whether the deferred tax asset will be realized. At that time, the allowance will either be increased or reduced; reduction could result in thecomplete elimination of the allowance if positive evidence indicates that the value of the deferred tax assets is no longer impaired and the allowance is no longer required. Should the Company undergo an ownership change as defined in Section 382 of the Internal Revenue Code, the Company’s tax net operating loss carry forwards generated prior to the ownership change will be subject to an annual limitation, which could reduce or defer the utilization of these losses.

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

9. INCOME TAXES (continued)

The components of income tax expense are as follows:


	For the Years Ended
	May 31,
	2008		2007
Federal Tax	-		-
State Tax	-		-
Change in Deferred Tax Asset	187,925		188,845
Change in Valuation Allowance	(187,925	)	(188,845	)
Total	-		-

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

10. UNAUDITED OIL AND GAS RESERVE QUANTITIES

The following unaudited reserve estimates presented as of May 31, 2008 and 2007 were prepared by independent petroleum engineers. There are many uncertainties inherent in estimating proved reserve quantities and in projecting future production rates and the timing of development expenditures. In addition, reserve estimates of new discoveries that have little production history are more imprecise than those of properties with more production history. Accordingly, these estimates are expected to change as future information becomes available.

Unaudited net quantities of proved developed reserves of crude oil and natural gas (all located within United States) are as follows:


		Natural Gas
Changes in proved reserves		(MCF)
Estimated quantity, May 31, 2006		-
Revisions of previous estimate		-
Discoveries		26,770
Production		(3,730)
Estimated quantity, May 31, 2007		23,040
Revisions of previous estimate		-
Discoveries		121,650
Production		(23,367)
Estimated quantity, May 31, 2008		121,323


Proved Reserves at year end	Developed	Undeveloped	Total
Gas (MCF)
May 31, 2008	121,323	-	121,323
May 31, 2007	23,040	-	23,040

The following information has been developed utilizing procedures prescribed by SFAS 69 "Disclosures About Oil and Gas Producing Activities" and based on crude oil and natural gas reserves and production volumes estimated by the Company. It may be useful for certain comparison purposes, but should not be solely relied upon in evaluating the Company or its performance. Further, information contained in the

THE STALLION GROUP

(An Exploration Stage Company)

Notes to Financial Statements

May 31, 2008

10.

UNAUDITED OIL AND GAS RESERVE QUANTITIES (continued)

following table should not be considered as representative or realistic assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net Cash Flows be viewed as representative of the current value of the Company.

Future cash inflows were computed by applying year-end prices of oil and gas to the estimated future production of proved oil and gas reserves. The future production and development costs represent the estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves, assuming continuation of existing economic conditions. Future income tax expenses were computed by applying statutory income tax rates to the difference between pre-tax net cash flows relating to our proved oil and gas reserves and the tax basis of proved oil and gas properties and available net operating loss carry forwards. Discounting the future net cash inflows at 10% is a method to measure the impact of the time value of money.


	May 31, 2008
Future Cash inflows	$ 1,175,595
Future production costs	(232,742)
Future development costs	(109,688)
Future income tax expense	(243,184)
Future cash flows	589,982
10% annual discount for estimated timing of cash flows	(52,073)
Standardized measure of discounted future next cash	$ 537,909

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Avg

Stallion (SLGR) Inactive 10-K2008 FY Annual report

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