Stallion (SLGR) 10-Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ X ]         QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended NOVEMBER 30, 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 organization)	(I.R.S. Employer Identification No.)
604 – 700 West Pender Street Vancouver, British Columbia	V6C 1G8
(Address of principal executive offices)	(Zip Code)

Issuer’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

(Title of class)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act)     Yes  [   ]     No [R ]

Indicate by check mark whether the registrant is a shell corporation (as defined in Rule 12b-2 of the Exchange Act)     Yes  [   ]     No [R ]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  73,259,508  shares of Common Stock as of November 30, 2008.

Transitional Small Business Format.   Yes [  ]   No [X]

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

THE STALLION GROUP
(An Exploration Stage Company)
Balance Sheets
November 30, 2008
				November 30,		May 31,
				2008		2008
				(Unaudited)		(Audited)
ASSETS
Current assets:
	Cash and cash equivalents		$	3,419	$	6,022
	Accounts receivable, net of allowance $0			12,344		114,577
	Prepaid expense			30,990		-
		Total current assets		46,753		120,599
Capital assets, net				5,022		6,334
Other assets
	Oil and gas properties (Note 3)
	Proved properties subject to amortization, net of amortization			418,091		550,483
	Unproved properties			492,692		377,976
		Total Other assets		910,783		928,459
		TOTAL ASSETS	$	962,558	$	1,055,392
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable and accrued liabilities		$	73,946	$	9,063
	Due to related party			24,200		9,588
	Stock Deposits			300,000		300,000
		Total current liabilities		398,146		318,651
Long term liabilities:
	Asset retirement obligation			14,928		14,083
		Total liabilities		413,074		332,734
Commitments
Stockholders' equity (Note 7)
	Common stock, $0.001 par value; 1,200,000,000 shares authorized
		73,259,508, and 72,109,508 shares issued and outstanding respectively		73,260		72,110
	Additional paid-in capital			3,121,785		3,077,235
	Cumulative other comprehensive income			13,001		12,207
	Deficit accumulated during the exploration stage			(2,658,562)		(2,438,894)
		Total stockholders' equity		549,484		722,658
		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	962,558	$	1,055,392

THE STALLION GROUP
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
JANUARY 9, 2004 (inception) TO NOVEMBER 30, 2008
(Unaudited)
		Common Stock				Additional				Cumulative		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
Exercise of warrant at $0.1 per share		250,000		250		24,750		-		-		25,000
Shares issued to a director and officer and a consultant		900,000		900		19,800		-		-		20,700
	as part of the Consulting Agreements at $0.023
Net loss, period ended November 30, 2008		-		-		-		(219,668)		-		(219,668)
Cumulative translation adjustment		-		-		-		-		794		794
Balance, November 30, 2008		73,259,508	$	73,260	$	3,121,785	$	(2,658,562)	$	13,001	$	549,484

THE STALLION GROUP
(An Exploration Stage Company)
Statements of Operations
(Unaudited)
											January 9, 2004
											(Inception)
			For The Three Months Ended				For The Six Months Ended				Through
			November 30				November 30				November 30
			2008		2007		2008		2007		2008
Revenue
	Natural gas and oil revenue	$	22,296	$	9,192	$	171,371	$	16,613	$	382,155
							&nb sp;
Cost of revenue
	Natural gas and oil operating costs		33,696		1,456		85,668		2,912		128,162
	Depletion		31,634		24,883		89,259		31,248		287,875
	Accretion		422		-		845		-		2,354
	Writedown in carrying value of oil and gas property		-		226,734		45,382		226,734		827,437
							&nb sp;
			65,752		253,073		221,154		260,894		1,245,828
							&nb sp;
Gross profit			(43,456)		(243,881 )		(49,783)		(244,281 )		(863,673)
							&nb sp;
Expenses
	Contribute rent		-		-		-		-		2,900
	Contribute administrative support		-		-		-		-		450
	Consulting (Note 4 and 8)		65,326		77,772		112,582		157,799		1,122,927
	Depreciation		656		656		1,312		1,127		4,582
	Investor relations services		2,576		24,125		2,576		55,305		207,447
	Mineral exploration and filing fees (Note 6)		358		2,614		358		7,157		48,761
	Legal and accounting		17,722		19,621		44,511		32,059		233,793
	Office and miscellaneous		2,270		3,911		5,956		7,323		79,377
	Organization costs		-		-		-		-		1,160
	Professional fee		-		-		525		-		525
	Travel		-		-		1,322		3,247		83,709
	Business promotion		-		-		-		-		7,151
	Other		535		672		743		1,234		7,764
							&nb sp;
Total expenses			89,443		129,371		169,885		265,251		1,800,546
							&nb sp;
Loss from operations			(132,899)		(373,252)		(219,668)		(509,532)		(2,664,219)
							&nb sp;
Other income
	Interest income		-		-		-		-		5,657
							&nb sp;
Total other income			-		-		-		-		5,657
							&nb sp;
Net loss before Income Tax			(132,899)		(373,252)		(219,668)		(509,532)		(2,658,562)
Income Tax			-		-		-		-		-
							&nb sp;
Net loss		$	(132,899)	$	(373,252)	$	(219,668)	$	(509,532)	$	(2,658,562)
							&nb sp;
Basic and diluted loss per share		$	(0.00)	$	(0.01)	$	(0.00)	$	(0.01)	$	(0.04)
							&nb sp;
Basic and diluted weighted average
common shares outstanding			73,239,728		71,623,508		72,753,497		71,197,770		59,574,641
							&nb sp;
Comprehensive income/(loss)
Net loss		$	(132,899)	$	(373,252)	$	(219,668)	$	(509,532)	$	(2,658,562)
Other comprehensive income/(loss)
	Foreign currency translation		2,023		(1,778)		794		2,595		13,001
							&nb sp;
Comprehensive loss		$	(130,876)	$	(375,030)	$	(218,874)	$	(506,937)	$	(2,645,561)

THE STALLION GROUP
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
									January 9, 2004
									(Inception)
					Six Months Ended				Through
					November 30,				November 30,
					2008		2007		2008
Cash flows provided (used) by operating activities:
	Net loss			$	(219,668)	$	(509,531)	$	(2,658,562)
	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 7(c))			20,700		85,653		871,261
		Depletion			89,259		31,248		287,875
		Accretion			845		-		2,354
		Write down in carrying value of oil and gas properties			45,382		226,734		827,437
		Depreciation			1,312		1,127		4,582
		Changes in operating assets and liabilities:
			(Increase)/Decrease in accounts receivable		7,285		(4,982)		(107,292)
			(Increase)/Decrease in prepaid expenses		(30,990)		(1,945)		(30,990)
			Increase/(Decrease) in accounts payable		45,115		(38,824)		54,178
			Increase in amounts due to related party		14,612		-		24,200
			Net cash used by operating activities		(26,148)		(210,520)		(721,607)
Cash flows used by investing activities:
	Oil and gas properties acquisition (Note 3)				(2,249)		(423,606)		(1,898,805)
	Purchase of furniture and computer equipment				-		(3,335)		(9,604)
			Net cash used by investing activities		(2,249)		(426,941)		(1,908,409)
Cash flows provided (used) by financing activities:
	Proceeds from sales of common stock				-		-		1,833,058
	Proceeds from exercise of options and warrants				25,000		159,000		494,876
	Payment of offering costs				-		-		(7,500)
	Stock Deposits				-		415,000		300,000
			Net cash provided by financing activities		25,000		574,000		2,620,434
Effect of exchange rate changes on cash					794		2,594		13,001
Increase in cash and cash equivalents					(2,603)		(60,867)		3,419
Cash and cash equivalents, beginning of period					6,022		162,266		-
Cash and cash equivalents, end of period				$	3,419	$	101,399	$	3,419
Supplemental Information:
	Interest			$	-	$	-	$	-
	Taxes			$	-	$	-	$	-
The account receivables are reduced by the amount of $82,084 and account payables increased by $32,632 for property
acquisition costs of $114,716.

1.

BASIS OF PRESENTATION

The unaudited financial statements as of November 30, 2008 included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  It is suggested that these condensed financial statements be read in conjunction with the May 31, 2008 audited financial statements and notes thereto.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)

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.  

b)

Development Stage Activities

The Company is a development 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.

4

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

c)

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 $2,658,562 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 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 adju stments that might result from the outcome of this uncertainty.

d) 

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.

e) 

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.

f)

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

5

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

f)  

Natural Gas and Oil Properties (Continued)

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 assessed 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 unprove d properties, net of tax considerations.  These properties are included in the amortization pool immediately upon the determination that the well is dry.

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.

g)

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 November 30, 2008, the Company had no overproduced imbalances.

h)

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.

6

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

i)

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.

j)

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.

k)

Capitalized 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 Periods Ended
		November 30,	November 30,
		2008		2007
Furniture and Equipment	$	9,604	$	9,604
Less: Accumulated Amortization		(4,582)		(1,958)
Net Capital Assets	$	5,022	$	7,646

7

2.   

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

l)

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.

m)

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 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.

n)

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.

o)

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalent, accounts receivable, prepaid expense, accounts payable and accrued liabilities, and stock deposits.

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.

8

2.   

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

p)

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 has adopted 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 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 c redit-adjusted risk-free interest rate of 12%.  Management has determined that the accretion expense for the three months period ended November 30, 2008 is $422 and the ARO is $14,928 as at November 30, 2008.

r)

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.

9

2.  

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

s)

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.

t)

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 November 30, 2008 and 2007, accordingly, no allowance for doubtful accounts or bad debt expense has been recorded.

	November 30, 2008	November 30, 2007
Accounts receivable	$ 12,344	$ 10,790
Less: allowance for doubtful accounts	-	-
	$ 12,344	$ 10,790

3.   

OIL AND GAS PROPERTIES

(a) Proved property

Property		May 31, 2008		Addition	Depletion for the period		Write down in carrying value		November 30, 2008
U.S.A. –   Proved property	$	550,483	$	2,249	$	(89,259)	$	(45,382)	$	418,091

(b) Unproved property

Property		May 31, 2008		Addition		Cost added to capitalized cost		November 30, 2008
U.S.A. – Unproved property	$	377,976	$	114,716	$	-	$	492,692

10

3.

OIL AND GAS PROPERTIES (Continued)

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:

1.

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.  

2.

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.

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.

During the six months period ended November 30, 2008, the Company capitalized $114,716 for brokerage charges.  The cost was added to the unproved properties.

11

3.   

OIL AND GAS PROPERTIES (Continued)

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 November 30, 2008, the Company has expended $195,887 for the costs of Wilson Creek #1-27 and $60,000 for 3D seismic in the prospect area.  Wilson Creek #1-27 started producing gas from April 2008.

4.   

RELATED PARTY TRANSACTIONS

The Company paid $9,398 (November 30, 2007 - $11,227) for the three months ended November 30, 2008 and $20,224 (November 30, 2007 - $24,424) for the six months ended November 30, 2008 for accounting and administrative services, and incurred $131 (November 30, 2007 - $397) for the three months ended November 30, 2008 and $131 (November 30, 2007 - $579) for the six months ended November 30, 2008 for legal and filing services to a Company controlled by a director.    

The Company paid $9,000 and accrued $15,000 (November 30, 2007 - $16,960) for the three months ended November 30, 2008 and incurred $48,000 (November 30, 2007 – $36,940) for the six months ended November 30, 2008 as a consulting fee to the Chairman of the Company.  

On September 2, 2008, the Company issued to a Director of the Company 500,000 shares of common stock in consideration for services rendered pursuant to his consulting agreement.  The price of the share as of September 2, 2008 was $0.023.  Total cost of $11,500 was included in the consulting expense.

At November 30, 2008, the Company owed $24,200 to the related party.

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.

12

5.   

EARNINGS/ (LOSS) PER SHARE (Continued)

		Income/(Loss)	Shares		Per-Share
		(Numerator)	(Denominator)		Amount
For the six months period ended November 30, 2008:
Basic EPS
Income/(Loss) to common stockholders	$	(219,668)	72,753,497	$	(0.00)
For the six months period ended November 30, 2007:
Basic EPS
Income/(Loss) to common Stockholders	$	(509,532)	71,197,770	$	(0.01)

The Company excluded 50,000 options 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:

A.

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

B.

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.

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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 ad 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.

14

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 period ended August 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 of November 30, 2008.

On September 2, 2008, the Company issued to a director and officer of the Company 500,000 shares and a consultant 400,000 shares of common stock respectively in consideration for services rendered pursuant to their consulting agreements.  The price of the share as of September 2, 2008 was $0.023.  Total cost of $20,700 was included in the consulting expense.

(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.  On July 2, 2008 the Company has received $25,000 for exercising 250,000 share purchase warrants at an exercise price of $0.10 per share.  On August 15, 2008, 4,806,400 share purchase warrants were expired.  On September 2, 2008, the remaining of 2,110,588 share purchase warrants was also expired.  As at November 30, 2008, share purchase warrants outstanding for the purchase of common shares are nil.

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 period then ended is as follows:

15

7.   

STOCKHOLDERS’ EQUITY (Continued)

	For the periods ended
	November 30, 2008			May 31, 2008
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Outstanding at beginning of period	7,166,988	$	0.22	8,756,988	$	0.20
Granted	-		-	-		-
Exercised	(250,000)		(0.10)	(1,590,000)		(0.10)
Forfeited   Expired	-  (4,806,400)		-            (0.10)	- -		- -
Expired	(2,110,588)		(0.50)	-		-
Outstanding at end of period	-	$	-	7,166,988	$	0.22
Exercisable at end of period	-	$	-	7,166,988	$	0.22

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, 2008	2,230,000	$0.571
Cancelled   Exercised	(2,030,000) -	0.576 -
Granted	-	-
Balance outstanding, November 30, 2008	200,000	$0.520

The following table summarized information about the stock options outstanding as at November 30, 2008:

		Options Outstanding		Options Exercisable
Exercise Price	Weighted Average Exercise Price	Number of Shares	Remaining Contractual Life (Years)	Number of Shares
$0.375 $0.950	$0.375 $0.950	150,000 50,000	0.80 1.46	150,000 50,000
Total	$0.520	200,000		200,000

Item 2.

Management’s Discussion and Analysis or Plan of Operation.

Cautionary Statement Regarding Forward-Looking Statements

This quarterly 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.

17

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.

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 $1.00 or CA $1.00 being approximately equal to US $1.00 which is the approximate average exchange rate during recent months and which is consistent with the incorporated financial statements.

THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF THE CORPORATION FOR THE PERIOD ENDING AUGUST 31, 2008 SHOULD BE READ IN CONJUNCTION WITH THE CORPORATION’S CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO CONTAINED ELSEWHERE IN THIS FORM 10-QSB.

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. 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 exist 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

18

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.

Under the terms of the agreement, Mayan granted to Stallion the sole and exclusive right to acquire 100 percent of the right, title and interest of Angel Jade in the Bell Claims, subject to Mayan receiving annual payments and a royalty, in accordance with the terms of the agreement, as follows:

1.

Stallion must incur exploration expenditures on the claims of a minimum of $35,000, by February 28, 2006 (completed and awaiting engineering report);

2.

Stallion must incur exploration expenditures on the claims of a further $85,000, for an aggregate minimum exploration expense of $120,000, by November 30, 2006; and

3.

Upon exercise of the option, Stallion is required to pay to Mayan, commencing January 1, 2007, the sum of $40,000 per annum, as prepayment of the royalty.

The claims are located approximately 25 miles south west of Telkwa, B.C., at 54º 37' north latitude and 127º 40' west longitude at an approximate median elevation of six thousand feet. The property consists of four mineral claims which in total measure 1,000 metres (3,240 feet) by 1,000 metres (3,240 feet) and covers an area of approximately 160 acres or 64 hectares.

The Company has terminated the agreement to pursue this property as it focuses on oil and natural gas exploration.

Mississippi Prospect

On August 2^nd, 2006 the Company entered into a Memorandum between Griffin & Griffin Exploration LLC (G&G) that proposes two drilling programs that will be conducted by G&G.  The company’s share of all costs will be 30%, which will entitle the Company to share in the following royalty arrangement;

1.

Wilcox wells.

I.

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

II.

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

III.

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).

2.

Frio wells.

I.

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

II.

The Company will be entitled to receive its pro-rata share (24%) of eighty percent of all net revenues.

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

a.

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

b.

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.  

19

c.

On or before March 31, 2007 the Company 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.

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 Company is anticipating the receipt of royalty revenues shortly.  The costs of this well are $105,376.

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 it was plugged and abandoned.  The costs transferred to Prove 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 Net Reserves of natural gas is 0.341 BCF.    This well is connected to the nearby pipeline and has begun producing natural gas.  

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.

During the period subsequent to the quarter ended November 30, 2007, the Company drilled two prospective holes, PP F-6A & PP F-83.  Both holes were not to have economic quantities of hydrocarbons and hence were plugged and abandoned.

The Company is anticipating that the remaining proved well will be tied in during the 2009 fiscal year.

The total costs expended by the Company from inception to the period ended November 30, 2008 are $1,264,942.

20

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.

Well name	Total Net	Suggested	Proved, Awaiting
	Reserves @ WI	Daily Flow Rate	Tie-in or Producing
	BCF	Cubic Feet
CMR USA 39-14	0.230	140,000	Proved &
Redbug #1			Producing
TEC 1 Closure			Proved &
Faust #1	0.319	175,000	Awaiting Tie
BR F-24	0.196	154,000	Abandoned
USA 37-1	0.341	200,000	Proved &
Redbug #2			Producing
BR F-33	0.226	194,000	Proved &
			Producing
PP F-100			Abandoned
PP F-111			Abandoned
PP F-6A			Abandoned
PP F-83			Abandoned
Total	1.312	863,000

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.  Stallion has participated in the drilling of the first well on the prospect area and encountered a number of prospective pay zones.  Testing has been completed and stabilized flow rates exceeded a combined 1.5 million cubic feet per day of sweet high quality gas, the well has been connected to a nearby pipeline and has begun producing natural gas.

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.  Total costs for this prospect for the end of the quarter ended November 30, 2008 is $255,887.

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.

21

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. Mr. Paton-Gay does not have an employment agreement with us. We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt such plans in the future. There are presently no personal benefits available to 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 three and six months ended November 30, 2008, November 30, 2007 and January 09, 2004 (inception) through November 30, 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 November 30, 2008 was $2,620,434 as a result of proceeds received from sales of our common stock.

The Corporation generated $22,296 in revenues from operations for the three months ended November 30, 2008($9,192 for the three months ended November 30, 2007) and $171,371 in revenues for the six months ended November 30, 2008 ($16,613 for the six months ended November 30, 2007).  The increase in revenues resulted from the production royalties received from the Company’s share in wells in the Mississippi and California region.  

22

REVENUES

REVENUE – Gross revenue for the six months ended November 30, 2008 was $171,371 ($16,613 for the six months ended November 30, 2007 and $382,155 for the period from inception to November 30, 2008).  Gross revenue for the three months ended November 30, 2008 was $22,296 ($9,192 for the three months ended November 30, 2007).  The increase in revenue resulted from royalties received from wells in production from the Company’s projects in Mississippi and California, however, the reduction in commodity prices for natural gas offset the overall increase during the quarter ended November 30, 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 six months ended November 30, 2008 was $25,000 as compared to $574,000 for the six months ended November 30, 2007 and $2,620,434 received for the period from inception on January 09, 2004 through to and including November 30, 2008.  

EXPENSES

SUMMARY – Total expenses decreased to $391,039 for the six months ended November 30, 2008 from $526,145 in the corresponding six months ended November 30, 2007. A total of $3,046,374 in expenses has been incurred since inception on January 09, 2004 through November 30, 2008. The decrease in operating costs was caused by the following;

1.

Depletion Costs.  The depletion cost for the six months ending November 30, 2008 was $89,259.  (November 30, 2007: $31,248).  The increase in depletion was due to an increase in production from natural gas wells.  There was also a write down in the carrying value of properties of $45,382. (November 30, 2007: $226,734).

2.

Production Costs.  Production costs associated with producing wells was $85,668 for the period ending November 30, 2008.  (November 30, 2007: $2,912).  The increase was caused by an increase in the number of producing wells costs associated therein.

3.

Consulting Fees.  A decrease in consulting fees to $112,582 for the six months ending November 30, 2008 (November 30, 2007: $157,799) was caused by a reduction in stock based compensation charge of $20,700. (November 30, 2007: $85,653).

4.

Legal and Accounting.    These costs increased to $44,511 (November 30, 2007: $32,059) was caused by costs associated with the preparation of the Company’s annual filings and legal expenses associated with the offer to acquire the Company.

5.

Investor relations costs decreased to $2,576 (November 30, 2007: $55,305) was caused by the cancellation of a contract with an investor relations firm in Germany.

During the current quarter under review, Stallion has 73,259,508 common shares issued and outstanding.

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 quarter ended November 30, 2008, the Company earned $0 in interest income from the funds on deposit during the period.  (November 30, 2007: $0).  The Company has earned $5,657 from inception on January 9, 2004 through November 30, 2008.

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For the quarter ended August 31, 2008, the net loss was $(132,899) ($0.00 per share). The loss per share was based on a weighted average of 73,239,728 common shares outstanding. For the same period ended August 31, 2007, the corresponding number was a loss of $(373,252) ($0.01 per share) based on 71,623,508 shares outstanding. The decrease in loss was caused by a reduction in the write-down in the carrying value of the property of $226,734 and a reduction in operating expenses from $39,928.

For the six months ended November 30, 2008, the net loss was $(219,668) ($0.00 per share).  The loss was based on a weighted average of 72,753,497 common shares outstanding.  For the same period ended November 30, 2007, the corresponding loss was $(509,532) ($0.01 per share) based on 71,197,770 shares outstanding.  The decrease in loss was due to the aforementioned reasons in the previous paragraph.

Plan of Operation

Stallion believes it can satisfy its cash requirements for the current fiscal year end of May 31, 2009, only by raising additional capital through private placements, equity financing, loans or the like. As of November 30, 2008, we had $(51,393) deficit in unallocated working capital, excluding stock deposits of $300,000.

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 will pursue its working interest obligations within its area of mutual interest on its controlled lands in California, Mississippi and Louisiana.  The Company will fund its drilling obligations through issuing equity capital by way of private placements.

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 from a second public offering, a private placement, loans or the establishment of a joint venture whereby a third party would pay the costs associated with the exploration and we would retain a carried interest. At the present time, there is no assurance that we would be able to raise money in the future. If we need additional money and can't raise it, we will have to suspend operations.

We do not expect any changes or more hiring 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.

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 November 30, 2008, we had a working capital deficit of $(51,393), excluding stock deposits of $300,000. 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 our ability to continue as a going concern as the continuation of our 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

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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

As of the end of the last quarter on November 30, 2008, we generated $171,371 in oil and gas revenues from our business operations.

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 November 30, 2008 was $2,620,434 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. During the last quarter of the last fiscal year we raised $69,300 through the sale of 306,500 shares at a price of $0.20 under a Regulation SB-2 prospectus offering to a total of 43 placees.  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 Company 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.  During the quarter ended August 31, 2007, the Company realised proceeds of $159,000 from the exercise of outstanding warrants of 1,590,000 at an exercise price of $0.10.  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 six months ended November 30, 2008, the Company realised proceeds of $25,000 from the exercise of outstanding warrants of 250,000 at an exercise price of $0.10.

As of November 30, 2008, our total assets which consist of cash, accounts receivable, prepaid expenses and the Working Interest in the Mississippi Prospect amounted to $962,558 (May 31, 2008 $1,055,392) and our total liabilities were $413,074 (May 31, 2008 $332,734).  The increase in liabilities was caused by an increase in accounts payable and accrued liabilities and due to related party.

Inflation / Currency Fluctuations

Inflation has not been a factor during the recent quarter ended November 30, 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.

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Item 3.

Controls and Procedures

Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of November 30, 2008.  Based on that evaluation, our principal executive officer and principal financial officer have concluded that as of November 30, 2008, we have maintained effective disclosure controls and procedures in all material respects, including those necessary to ensure that information required to be disclosed in reports filed or submitted with the SEC (i) is recorded, processed, and reported within the time periods specified by the SEC, and (ii) is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow for timely decision regarding required disclosure.

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

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PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

The Corporation is and has not been party to any legal proceedings in the preceeding quarter.

Item 2.

Changes in Securities

Stallion had 73,259,508 shares of common stock issued and outstanding as of November 30, 2008. Of these shares, approximately 30,000,000 shares are held by an affiliate of the Corporation; some of those shares can be resold in compliance with the limitations of Rule 144 as adopted by the Securities Act of 1933, as amended (the “Securities Act”).

In general, under Rule 144, a person who has beneficially owned shares privately acquired directly or indirectly from us or from one of our affiliates, for at least one year, or who is an affiliate, is entitled to sell, within any three-month period, a number of shares that do not exceed the greater of 1% of the then outstanding shares or the average weekly trading volume in our shares during the four calendar weeks immediately preceding such sale. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us. A person who is not deemed to have been an affiliate at any time during the 90 days preceding the sale, and who has beneficially owned restricted shares for at least two years, is entitled to sell all such shares under Rule 144 without regard to the volume limitations, current public information requirements, manner of sale provisions or notice requiremen ts.

The issuances discussed under this section are exempted from registration under Rule 903 of Regulation S of the Securities Act (“Reg. S”) or Section 4(2) of the Securities Act (“Section 4(2)”), as provided. All purchasers of our securities acquired the shares for investment purposes only and all stock certificates reflect the appropriate legends as appropriate. No underwriters were involved in connection with the sale of securities referred to in this report.

Item 4.

Submission of Matters to a Vote of Security Holders

The majority of the security holders approved the forward stock split which was completed by the Company during the quarter.

Item 5.

Other Information

Common Stock

During the six - month period ended November 30, 2008, 250,000 shares of common stock were issued upon exercise of warrants at $0.10 per share.  $25,000 was raised via the exercise of warrants.   The Company issued 900,000 to officers and consultants in consideration for services rendered in accordance with their consulting agreements.  As of November 30, 2008, there were 73,259,508 shares issued and outstanding.

Options

No options were granted to officers of the Company during the six-month period ending November 30, 2008.

Item 6. Exhibits and Reports on Form 8-K

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Reports on Form 8-K filed during the quarter ended August 31, 2008: NONE

Exhibits

31.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

The following Exhibits are filed as part of this report pursuant to Item 601 of Regulation K.  All Exhibits have been previously filed unless otherwise noted.

Exhibit No.	Document Description
3.1	Articles of Incorporation
3.2	Bylaws of The Stallion Group

Incorporated by reference to SB-2 Registration Statement filed on August 19, 2004

Description of Exhibits Incorporated by Reference

Exhibit 3.1

Articles of Incorporation of The Stallion Group dated January 09, 2004.

Exhibit 3.2

Bylaws of The Stallion Group dated January 28, 2004.

Exhibit 10.1

*       Incorporated by reference to SB-2 Registration Statement filed on October 1, 2007

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

The Stallion Group

(Registrant)

Date: January 14, 2009

BY:

/s/

“Christopher Paton-Gay”

Christopher Paton-Gay, Chairman, CEO and a Member of the Board of Directors

CERTIFICATION PURSUANT TO SECTION 302 

 I, Christopher Paton-Gay, certify that: 

1. I have reviewed this Quarterly report on Form 10-Q of The Stallion Group;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in the light of circumstances under which such statements were made, nor misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods represented in this report;

4. The small business issuer's registrant's sole certifying officer, I, am responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-14 and 15d-14 13a-15(f) and 15d-15(f)] for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) Designed such internal control over financial reporting, or causes such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an quarterly report) that has materially affected or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's sole certifying officer, I, have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and identified for the registrant's auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Dated: January 14, 2009

By:

/s/Christopher Paton-Gay

Christopher Paton-Gay

Chairman, CEO & CFO

Exhibit 32 

CERTIFICATION PURSUANT TO 18 USC SECTION 1350 

31

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, 

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002 

In connection with the Quarterly Report of The Stallion Group a Nevada corporation (the "Company"), on Form 10-Q for the quarter ended November 30, 2008 as filed with the Securities and Exchange Commission (the "Report"), I, Christopher Paton-Gay, Director/CFO of the Company, certify, pursuant to 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: January 14, 2009

/s/ Christopher Paton-Gay 

Christopher Paton-Gay

Director/ CFO

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, 

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002 

In connection with the Quarterly Report of The Stallion Group a Nevada corporation (the "Company"), on Form 10-QSB for the quarter ended November 30, 2008 as filed with the Securities and Exchange Commission (the "Report"), I, Christopher Paton-Gay, CEO of the Company, certify, pursuant to 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: January 14, 2009

/s/ Christopher Paton-Gay 

Christopher Paton-Gay

Chairman /CEO