-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
JVcWXgGnfZrK0DqGnGzQSPAEn469FvduTggegpDh6pmMUxKLrzD50W3tV91W0m1h
u1VELNXs/MYsQ0Wa9D5C9w==
UNITED STATES FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 [ ] Transition report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 Commission file number: 000-51775 STERLING GROUP VENTURES,
INC. Suite 900 - 789 West Pender Street, Vancouver, B.C. V6C
1H2 (604) 893-8891 N/A Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of April 13, 2010. 1 STERLING GROUP VENTURES, INC. 2 3 4 5 Balance, July
27, 1994 (Date of inception) Common stock Amount
contributed by director Net loss for the periods
Balance, May 31,
2001 Net loss of the year Balance, May 31,
2002 Net loss of the year Balance, May 31,
2003 Reverse acquisition Issuance of
common shares for reverse acquisition Outstanding common shares of
Company prior to acquisition Issuance of
shares for cash pursuant to a private placement - at
$0.50 Stock-based compensation
Net loss of the
year Balance, May 31, 2004 Issuance of
shares for cash pursuant to a private placement - at
$0.50 Issuance of shares for finder's
fee of private placement Finders' fees
Fair value of share purchase
warrants (finders' fees) Issuance of
shares for services rendered Net loss of the year Balance, May 31,
2005 Net loss for the year ended May
31, 2006 Balance, May 31,
2006 Issuance of shares for cash
pursuant to a private placement - at $0.15 Issuance of
shares for finder's fee of private placement Finders' fees Share issuance
costs Fair value of share purchase
warrants (finders' fees) Revaluation of
share purchase warrants Issuance of shares for services
rendered Net loss for the
year ended May 31, 2007 Balance, May 31, 2007 Issuance of
shares for services rendered at $0.06 Revaluation of share purchase
warrants Net loss for the
year ended May 31, 2008 Balance, May 31, 2008 Revaluation of
share purchase warrants Net loss for the year ended May
31, 2009 Balance, May 31,
2009 Revaluation of share purchase
warrants Net loss for the
nine months ended February 28, 2010 Balance, February 28, 2010
STERLING GROUP VENTURES, INC. While the information presented in the
accompanying interim six-month consolidated financial statements is unaudited,
it includes all adjustments which are, in the opinion of management, necessary
to present fairly the financial position, result of operations and cash flows
for the interim periods presented. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature. It is suggested that these consolidated financial statements
be read in conjunction with the Companys May 31, 2009 annual consolidated
financial statements. Operating results for the nine-month
period ended February 28, 2010 are not necessarily indicative of the results
that can be expected for the year ending May 31, 2010. The interim consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles (GAAP) applicable in the United States to a going concern, which
assumes that the Company will be able to meet its obligations and continue its
operations for its next twelve months. Realization values may be substantially
different from carrying values as shown and these consolidated financial
statements do not give effect to adjustments that would be necessary to the
carrying values and classification of assets and liabilities should the Company
be unable to continue as a going concern. At February 28, 2010, the Company had
a working capital deficiency of $303,666, has not yet achieved profitable
operations, has accumulated losses of $3,636,406 since its inception and expects
to incur further losses in the development of its business, all of which casts
substantial doubt about the Companys ability to continue as a going concern.
The Companys ability to continue as a going concern is dependent upon its
ability to generate future profitable operations and/or to obtain the necessary
financing to meet its obligations and repay its liabilities arising from normal
business operations when they come due. Management has no formal plan in place
to address this concern but considers that the Company will be able to obtain
additional funds by equity financing and/or related party advances, however
there is no assurance of additional funding being available. These consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries, Micro
Express Holdings Inc., Micro Express Ltd., Huyana Ventures Limited, Makaelo
Holdings Inc. and Makaelo Limited. All inter-company transactions and account
balances have been eliminated. FASB Accounting Standards
Codification Effective for interim and annual periods ending after
September 15, 2009, the FASB has defined a new hierarchy for U.S. GAAP and
established the FASB Accounting Standards Codification (ASC) as the sole source
for authoritative guidance to be applied by nongovernmental entities. The
adoption of the ASC changes the manner in which U.S. GAAP guidance is
referenced, but it does not have any impact on the Companys financial position
or results of operations In April 2009, the FASB issued
additional disclosure requirements related to fair values, which are included in
ASC 820, Interim Disclosures about Fair Value of Financial Instruments.
The provisions require disclosures about fair value of financial instruments for
interim reporting periods of publicly traded companies as well as in the annual
financial statements. The required disclosures were effective for interim
reporting periods ending after June 15, 2009. The adoption of the provision did
not have a material impact on the Companys statements of financial position,
results of operations and cash flows. 7 Sterling Group Ventures, Inc. In August 2009, the FASB issued ASU No.
2009-05, Measuring Liabilities at Fair Value, or ASU 2009-05, which
amends ASC 820 to provide clarification of circumstances in which a quoted price
in an active market for an identical liability is not available. A reporting
entity is required to measure fair value using one or more of the following
methods: 1) a valuation technique that uses a) the quoted price of the identical
liability when traded as an asset or b) quoted prices for similar liabilities
(or similar liabilities when traded as assets) and/or 2) a valuation technique
that is consistent with the principles of ASC 820. ASU 2009-05 also clarifies
that when estimating the fair value of a liability, a reporting entity is not
required to adjust to include inputs relating to the existence of transfer
restrictions on that liability. The adoption of this ASU did not have an impact
on the Companys consolidated financial statements. The Company adopted ASC 805
Business Combinations which was issued in December 2007.. ASC 805
requires that upon initially obtaining control, an acquirer should recognize
100% of the fair values of acquired assets, including goodwill and assumed
liabilities, with only limited exceptions, even if the acquirer has not acquired
100% of its target. Additionally, contingent consideration arrangements will be
fair valued at the acquisition date and included on that basis in the purchase
price consideration and transaction costs will be expensed as incurred. This
statement also modifies the recognition for pre-acquisition contingencies, such
as environmental or legal issues, restructuring plans and acquired research and
development value in purchase accounting. This statement amends ASC 740-10,
Income Taxes (ASC 740) to require the acquirer to recognize changes
in the amount of its deferred tax benefits that are recognizable because of a
business combination either in income from continuing operations in the period
of the combination or directly in contributed capital, depending on the
circumstances. ASC 805 is effective for fiscal years beginning after December
15, 2008. The adoption of this standard did not have any impact on the Companys
financial position or results from operations. The Company adopted ASC 470-20.
In June 2008, the Emerging Issues Task Force (EITF) reached consensus on Issue
No. 07-5, Determining Whether an Instrument (or Embedded Feature) is Indexed
to an Entitys Own Stock (EITF 07-5). EITF 07-5 was incorporated into ASC
470-20, Distinguishing Liabilities vs Equity. ASC 470-20 provides
guidance for instruments (including options or warrants on a companys shares,
forward contracts on a companys shares, and convertible debt instruments and
convertible preferred stock) that may contain contract terms that call into
question whether the instrument or embedded feature is indexed to the entitys
own stock. ASC 470-20 is effective for financial statements issued for fiscal
years and interim periods beginning after December 15, 2008. The adoption of
this standard did not have any impact on the Companys financial position or
results from operations. The Company adopted ASC 810-10, Non-controlling
Interests in Consolidated Financial Statements. ASC 810-10 changes the accounting
and reporting for minority interests, which is re-characterized as non-controlling
interests and classified as a component of equity. ASC 810-10 requires retroactive
adoption of the presentation and disclosure requirements for existing minority
interests. The adoption of ASC 810-10 did not have a material impact on the
Companys consolidated financial statements. The Company adopted ASC 815-10
Disclosures about Derivative Instruments and Hedging Activities. This
guidance requires enhanced disclosures about an entitys derivative and hedging
activities and thereby improves the transparency of financial reporting. This
guidance is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. This guidance encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. The adoption of ASC 815-10
did not have a material impact on the Companys consolidated financial
statements. 8 Sterling Group Ventures, Inc. The Company adopted ASC 855. In
May 2009, the FASB issued FASB Statement No. 165, Subsequent Events
(SFAS No. 165). The statement establishes general standards of accounting
for and disclosure of events that occur after the balance sheet date but prior
to the issuance of financial statements. This statement was incorporated into
ASC 855, Subsequent Events (ASC 855). This statement was effective for
interim or annual reporting periods after June 15, 2009. ASC 855 sets forth the
period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements as well as the
circumstances under which the entity would recognize them and the related
disclosures an entity should make. The adoption of this standard did not have a
material impact on the Companys consolidated financial statements. Summary of mineral properties expenses
for the three-month and nine-month periods ended February 28, 2010 and 2009 and
for the cumulative period from date of inception (July 27, 1994) to February 28,
2010: 9 Sterling Group Ventures, Inc. 10 Sterling Group Ventures, Inc. Not included in the table above was a
total of $132,878 of costs incurred on other properties which were abandoned
during the years ended May 31, 2006 and 2007. Dangxiongcuo Salt Lake Project On September 16, 2005, the Company, through its wholly
owned subsidiary, Micro Express Holdings Inc. (Micro), signed an
agreement (the Mianping Agreement) for the development of Dangxiongcuo
salt lake property (DXC Salt Lake) in Nima county of Naqu district in
Tibet, China. Pursuant to the Mianping Agreement, the parties agreed to
set up a Cooperative Company, (the Cooperative) to develop the DXC Salt
Lake. The objective of the Cooperative was to use the funds provided by
the Company and the skills and technology provided by the other party to
produce lithium carbonate and borate from brine. The Company, through
Micro, was to own 65% of the Cooperative. It was anticipated that the
total investment in the Cooperative would be approximately 240 million RMB
(or approximately US$35 million). The Cooperative Company was never set
up. On July 3, 2007, Micro received a letter from the other party to the
Mianping Agreement stating that the agreement between Micro and the other
party should be deemed terminated as a result of lack of progress in the
approval for the establishment of the joint venture company and is
considering a lawsuit against the Company and Micro. Micro has responded
that the other partys claim has no legal grounds as the lack of progress
is not caused by Micro. There has been no legal action to date and none is
expected. By letter dated August 25, 2008, Beijing Mianping Salt Lake
Research Institute (Mianping) has confirmed that the agreement dated
September 16, 2005 was terminated effective July 8, 2008. This agreement
was replaced by the agreement with Zhong Chuan International Mining
Holdings Co. Ltd. dated July 8, 2008. On July 8, 2008, the Company signed an agreement (the
"Agreement") with the shareholders of Monte Sea Holdings Ltd. ("Monte Sea
Shareholders") and a third party to restructure the transactions
contemplated under the September 16, 2005 agreement. The parties wish to
jointly develop the DXC Salt Lake property and lithium resources in Tibet
including an exploration license, and elsewhere (the Property), by way
of a cooperative joint venture. Monte Sea Shareholders and the third party
are to provide RMB100,000,000 ($14,584,000) to finance the DXC property to
production. Pursuant to the Agreement, the parties wish to establish
a Sino-foreign cooperative joint venture company ("CJV") for the purpose
of applying for and holding required approvals, permits and licenses with
respect to the development of the Property. The Parties agree that an operating company ("Opco") will
be established in Tibet prior to the establishment of the CJV for the
purpose of applying for and holding required approvals, permits and
licenses with respect to the development of the Property. The Opco shall
hold all such approvals, permits and licenses in trust for the
CJV. Under the Agreement, the CJV will be established within
90 days, subject to required regulatory approval and based on a joint
venture agreement by way of acquisition of interest in the Opco by Monte
Sea Holdings Ltd. (Monte Sea), or by way of incorporation under the
Chinese laws. Monte Sea shall hold up to 65% but no less than 51% of
shares in the CJV. CJV shall own and hold all the Property. If for any Chinese regulatory or policy reasons, Monte
Sea is not permitted to have more than fifty-one percent (51%) interest in
the CJV, then the CJV agreement will be revised such
that: 11 Sterling Group Ventures, Inc. Dangxiongcuo Salt Lake Project
Continued Monte Sea shall have a forty-nine percent (49%) interest
in the CJV; Monte Sea shall be entitled to receive returns on its
investment in the CJV on a priority and accelerated basis until its
investment in the CJV and the Property is fully recovered; and Monte Sea shall be permitted to manage the daily
operation of the CJV pursuant to a management agreement to be entered into
on terms and conditions satisfactory to the
Company. Upon the Agreement being effective and
termination of the agreement dated September 16, 2005, the Company will be
repaid RMB6,000,000 (approximately $875,000). As of February 28, 2010, the
Company has received $nil in regards to this agreement. Upon signing of this Agreement and
subject to applicable regulatory approval, Monte Sea Shareholders shall
subscribe for 5,000,000 units (the "Units") to be issued by the Company at $0.15
per Unit. Each Unit shall consist of one common share in the stock of the
Company, and one warrant which shall entitle the Monte Sea shareholders to
purchase one common share in the stock of the Company at $0.16 per share within
two years from the date of the issuance of the Units. Subject to applicable regulatory
approval, the Company shall cause 200,000,000 shares to be issued to the Monte
Sea Shareholders within ten working days from the date transfer of the
exploration license to the CJV is approved by the Chinese regulators, in
exchange for all the shares then issued and outstanding in the stock of Monte
Sea and held by Monte Sea Shareholders (the "Share Exchange"). The Share
Exchange may be conducted and completed at an earlier date as long as the
Company and Monte Sea Shareholders may agree in writing. This transaction would
be accounted for as a reverse acquisition. Subject to applicable regulatory
approval, the Company shall cause 87,910,000 shares in the capital of the
Company to be issued to the Monte Sea Shareholders at no additional cost, upon
receipt by the CJV of a mining license and such other permits or approvals for
the Property, permitting the full exploitation and development of the
Property. The Company intends to, when and as
required by the CJV, arrange and complete financing for the operation of the
CJV. Zhong Chuan shall, together with Monte
Sea Shareholders, provide funds no less than RMB 100,000,000 (or US dollar
equivalent thereof) for the purpose of meeting registered capital payment
requirements in the registration and operation of the CJV. Zhong Chuan shall
keep other Parties informed of any development in the registration of the CJV
and transfer of the exploration license. The application to establish a joint
venture has not yet been approved by the regulators in Tibet, China. As of February 28, 2010, the Company
has incurred a total of $1,046,861 in mineral property costs on this
property. 12 Sterling Group Ventures, Inc. Dangxiongcuo Salt Lake Project
Continued The Company received verbal termination of the Agreement
with Zhong Chuan in July 2009, as advised by third party legal counsel, at
a meeting in Beijing, China. The Agreement, in effect, allows Zhong Chuan
to terminate the Agreement if it pays the Company double the amount of
funds paid by the Company to date to secure and develop the DXC Project.
Zhong Chuan has not paid the required amount anticipated by the Agreement
to date. The delay in payment has delayed the termination process and the
Company is pursuing Zhong Chuan to complete the termination, as the
Company deems, is mandated by the Agreement. Jiajika Spodumene Property On September 16, 2003, the Company, through its wholly
owned subsidiary, Micro Express Ltd. (Micro), entered into an agreement
with Sichuan Province Mining Ltd. to acquire a 75% interest in a 30-year
mining joint venture company. The joint venture company would hold the
mining licenses to develop the Jiajika spodumene property located in
Sichuan province, China for the extraction of lithium and lithium salts.
Pursuant to the agreement, the total investment required was estimated at
RMB88,500,000 (US$10,800,000) for the initial capacity of 240,000
tonnes/annum. The initial registered capital was RMB56,000,000
(US$6,800,000). Sichuan Province Mining Ltd. would contribute
RMB14,000,000 (US$1,700,000) including the mining permits to hold 25% of
the JV Company. Micro would contribute RMB42,000,000 (US$ 5,100,000) to
hold 75% of the JV Company. On April 5, 2005, the Company, through its wholly-owned
subsidiary Micro Express Ltd. (MEL), signed a joint venture contract
with a Chinese partner for the establishment of a joint venture company,
Jihai Lithium Ltd. and the development of the Jiajika lithium deposit in
Kangding District, Sichuan province, China. On March 3, 2006, both parties
agreed to terminate the joint venture and the Chinese partner agreed to
pay back RMB2,480,000 ($309,058) incurred by MEL on the project. The
Chinese partner agreed to pay RMB1,200,000 ($149,520) and RMB1,280,000
($159,538) before April 15, 2006 and March 30, 2007, respectively. If the
Chinese partner does not pay the RMB1,280,000, the amount will be
converted into an interest in the Jiajika project based on the percentage
of MELs investment as to the registered capital contribution in Jiajika
project by the Chinese partner. As at May 31, 2006, the Company had
received RMB500,000 ($62,350) and a receivable of RMB1,980,000 ($246,708)
was recorded. As of May 31, 2009, the Company had received the full amount
of RMB2,480,000 ($334,707) from the Chinese partner. As the Chinese partner had not paid the remaining
RMB700,000 ($87,170) and the recoverability of the RMB1,280,000 ($159,538)
was uncertain, the Company recorded an allowance for doubtful collection
totalling $246,708 for the year ended May 31, 2006. During the year ended May 31, 2007, the Company received
RMB 300,000 ($40,381) from the Chinese partner and this was recorded as a
recovery of doubtful collection on the statement of operations. During the year ended May 31, 2008, the Company received
RMB1,100,000 ($147,154) from the Chinese partner. This amount was reported
as recovery of doubtful collection in the consolidated statements of
operation. 13 Sterling Group Ventures, Inc. Jiajika Spodumene Property
Continued During the year ended May 31, 2009,
the Company received RMB580,000 ($84,823) from the Chinese partner and this was
recorded as a recovery of doubtful collection on the statement of
operations. As at February 28, 2010, the Company
had incurred a total of $398,407 in the Jiajika Spodumene Property before the
cumulative cost recovery of RMB2,480,000 ($309,058). The Company was charged consulting fees
for administrative, corporate, financial, engineering, and management services
during the three-month and nine-month periods ended February 28, 2010 totalling
$5,701 (2009: $33,887) and $16,890 (2009: $86,268) by companies controlled by
two directors of the Company respectively. The Company was charged rental fees
included in general and administrative expense during the three-month and
nine-month periods ended February 28, 2010 totalling $3,258 (2009: $3,946) and
$9,486 (2009: $14,115) by a company controlled by a director of the Company,
respectively. The Company was charged consulting fees
included in mineral property costs during the three-month and nine-month periods
ended February 28, 2010 in the amount of $nil (2009: $585) and $nil (2009:
$4,094) by the Vice President of Micro, respectively. The Company was charged consulting fees
included in mineral property costs during the three-month and nine-month periods
ended February 28, 2010 in the amount of $nil (2009: $nil) and $nil (2009:
$22,042) by a company controlled by a director of the Company, respectively.
Cash and cash equivalents at February
28, 2010 include $33 (May 31, 2009: $55,320) held in trust by a director of the
Company. Included in accounts payable and
accrued liabilities is $498,748 (May 31, 2009: $459,043) which was due to
companies controlled by the directors of the Company for their services
provided. These transactions were in the normal course of operations and were
measured at the exchange amount which represented the amount of consideration
established and agreed to by the related parties. Stock Options On February 3, 2004, the Board of Directors of the
Company approved the 2004 Stock Option Plan which allows the Company to
grant up to 3,636,000 stock options as an incentive to directors,
officers, employees and consultants. During the nine-month periods ended February 28, 2010 and
2009, no stock options were granted or exercised. On February 3, 2009,
3,636,000 stock options with an exercise price of $0.50 per share expired
unexercised. At February 28, 2010, there were no outstanding stock
options (May 31, 2009 - nil). 14 Sterling Group Ventures, Inc. Share Purchase Warrants Share purchase warrants outstanding at
February 28, 2010 were as follows: During the nine-month periods ended
February 28, 2010 and 2009, no warrants were exercised, cancelled or expired.
Each Series A warrant entitles the
holder thereof the right to purchase one common share at $0.50 per share
expiring on the earlier of: February 16, 2008; or The 90th day after the day on which the weighted average
trading price of the Company's shares exceeds $0.85 per share for 30
consecutive trading days. Upon exercise of the Series "A" Share
Purchase Warrant at $0.50 each, the holder will receive one Common Share of the
Company and a Series "B" Share Purchase Warrant exercisable at $1.00 expiring
one year after the occurrence of either (1) or (2) as described above. The
Series "A" Share Purchase Warrants were originally issued in 2004 pursuant to a
private placement commenced in February 2004. On February 7, 2008, the Company
extended the expiry date of the 3,817,500 Series A Share Purchase Warrants
from February 16, 2008 to February 16, 2009. The exercise price of the warrants
remains unchanged at $0.50 per share. The additional fair value of the 3,817,500
extended life Series A Share Purchase Warrants was estimated at $252,989, by
using the Black-Scholes Option Pricing Model with the following weighted average
assumptions: dividend yield of 0%, expected volatility of 218.52%, risk free
interest rates of 2.08% and expected life of one year. On February 6, 2009, the Company
re-extended the expiry date of 3,817,500 Share Purchase Warrants (the Series "A"
Share Purchase Warrants) from February 16, 2009 to February 16, 2010. The
exercise price of the warrants remains unchanged at $0.50 per share. The
additional fair value of the 3,817,500 extended life Series A Share Purchase
Warrants was estimated at $35,593 using the Black-Scholes Option Pricing Model
with the following weighted average assumptions: dividend yield of 0%, expected
volatility of 223.36%, risk free interest rates of 0.82% and expected life of
one year. 15 Sterling Group Ventures, Inc. Share Purchase Warrants -
Continued On February 12, 2010, the Company
re-extended the expiry date of 3,817,500 Share Purchase Warrants (the Series "A"
Share Purchase Warrants) from February 16, 2010 to February 16, 2011. The
exercise price of the warrants remains unchanged at $0.50 per share. The
additional fair value of the 3,817,500 extended life Series A Share Purchase
Warrants was estimated at $105,341 using the Black-Scholes Option Pricing Model
with the following weighted average assumptions: dividend yield of 0%, expected
volatility of 244%, risk free interest rates of 0.56% and expected life of one
year. On February 7, 2008, the Company
extended the expiry date of the 2,873,990 Series C Share Purchase Warrants
from February 29, 2008 to February 27, 2009. The exercise price of the warrants
remained unchanged at $0.18 per share. The additional fair value of the
2,873,990 extended life Series C Share Purchase Warrants was estimated at
$156,536, by using the Black-Scholes Option Pricing Model with the following
weighted average assumptions: dividend yield of 0% expected volatility of
222.09%, risk-free interest rates of 2.08% and expected life of one year. The Company also re-extended the
expiry date of 2,873,990 Share Purchase Warrants (the Series "C" share purchase
Warrants) from February 27, 2009 to February 26, 2010. The exercise price of the
warrants remains unchanged at $0.18 per share. The Series "C" Share Purchase
Warrants were originally issued in September 2006 pursuant to a private
placement commenced in August 2006. The additional fair value of the 2,873,990
extended life Series C Share Purchase Warrants was estimated at $48,259 using
the Black-Scholes Option Pricing Model with the following weighted average
assumptions: dividend yield of 0% expected volatility of 244.01%, risk-free
interest rates of 0.82% and expected life of one year. The Company also re-extended the
expiry date of 2,873,990 Share Purchase Warrants (the Series "C" share purchase
Warrants) from February 26, 2010 to February 16, 2011. The exercise price of the
warrants remains unchanged at $0.18 per share. The additional fair value of the
2,873,990 extended life Series C Share Purchase Warrants was estimated at
$81,794 using the Black-Scholes Option Pricing Model with the following weighted
average assumptions: dividend yield of 0% expected volatility of 244%, risk-free
interest rates of 0.56% and expected life of one year. As at February 28, 2010, the Company
has a total of 3,817,500 Series A and 2,873,990 Series C share purchase
warrants outstanding, respectively. The Company is exposed to fluctuations
in foreign currencies through amounts held in China in RMB: - Cash held in trust $33 (May 31, 2009
- - $55,320) 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with our
consolidated financial statements and related notes for the year ended May 31,
2009 , the financial statements and related notes in this Quarterly Report, the
risk factors in our 10K for the year ended May 31, 2009 , and all of the other
information contained elsewhere in this report. As used in this quarterly report, the terms we, us, our,
our company, Company and Sterling refer to Sterling Group Ventures, Inc.
and its subsidiaries, unless otherwise indicated. Forward-Looking Statements. When used in this Form 10-Q,
the words believe, may, will, plan, estimate, continue,
anticipate, intend, expect, project, estimates, and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to risks and uncertainties, including those set forth below under
"Risks and Uncertainties," that could cause actual results to differ materially
from those projected. These forward-looking statements speak only as of the date
hereof. The Company expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in the Company's expectations with regard thereto
or any change in events, conditions or circumstances on which any statement is
based. Overview
On July 8, 2008, the Company signed an agreement (the "Agreement") with Zhong Chuan International Mining Holding Co., Ltd. ("Zhong Chuan"), Ximing Sun and Charles Yan - shareholders of Monte Sea Holdings Ltd. (collectively hereinafter "Monte Sea Shareholders") to complete an equity financing, to accelerate the development of the DXC salt lake deposits in China and to restructure the transactions contemplated under the initial agreement signed by Beijing Mianping Salt Lake Research Institute ("Mianping") and Micro Express Holdings Inc. ("MEH") on September 16, 2005. Pursuant to the Agreement, the parties wish to establish a Sino-foreign cooperative joint venture company ("CJV") for the purpose of applying for and holding required approvals, permits and licenses with respect to the development of the DXC Salt Lake property (the "Property") located in Tibet of China. In July 2009, the Company received verbal termination of the Agreement with Zhong Chuan, as advised by third party legal counsel, at a meeting i
n Beijing, China. Formal written notice has not been received from Zhong Chuan. The Agreement in effect, allows Zhong Chuan to terminate the Agreement if it pays the Company double the amount of funds paid by the Company to date to secure and develop the DXC Project. Zhong Chuan has not repaid the required amount as anticipated by the Agreement to date. This unfortunate delay on the part of Zhong Chuan places the termination it gave the Company in dispute as the termination is conditional upon repayment of the required funds. At this point then, the termination is incomplete. The Company is pursuing Zhong Chuan to complete the termination, as the Company deems, is mandated by the Agreement.
Business of Sterling Group Ventures Inc. Sterling Group Venture Inc. is a start-up, exploration stage company engaged in the search and exploration of lithium and related minerals. The Company has DXC Salt Lake Project for the exploration of lithium and lithium Carbonate. Application of Critical Accounting Policies and Use of Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires that we 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 revenue and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ significantly from these estimates under different assumptions or conditions. There have been no material changes to these estimates for the periods presented in this quarterly report. 17 Interim Reporting The information presented in the accompanying interim consolidated financial statements is without audit pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in the interim consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. Except where noted, the interim consolidated financial statements follow the same accounting policies and methods of their application as our May 31, 2009 annual consolidated financial statements. All adjustments are of a normal recurring nature. It is suggested that these interim consolidated financial statements be read in conjunction with our May 31, 2009 annual consolidated financial statements. Operating results for the three months and nine months ended February 28, 2010 are not necessarily indicative of the results that can be expected for the year ending May 31, 2010.
Results Of Operations The operating loss increased to $112,550 for the quarter ended February 28, 2010, as compared to $101,613 for the quarter ended February 28, 2009 mainly due to the increase of stock-based compensation expense with respect to revaluing the extension of Class A and Class C Share Purchase Warrants in the amount of $91,703 and the increase in accounting & audit fees in 2010. The operating loss for nine months ended February 28, 2010 decreased to $191,353 as compared to $211,786 for the nine months ended February 28, 2009. Costs for the nine month period ended February 28, 2010 decreased primarily in respect of consulting fees, mineral property cost and general and administrative expenses; these cost decreases were offset by the Company not having a recovery of doubtful accounts as it did in the comparative period and, as well, incurring a foreign exchange loss of $5,214 in the current period compared to a gain of $ 21,922 in the comparative period. For the three months ended February 28, 2010, relative to the same period in 2009, consulting fees decreased by $28,186, while consulting fees decreased by $70,378 for the nine months ended February 28, 2010 relative to the same period in 2009. Accounting, audit and legal fees increased by $2,514 for the three months ended February 28, 2010 when compared to the same period in 2009. Accounting, audit and legal fees increased by $14,683 for the nine months ended February 28, 2010 when compared to the same period in 2009. Mineral property costs decreased by $9,567 for the three months ended February 28, 2010 when compared to the same period in 2009. Mineral property costs decreased by $50,727 for the nine months ended February 28, 2010 when compared to the same period in 2009. General and administrative decreased by $807 for the three months ended February 28, 2010 when compared to the same period in 2009. General and administrative decreased by $4,782 for the nine months ended February 28, 2010 when compared to the same period in 2009.
The Company expects the trend of losses to continue until we can achieve commercial production on some of the mineral properties, of which there can be no assurance as described in Risk Factors. 18 Liquidity And Working Capital As of February 28, 2010, the Company had total current assets of $213,691 and total liabilities of $517,357. As of February 28, 2010, the Company had cash of $200,724 and negative working capital of $303,666.
Cash used in operating activities for the nine months ended February 28, 2010 was $46,565 as compared to cash used in operating activities for the same period in 2009 of $166,290. The decrease in cash used in operating activities was primarily due to the decrease in cash expenditures for consulting and mineral property costs.
According to the agreement signed with Zhongchuan on July 8, 2008, Mianping will repay the Company RMB 6,000,000 ($875,000) and Monte Sea Shareholders shall subscribe for 5,000,000 units (the "Units") to be issued by the Company at $0.15 per unit. As a result, the Company expects to raise working capital in the amount of $750,000 and a total of $1,625,000 including the repayment of approximately RMB 6,000,000 described earlier to meet its short term working capital requirements. However, in July 2009, the Company received verbal termination of the Agreement with Zhong Chuan, as advised by third party legal counsel, at a meeting in Beijing, China. Formal written notice has not been received from Zhong Chuan. The Agreement in effect, allows Zhong Chuan to terminate the Agreement if it pays the Company double the amount of funds paid by the Company to date to secure and develop the DXC Project. Zhong Chuan has not repaid the required amount as anticipated by the Agreement to date. This unfortunate delay on the part of Zhong Chuan places the termination it gave the Company in dispute as the termination is conditional upon repayment of the required funds. At this point then, the termination is incomplete. The Company is pursuing Zhong Chuan to complete the termination, as the Company deems, is mandated by the Agreement. The Company has no other capital resources other than the ability to use its common stock to raise additional capital or the exercise of the warrants by the unit holders. The Company's current cash can provide the Company with working capital for over one year since consulting fees are being reduced and accrued. Estimated cash needed for next 12 months is about $80,000. The cash will be mainly used for general administrative, corporate (legal, accounting and audit), financing and management. No commitments to provide additional funds have been made by management or other stockholders except as set forth above. Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover operation expenses. This raises substantial doubt that the Company will be able to continue as a going concern unless additional capital is raised
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In addition to the U.S. Dollar, we conduct our business in
Chinese Yuan (RMB) and Canadian Dollar and, therefore, are subject to foreign
currency exchange risk on cash flows related to expenses and investing
transactions. In July 2005, the Chinese government began to permit the Chinese
Yuan to float against the U.S. Dollar. All of our costs to operate our Chinese
project are paid in Chinese Yuan and all of our costs to operate our principal
executive office in Canada are paid in Canadian dollar. Our exploration costs in
China may be incurred under contracts denominated in Chinese Yuan or U.S.
Dollars. If the Chinese Yuan continues to appreciate with respect to the U.S.
Dollar, our costs in China may increase. If the Canadian Dollar continues to
appreciate with respect to the U.S. Dollar, our costs in Canada may increase. To
date we have not engaged in hedging activities to hedge our foreign currency
exposure. In the future, we may enter into hedging instruments to manage our
foreign currency exchange risk or continue to be subject to exchange rate risk.
Although inflation has not materially impacted our operations
in the recent past, increased inflation in China or Canada could have a negative
impact on our operating and general and administrative expenses, as these costs
could increase. China has recently experienced inflationary pressures, which
could increase our costs associated with our operations in China. If there are
material changes in our costs, we may seek to raise additional funds earlier
than anticipated. 19 ITEM 4. CONTROLS AND PROCEDURES a. Evaluation of
Disclosure Controls and Procedures: We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.. b. Changes in
Internal Control over Financial Reporting: There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 1A. RISK FACTORS We have sought to identify what we believe to be the most
significant risks to our business. However, we cannot predict whether, or to
what extent, any of such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with
respect to our Common Stock. We provide the following cautionary discussion of
risks, uncertainties and possible inaccurate assumptions relevant to our
business. These are factors that we think could cause our actual results to
differ materially from expected results. Other factors besides those listed here
could adversely affect us. Factors That May Affect Future Results and Market Price
of Stock The business of the Company involves a number of risks and
uncertainties that could cause actual results to differ materially from results
projected in any forward-looking statement, or statements, made in this report.
These risks and uncertainties include, but are not necessarily limited to the
risks set forth below. The Company's securities are speculative and investment
in the Company's securities involves a high degree of risk and the possibility
that the investor will suffer the loss of the entire amount invested. Limited Operating History; Anticipated Losses;
Uncertainty of Future Results (Risk of Going Concern) Sterling is in the exploration stage. The Company has entered
into joint venture agreements to explore and develop mineral properties located
in China and has not yet determined whether these properties contain reserves
that are economically recoverable. The Company has not yet achieved profitable
operations and is dependent on its ability to raise capital from shareholders or
other sources to meet its obligations and repay its liabilities arising from
normal business operations when they come due. These factors raise substantial
doubt that the Company will be able to continue as a going concern. 20 Lack of Technical Training of Management The Management of our Company has academic and scientific
experience related to mining issues but lacks technical training and experience
exploring for, commissioning and operating a mine. With no direct training or
experience in these areas, management may not be fully aware of many of the
specific requirements related to working within this industry. The decisions and
choices may not take into account standard engineering or managerial approaches
mineral exploration companies commonly use. Consequently, operations, earnings
and the ultimate financial success of the Company could suffer irreparable harm
due to managements lack of experience in this industry. Exploration Risk Development of mineral properties is contingent upon obtaining
satisfactory exploration results. Mineral exploration and development involves
substantial expenses and a high degree of risk, which even a combination of
experience, knowledge and careful evaluation may not be able to adequately
mitigate. The companys exploration properties have not been examined in
the field by professional geologists or mining engineers. There is no assurance
that commercial quantities of ore will be discovered on any of the Companys
exploration properties. There is also no assurance that, even if commercial
quantities of ore are discovered, a mineral property will be brought into
commercial production. The discovery of mineral deposits is dependent upon a
number of factors not the least of which is the technical skill of the
exploration personnel involved. The commercial viability of a mineral deposit,
once discovered, is also dependent upon a number of factors, some of which are
the particular attributes of the deposit, such as size, grade and proximity to
infrastructure, metal prices and government regulations, including regulations
relating to royalties, allowable production, importing and exporting of
minerals, and environmental protection. In addition, assuming discovery of a
commercial ore body, depending on the type of mining operation involved, several
years can elapse from the initial phase of drilling until commercial operations
are commenced. Most of the above factors are beyond the control of the Company.
The exploration process is conducted in phases. When each phase
of a project is completed, and upon analysis of the results of that phase, the
Company will make a decision whether to proceed with each successive phase of
the exploration program. There is no assurance that projects will be carried to
completion. Limited Management Resource Development
Experience The Company does not have a track record of exploration and
mining operation history. The Company's management has limited experience in
mineral resource development and exploitation, and has relied on and may
continue to rely upon consultants and others for development and operation
expertise. Limited Financial Resources Furthermore, the Company has limited financial resources with
no assurance that sufficient funding will be available to it for future
exploration and development or to fulfill its obligations under current
agreements. There is no assurance that the Company will be able to obtain
adequate financing in the future or that the terms of such financing will be
favorable. Failure to obtain such additional financing could result in delay or
indefinite postponement of further exploration and development of its
projects. Limited Public Market, Possible Volatility of Share
Price The Company's Common Stock is currently quoted on the NASD OTC
Bulletin Board under the ticker symbol SGGV and is listed on Berlin Bremen Stock
Exchange under the symbol GD7. As of February 28, 2010, there were
43,826,175 shares of common stock outstanding. There can be no assurance that a
trading market will be sustained in the future. 21
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
for the quarterly period ended February 28, 2010..
for the transition period from _________ to _______ .
(Exact name of registrant as specified in its
charter)
Nevada
72-1535634
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
(Address of principal executive offices) (Zip Code)
(Registrants telephone number,
including area code)
(Former name, former address and former
fiscal year, if changes since last report)
Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required
to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
smaller reporting company. See the definitions of "large accelerated filer,"
"accelerated filer" and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ]
Smaller reporting company [X]
Yes [
] No [X]
Title of each class
Number of shares
Common Stock, par value $0.001 per share
43,826,175
FORM 10-Q
INDEX
STERLING GROUP
VENTURES, INC.
(An Exploration
Stage Company)
CONSOLIDATED
BALANCE SHEETS
February 28, 2010
and May 31, 2009
February 28,
May 31,
2010
2009
Stated in U.S. dollars
(Unaudited)
ASSETS
Current
Assets
Cash
$
200,724
$
192,002
Cash held in trust
33
55,320
GST receivable
12,921
9,577
Prepaid expenses and other receivable
13
270
Total current assets
213,691
257,169
Equipment
94
454
Total Assets $
213,785
$
257,623
LIABILITIES
AND CAPITAL DEFICIT
Current Liabilities
Accounts payable and other accrued liabilities
- Note 4
$
517,357
$
461,545
Capital Deficit
Common Stock : $0.001 Par Value
Authorized :
500,000,000
Issued and Outstanding : 43,826,175 (May 31, 2009 : 43,826,175)
43,826
43,826
Additional Paid In Capital
2,744,627
2,652,924
Warrants
544,964
544,964
Accumulated Other Comprehensive Loss
(583
)
(583
)
Deficit accumulated during the exploration
stage
(3,636,406
)
(3,445,053
)
Total Capital Deficit
(303,572
)
(203,922
)
Total
Liabilities and Capital Deficit $
213,785
$
257,623
See
accompanying notes to consolidated financial statements
STERLING
GROUP VENTURES, INC.
(An
Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three
months and nine months ended February 28, 2010 and 2009 and
for the period
from July 27, 1994 (date of inception) to February 28, 2010
(Unaudited)
July 27,
1994
(Date of
Three
months ended
Nine
months ended
inception)
February 28,
February 28,
to February
28,
Stated in U.S. dollars
2010
2009
2010
2009
2010
Expenses
Accounting, audit and legal fees
$
10,343
$
7,829
$
56,213
$
41,530
$
426,521
Bank charges
32
25
195
111
1,881
Consulting
fees - Note 4
5,701
33,887
16,890
87,268
705,893
Depreciation
47
327
360
980
9,252
Filing
fees and transfer agent
-
194
4,704
1,603
41,250
Foreign exchange loss
(gain)
837
(2,231
)
5,214
(21,922
)
(24,295
)
General
and administrative - Note 4
3,887
4,694
11,401
16,183
109,943
Mineral property costs -
Note 3
-
9,567
4,694
55,421
1,269,088
Printing
and mailing
-
-
-
-
16,883
Shareholder information
and investor relations
-
-
-
1,530
61,230
Stock-based compensation - Note 5
91,703
83,852
91,703
83,852
953,721
Travel and entertainment
-
-
-
-
122,432
Recovery
of doubtful collection
-
(36,522
)
-
(51,174
)
(272,358
)
Allowance for doubtful
collection
-
-
-
-
246,708
(112,550
)
(101,622
)
(191,374
)
(215,382
)
(3,668,149
)
Other item
Interest
income
-
9
21
3,596
31,743
Net loss for the period
$
(112,550
)
$
(101,613
)
$
(191,353
)
$
(211,786
)
$
(3,636,406
)
Basic and
diluted loss per share $
(0.00
)
$
(0.00
)
$
(0.00
)
$
(0.00
)
Weighted average number of
shares outstanding
43,826,175
43,826,175
43,826,175
43,826,175
See
accompanying notes to consolidated financial statements
STERLING GROUP
VENTURES, INC.
(An Exploration
Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the three and
nine months ended February 28, 2010 and 2009 and
for the period
from July 27, 1994 (date of inception) to February 28, 2010
(Unaudited)
July 27, 1994
(Date of
Nine
months ended
inception)
February 28,
to February 28,
Stated in U.S. dollars
2010
2009
2010
Cash flows from operating
activities
Net loss for the period
$
(191,353
)
$
(211,786
)
$
(3,636,406
)
Adjustments to reconcile net
loss to net cash provided by (used in) operating
activities
Stock compensation expense
91,703
83,852
953,721
Depreciation
360
980
9,252
Permit and engineering studies
-
-
150,000
Shareholder information and investor relations
-
-
20,447
Accounting, audit and legal fees
-
-
49,000
Translation adjustment
-
-
(106
)
Changes in
non-cash working capital items related to operations
GST
refundable
(3,344
)
(3,582
)
(12,921
)
Prepaid expenses and other receivable
257
(354
)
21,540
Advance receivable
-
8,850
-
Accounts payable and accrued liabilities
55,812
(44,250
)
536,837
Net cash provided by (used in)
operating activities
(46,565
)
(166,290
)
(1,908,636
)
Cash flows
from investing activities
Advance on investment
-
-
(150,000
)
Additions to equipment
-
-
(9,346
)
Net
change in cash held in trust
55,287
203,090
(33
)
Net cash flows
used in investing activities
55,287
203,090
(159,379
)
Cash flows from financing
activities
Net proceeds on issuance of common stock
-
-
2,266,858
Amounts contributed by director
-
-
1,881
Net cash flows
provided by financing activities
-
-
2,268,739
Net increase (decrease) in
cash
8,722
36,800
200,724
Cash -
beginning of period
192,002
148,427
-
Cash - end of period
$
200,724
$
185,227
$
200,724
Supplemental Information :
Cash paid for :
Interest
$
-
$
-
$
-
Income taxes
$
-
$
-
$
-
Non-cash
Transactions :
Issuance of shares for
commission paid to broker for private placement
$
-
$
-
$
72,396
Issuance of shares for services rendered
$
-
$
-
$
91,000
Issuance of shares for settlement of accounts payable
$
-
$
-
$
19,480
Issuance of share purchase
warrants for finder's fee paid to broker for private
placement
$
-
$
-
$
11,477
See accompanying notes to consolidated financial
statements
STERLING
GROUP VENTURES, INC.
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
For the period
from July 27, 1994 (date of inception) to February 28,
2010
(Unaudited)
Deficit
Accumulated
Accumulated
Stock
Additional
Other
During The
Common
Amount At
Paid In
Comprehensive
Exploration
Stated in U.S. dollars
Shares
Par Value
Capital
Warrants
Loss
Stage
Total
-
$
-
$
-
$
-
$
-
$
-
$
-
1
1
-
-
-
-
1
-
-
1,881
-
-
-
1,881
-
-
-
-
-
(7,902
)
(7,902
)
1
$
1
$
1,881
$
-
$
-
$
(7,902
)
$
(6,020
)
-
-
-
-
-
(1,860
)
(1,860
)
1
$
1
$
1,881
$
-
$
-
$
(9,762
)
$
(7,880
)
-
-
-
-
-
(1,360
)
(1,360
)
1
$
1
$
1,881
$
-
$
-
$
(11,122
)
$
(9,240
)
(1
)
(1
)
(1,881
)
-
-
-
(1,882
)
25,000,000
25,000
(23,119
)
-
-
-
1,881
11,360,000
11,360
(10,883
)
-
(583
)
-
(106
)
1,766,000
1,766
881,234
-
-
-
883,000
-
-
368,641
-
-
-
368,641
-
-
-
-
-
(527,446
)
(527,446
)
38,126,000
$
38,126
$
1,215,873
$
-
$
(583
)
$
(538,568
)
$
714,848
1,950,000
1,950
973,050
-
-
-
975,000
101,500
102
50,648
-
-
-
50,750
-
-
(50,750
)
(50,750
)
-
-
(40,110
)
40,110
-
-
-
100,000
100
41,900
-
-
-
42,000
-
-
-
-
-
(818,954
)
(818,954
)
40,277,500
$
40,278
$
2,190,611
$
40,110
$
(583
)
$
(1,357,522
)
$
912,894
-
-
-
-
-
(461,201
)
(461,201
)
40,277,500
$
40,278
$
2,190,611
$
40,110
$
(583
)
$
(1,818,723
)
$
451,693
2,750,300
2,750
409,795
-
-
-
412,545
123,690
124
21,522
-
-
-
21,646
-
-
(21,646
)
(21,646
)
-
-
(3,687
)
-
-
-
(3,687
)
-
-
(9,895
)
9,895
-
-
-
-
-
(1,582
)
1,582
-
-
-
350,000
350
48,650
-
-
-
49,000
-
-
-
-
-
(864,485
)
(864,485
)
43,501,490
$
43,502
$
2,633,768
$
51,587
$
(583
)
$
(2,683,208
)
$
45,066
324,685
324
19,156
-
-
-
19,480
-
-
409,525
-
-
409,525
-
-
-
-
-
(516,440
)
(516,440
)
43,826,175
$
43,826
$
2,652,924
$
461,112
$
(583
)
$
(3,199,648
)
$
(42,369
)
-
-
83,852
-
-
83,852
-
-
-
-
-
(245,405
)
(245,405
)
43,826,175
$
43,826
$
2,652,924
$
544,964
$
(583
)
$
(3,445,053
)
$
(203,922
)
-
91,703
-
-
91,703
-
-
-
-
-
(191,353
)
(191,353
)
43,826,175
$
43,826
$
2,744,627
$
544,964
$
(583
)
$
(3,636,406
)
$
(303,572
)
See
accompanying notes to consolidated financial statements
6
(An Exploration
Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in US Dollars)
February 28, 2010 and
2009
(Unaudited)
Note 1
Nature of Operations and Ability to Continue
as a Going Concern
Note 2
Recent Accounting Pronouncements
(An Exploration Stage
Company)
Notes to Consolidated Financial Statements
February 28, 2010 and
2009
(Stated in US Dollars)
(Unaudited)
Note 2
Recent Accounting Pronouncements -
Continued
(An Exploration Stage
Company)
Notes to Consolidated Financial Statements
February 28, 2010
and 2009
(Stated in US Dollars)
(Unaudited)
Note 2
Recent Accounting Pronouncements -
Continued
Note 3
Mineral Properties
DXC
Salt Lake
Property
Three months
ended February 28, 2010
Administrative
$
-
Travel
-
$
-
Three months
ended February 28, 2009
Administrative
$
577
Consulting fees
585
Travel
4,239
Legal fees
4,166
$
9,567
DXC
Salt Lake
Property
Nine months
ended February 28, 2010
Administrative
$
88
Travel
4,606
$
4,694
Nine months
ended February 28, 2009
Administrative
$
867
Consulting fees
27,890
Travel
19,656
Legal fees
7,008
$
55,421
(An Exploration Stage
Company)
Notes to Consolidated Financial Statements
February 28, 2010
and 2009
(Stated in US Dollars)
(Unaudited)
Note 3
Mineral Properties - Continued
DXC
Jiajika
Salt Lake
Spodumene
Summary of mineral property expenditures
Property
Property
From Date of Inception (July
27, 1994) to February 28, 2010
Balance, May 31,
2003
$
-
$
-
Administrative
-
471
Consulting fees
-
9,263
Travel
-
2,763
Balance, May 31,
2004
-
12,497
Administrative
-
6,598
Consulting fees
-
33,799
Feasibility study
-
157,769
Permit costs
-
150,000
Travel
-
15,085
Balance, May 31,
2005
-
375,748
Administrative
5,560
2,100
Consulting fees
46,629
12,062
Engineering studies
26,933
-
Feasibility
study
29,080
-
Geophysical study
31,114
-
Legal fees
623
-
Topography measurement
32,266
-
Travel
30,953
8,009
Wages and benefits
33,601
-
Cost recovery
-
(309,058
)
Balance, May 31, 2006
236,759
88,861
Administrative
5,200
-
Consulting fees
134,580
-
Engineering
studies
38,063
-
Mining permit
382,920
-
Topography
measurement
15,001
-
Legal fees
9,695
-
Travel
53,262
488
Wages and benefits
35,687
-
Balance, May 31,
2007
911,167
89,349
Administrative
706
-
Consulting fees
60,548
-
Travel
5,456
-
Legal fees
11,566
-
Balance, May 31, 2008
989,443
89,349
Administrative
867
-
Consulting fees
27,890
-
Travel
16,959
-
Legal fees
7,008
-
Balance, May 31,
2009
1,042,167
89,349
Administrative
88
-
Travel
4,606
-
Balance, February 28, 2010
$
1,046,861
$
89,349
(An Exploration Stage
Company)
Notes to Consolidated Financial Statements
February 28, 2010 and
2009
(Stated in US Dollars)
(Unaudited)
Note 3
Mineral Properties Continued
a)
(An Exploration Stage
Company)
Notes to Consolidated Financial Statements
February 28, 2010 and
2009
(Stated in US Dollars)
(Unaudited)
Note 3
Mineral Properties Continued
a)
(i)
(ii)
(iii)
(An Exploration Stage
Company)
Notes to Consolidated Financial Statements
February 28, 2010 and
2009
(Stated in US Dollars)
(Unaudited)
Note 3
Mineral Properties Continued
a)
b)
(An Exploration Stage
Company)
Notes to Consolidated Financial Statements
February 28, 2010 and
2009
(Stated in US Dollars)
(Unaudited)
Note 3
Mineral Properties Continued
b)
Note 4
Related Party Transactions
Note 5
Capital Stock
a)
(An Exploration Stage
Company)
Notes to Consolidated Financial Statements
February 28, 2010
and 2009
(Stated in US Dollars)
(Unaudited)
Note 5
Capital Stock - Continued
b)
Number
Price
Expiry
3,817,500
$
0.50
February 16, 2011
2,873,990
$ 0.18
February 16, 2011
6,691,490
1)
2)
(An Exploration Stage
Company)
Notes to Consolidated Financial Statements
February 28, 2010
and 2009
(Stated in US Dollars)
(Unaudited)
Note 5
Capital Stock - Continued
b)
Note 5
Foreign Currency Risk
Dependence on Executive Officers and Technical Personnel
The success of our business plan depends on attracting qualified personnel, and failure to attract and retain the necessary personnel could adversely affect our business. Competition for qualified personnel is intense, and we may need to pay premium wages to attract and retain personnel. Attracting and retaining qualified personnel is critical to our business. Inability to attract and retain the qualified personnel necessary would limit our ability to implement our business plan successfully.
Need for Additional Financing
The Company believes it has sufficient capital to meet its short-term cash needs, including the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934. However, the Company has to seek loans or equity placements to cover longer-term cash needs to continue operations and expansion.
>No commitments to provide additional funds have been made by management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover operation expenses.
If future operations are unprofitable, it will be forced to develop another line of business, or to finance its operations through the sale of assets it has, or enter into the sale of stock for additional capital, none of which may be feasible when needed. The Company has no specific management ability or financial resources or plans to enter any other business as of this date.
Dilution to the Existing Shareholders
The Company has no other capital resources other than the ability to use its common stock to raise additional capital or the exercise of the warrants by the unit holders. Pursuant to the agreement signed on July 8, 2008 with Zhongchuan, the Company shall cause 292,910,000 shares to be issued to Monte Sea Shareholders for the DXC Salt Lake project, which will significantly dilute the Company's stockholders.
Political Risks
The market in China is monitored by the government, which could impose taxes or restrictions at any time which would make operations unprofitable and infeasible and cause a write-off of investment in the mineral properties. Other factors include political policy on foreign ownership, political policy to open the doors to foreign investors, and political policy on mineral claims and metal prices.
Circumstances related to Tibet political activities and resulting political upheaval are beyond the control of the Company and constitute a risk to investors.
Other Risks and Uncertainties
The business of mineral deposit exploration and development involves a high degree of risk. Few properties that are explored are ultimately developed into production. Other risks facing the Company include competition, reliance on third parties and joint-venture partners, environmental and insurance risks, political and environmental instability, statutory and regulatory requirements, fluctuations in mineral prices and foreign currency, share price volatility, title risks, and uncertainty of additional financing.
Since October 2008, a severe general downturn in the U. S. economy and global economy slowdown which already affected the securities markets took place. Such a deleterious turn of events has made it much more difficult for the Company to access financing should it be required to do so.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits beginning on page 24 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
SIGNATURES
Pursuant to the requirements 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.
Sterling Group Ventures Inc. | |
/s/ Raoul Tsakok | |
Raoul Tsakok, Chairman and Chief Executive Officer | |
Date: April 14, 2010 | |
/s/ Richard Shao | |
Richard Shao, President and Chief Financial Officer | |
Date: April 14, 2010 |
23
INDEX OF EXHIBITS
Exhibit | |
Number | Description |
3.1 | Articles of Incorporation of the Company, (filed as Exhibit 3.1 to the Company's Registration Statement on Form SB-2 filed on July 26, 2002, and incorporated herein by reference). |
3.2 | Bylaws of the Company (filed as Exhibit 3.2 to the Company's Registration Statement on Form SB-2 filed on July 26, 2002, and incorporated herein by reference). |
4.1 | Specimen stock certificate (filed as Exhibit 4.1 to the Company's Registration Statement on Form SB-2 filed on July 26, 2002, and incorporated herein by reference). |
10.1 | Acquisition Agreement between the Company and Micro Express Ltd., dated January 20, 2004. (Filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on January 29, 2004, and incorporated herein by reference). |
10.2 | Joint Venture Contract between Micro Express Ltd. .(the Companys wholly subsidiary) and Sichuan Province Mining Ltd., dated April 5, 2005 (Filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on April 11, 2005, and incorporated herein by reference). |
10.3 | Agreement for Development of DXC Salt Lake Property between Micro Express Holdings Inc. .(the Companys wholly subsidiary) and Beijing Mianping Salt Lake Research Institute, dated September 16, 2005 (Filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on September 21, 2005, and incorporated herein by reference). |
10.4 | Agreement for Termination of Joint Venture between Micro Express Ltd. and Sichuan Province Mining Ltd., dated March 3, 2006 (Filed as Exhibit 10.1 to the Company's current report on Form 8- K filed on March 6, 2006, and incorporated herein by reference). |
10.5 | Agreement between the Company, Zhong Chuan International Mining Holding Co., Ltd. , and shareholders of Monte Sea Holdings Ltd., dated July 8, 2008 (Filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on July 15, 2008, and incorporated herein by reference). |
14.1 | Code of Ethics. ( Filed as Exhibit 14.1 to the Company's Annual report on Form 10-K filed on August 28, 2009, and incorporated herein by reference) |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
99.1 | Audit Committee Charter. (Filed as Exhibit 99.1 to the Company's Annual report on Form 10-K filed on August 28, 2009, and incorporated herein by reference) |
24
Exhibit 31.1
CERTIFICATIONS
I, Raoul Tsakok, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q ("Report") of Sterling Group Ventures, Inc.; | |
|
| |
2. |
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 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, 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 presented in this report; | |
|
| |
4. |
The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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) |
omitted; | |
|
| |
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 most recent fiscal quarter (the small business issuer's internal control over financial reporting that occurred during the small business issurer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's control over financial reporting; and | |
|
|
|
5. |
The small business issuer's other certifying officer(s) and 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 board of directors (or persons performing the equivalent functions): | |
|
| |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control 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 | |
|
| |
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. |
By: | /s/ Raoul Tsakok | |
Raoul Tsakok | ||
Chairman & Chief Executive Officer | ||
Date: April 14, 2010 |
Exhibit 31.2
CERTIFICATIONS
I, Richard (Xuxin) Shao, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q ("Report") of Sterling Group Ventures, Inc.; | |
|
| |
2. |
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 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, 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 presented in this report; | |
|
| |
4. |
The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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) |
omitted; | |
|
| |
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 most recent fiscal quarter (the small business issuer's internal control over financial reporting that occurred during the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's control over financial reporting; and | |
|
|
|
5. |
The small business issuer's other certifying officer(s) and 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 board of directors (or persons performing the equivalent functions): | |
|
| |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control 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 | |
|
| |
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. |
By: | /s/ Richard (Xuxin) Shao | |
Richard (Xuxin) Shao | ||
President & CFO | ||
Date: April 14, 2010 |
EXHIBIT 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
In connection with the Quarterly Report of Sterling Group Ventures, Inc. (the Company) on Form 10-Q for the quarter ended February 28, 2010, as filed with the Securities and Exchange Commission on the date hereof (the Periodic Report), I, Raoul Tsakok, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
1. |
the Periodic 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 Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ Raoul Tsakok | |
Raoul Tsakok | ||
Chairman & CEO | ||
Date: April 14, 2010 |
EXHIBIT 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
In connection with the Quarterly Report of Sterling Group Ventures, Inc. (the Company) on Form 10-Q for the quarter ended February 28, 2010, as filed with the Securities and Exchange Commission on the date hereof (the Periodic Report), I, Richard (Xuxin) Shao, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
1. |
the Periodic 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 Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ Richard (Xuxin) Shao | |
Richard (Xuxin) Shao | ||
President & CFO | ||
Date: April 14, 2010 |