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EXCEL - IDEA: XBRL DOCUMENT - STERLING GROUP VENTURES INCFinancial_Report.xls
EX-32.2 - SECTION 906 SARBANES - OXLEY CERTIFICATION OF CFO - STERLING GROUP VENTURES INCexhibit32-2.htm
EX-32.1 - SECTION 906 SARBANES - OXLEY CERTIFICATION OF CEO - STERLING GROUP VENTURES INCexhibit32-1.htm
EX-31.1 - SECTION 302 SARBANES - OXLEY CERTIFICATION OF CEO - STERLING GROUP VENTURES INCexhibit31-1.htm
EX-31.2 - SECTION 302 SARBANES - OXLEY CERTIFICATION OF CFO - STERLING GROUP VENTURES INCexhibit31-2.htm

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

FORM 10-Q

(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended August 31, 2014.

[   ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from _________ to _______ .

Commission file number: 000-51775

STERLING GROUP VENTURES, INC.
(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.)

802 - 1067 Marinaside Cr., Vancouver, B.C. V6Z 3A4
(Address of principal executive offices) (Zip Code)

(604) 684-1001
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changes since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S–T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X]    No [   ]

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

Large accelerated filer [   ] Accelerated filer [   ] Non-accelerated filer [   ] Smaller reporting company [X]

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of October 10, 2014.

Title of each class Number of shares
Common Stock, par value $0.001 per share 75,730,341

1


STERLING GROUP VENTURES, INC.
FORM 10-Q
INDEX

  Page
     
PART I - FINANCIAL INFORMATION 3
     
Item 1. Financial Statements (unaudited) 3
     
Unaudited Interim Consolidated Balance Sheets of Sterling Group Ventures, Inc. at August 31, 2014 and May 31, 2014 3
     
Unaudited Interim Consolidated Statements of Operations for the three months ended August 31, 2014 and 2013 4
     
Unaudited Interim Consolidated Statements of Changes in Stockholders' Equity for the three months ended August 31, 2014 and year ended May 31, 2014 . 5
     
Unaudited Interim Consolidated Statements of Cash Flows for the three months ended August 31, 2014 and 2013 6
     
  Notes to the Unaudited Interim Consolidated Financial Statements 7-12
     
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations  13
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk   17
     
Item 4. Controls And Procedures 17
     
     
PART II - OTHER INFORMATION 18 
     
Item 1. Legal Proceedings 18
     
Item 1A  Risk Factors 18
     
Item 2. Unregistered Sales of Equity Securities and Use of proceeds 20
     
Item 3. Defaults Upon Senior Securities 20
     
Item 4. Mine Safety Disclosures 20
     
Item 5. Other Information 20
     
Item 6. Exhibits 20
     
Signatures 21
     
Index to Exhibits 22

2



PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

STERLING GROUP VENTURES, INC.
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
August 31, 2014 and May 31, 2014

Stated in U.S. dollars   August 31, 2014     May 31, 2014  
    (Unaudited)     (Audited)  
ASSETS            
             
Current Assets            
   Cash and cash equivalents $  1,612,814   $  1,673,448  
   GST receivable   22,380     20,116  
   Prepaid expenses and other receivable   19,755     9,163  
Total current assets   1,654,949     1,702,727  
             
Equipment - Note 4   142,985     151,397  
Environmental deposit - Note 3(a)   128,506     126,366  
Mineral Properties - Note 3(a)   3,148,740     3,148,740  
Total Assets $  5,075,180   $  5,129,230  
             
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current Liabilities            
   Accounts payable and other accrued liabilities - Note 5 $  481,108   $  456,564  
             
Deferred income tax liability   732,687     732,687  
Total Liabilities   1,213,795     1,189,251  
             
Stockholders' Equity            
   Common Stock : $0.001 Par Value - Note 6 
         Authorized : 500,000,000 
         Issued and Outstanding : 75,730,341 (May 31, 2014: 75,730,341)
  75,730     75,730  
   Additional Paid In Capital - Note 6   10,724,416     10,724,416  
   Accumulated Other Comprehensive Loss   (582 )   (582 )
   Cumulative deficit   (6,938,179 )   (6,859,585 )
Total Stockholders' Equity   3,861,385     3,939,979  
             
Total Liabilities and Stockholders' Equity $  5,075,180   $  5,129,230  

See accompanying notes to consolidated financial statements

3


STERLING GROUP VENTURES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended August 31, 2014 and 2013
(Unaudited)

    Three months ended August 31,  
Stated in U.S. dollars   2014     2013  
             
Expenses            
 Accounting, audit, legal and professional fees $  37,391   $  22,100  
 Bank charges   225     116  
 Consulting fees - Note 5   6,049     6,255  
 Depreciation - Note 4   11,282     11,444  
 Filing fees and transfer agent   4,686     3,625  
 Foreign exchange loss (gain)   (13,239 )   (6,609 )
 General and administrative   509     475  
 Mineral property costs - Note 3   34,585     95,091  
 Shareholder information and investor relations   2,149     1,700  
    (83,637 )   (134,197 )
             
Other items            
 Interest income   5,043     1,639  
 Other income - Note 3(a)   -     6,013  
    5,043     7,652  
             
Net loss and Comprehensive loss for the period $  (78,594 ) $  (126,545 )
             
Basic and diluted loss per share $  (0.00 ) $  (0.00 )
             
Weighted average number of shares outstanding   75,730,341     75,730,341  

See accompanying notes to consolidated financial statements

4


STERLING GROUP VENTURES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the three months ended August 31, 2014 and year ended May 31, 2014
(Unaudited)

                      Accumulated              
          Stock     Additional     Other              
    Common     Amount At     Paid In     Comprehensive     Cumulative        
Stated in U.S. dollars   Shares     Par Value     Capital     Loss     Deficit     Total  
                                     
Balance, May 31, 2013   75,730,341   $  75,730   $  10,724,416   $  (582 ) $  (6,462,279 ) $  4,337,285  
Net loss for the year   -     -     -     -     (397,306 )   (397,306 )
Balance, May 31, 2014   75,730,341   $  75,730   $  10,724,416   $  (582 ) $  (6,859,585 ) $  3,939,979  
Net loss for the period   -     -     -     -     (78,594 )   (78,594 )
Balance, August 31, 2014   75,730,341   $  75,730   $  10,724,416   $  (582 ) $  (6,938,179 ) $  3,861,385  

See accompanying notes to consolidated financial statements

5


STERLING GROUP VENTURES, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended August 31, 2014 and 2013
(Unaudited)

    Three months ended August 31,  
Stated in U.S. dollars   2014     2013  
Cash flows from operating activities            
   Net loss for the period $  (78,594 ) $  (126,545 )
   Adjustments to reconcile net loss to net cash provided by (used in)
       operating activities
       
   Depreciation   11,282     11,444  
   Foreign exchange   (4,788 )   (801 )
             
Changes in non-cash working capital items            
   GST receivable   (2,264 )   (1,456 )
   Prepaid expenses and other receivable   (10,416 )   8,080  
   Accounts payable and accrued liabilities   24,317     (7,297 )
Net cash used in operating activities   (60,463 )   (116,575 )
             
Cash flows from investing activities            
   Additions to equipment   (397 )   (3,895 )
Net cash used in investing activities   (397 )   (3,895 )
             
Cash flows from financing activities            
   Amounts contributed by (repaid to) a director   226     (5,815 )
Net cash provided by (used in) financing activities   226     (5,815 )
             
Net decrease in cash and cash equivalents   (60,634 )   (126,285 )
Cash and cash equivalents - beginning of period   1,673,448     2,036,805  
Cash and cash equivalents - end of period $  1,612,814   $  1,910,520  
             
Supplemental Information :            
Cash paid for :            
   Interest $  -   $  -  
   Income taxes $  -   $  -  

See accompanying notes to consolidated financial statements

6


Sterling Group Ventures, Inc.
Notes to Condensed Interim Consolidated Financial Statements
August 31, 2014
(Stated in US Dollars)
(Unaudited)

Note 1 Nature of Operations and Ability to Continue as a Going Concern
   

Sterling Group Ventures, Inc. was incorporated in the State of Nevada on September 13, 2001 and its fiscal year-end is May 31. On January 20, 2004, the Company acquired all of the issued and outstanding shares of Micro Express Ltd. (“Micro”), which was incorporated on July 27, 1994. The business combination was accounted for as a reverse acquisition whereby the purchase method of accounting was used with Micro being the accounting acquirer and the Company being the accounting subsidiary.

   

Sterling Group Ventures, Inc. (the “Company”) 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 recoverability of amounts from these properties will be dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under the joint venture agreements and to complete the development of the properties and upon future profitable production or proceeds from the sale thereof.

   

These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown as these 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. The Company incurred a net loss of $78,594 during the period ended August 31, 2014 and, as at that date, had a cumulative loss of $6,938,179 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances; however there is no assurance of additional funding being available.

   

These condensed interim financial statements should be read in conjunction with the annual audited financial statements of the Company for the fiscal year ended May 31, 2014, included in the Company’s 10-K Annual Report as filed with the United States Securities and Exchange Commission.

   

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., Makaelo Limited, Silver Castle Investments Limited (“Silver Castle”) and its 100% controlled subsidiary, Chenxi County Hongyu Mining Co. Ltd. ("Hongyu"). All inter-company transactions and account balances have been eliminated.

   
Note 2

Recent Accounting Pronouncements

   

The Company has evaluated all the recent accounting pronouncements and the effect on the Company’s consolidated financial statements.

7


Sterling Group Ventures, Inc.
Notes to Condensed Interim Consolidated Financial Statements
August 31, 2014
(Stated in US Dollars)
(Unaudited)

Note 2 Recent Accounting Pronouncements – (cont’d)
   

On June 1, 2014, the Company adopted ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). The ASU 2013-04 amendments add to the guidance in FASB Accounting Standards Codification [FASB ASC] Topic 405, entitled Liabilities and require reporting entities to measure obligations resulting from certain joint and several liability arrangements where the total amount of the obligation is fixed as of the reporting date, as the sum of the following:


  The amount the reporting entity agreed to pay on the basis of its arrangement among co-obligors.
  Any additional amounts the reporting entity expects to pay on behalf of its co-obligors.

Adoption of ASU 2013-04 did not have a material impact on the Company’s consolidated financial statements or disclosures.

On June 1, 2014, the Company adopted ASU 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (“ASU 2013-05”). ASU 2013-05 updates accounting guidance related to the application of consolidation guidance and foreign currency matters. This guidance resolves the diversity in practice about what guidance applies to the release of the cumulative translation adjustment into net income. Adoption of these changes did not have a material impact on the Company’s consolidated financial statements or disclosures.

On June 1, 2014, the Company adopted ASU 2013-07, Liquidation Basis of Accounting (“ASU 2013-07”). With ASU 2013-07, the FASB amends the guidance in the FASB Accounting Standards Codification Topic 205, entitled Presentation of Financial Statements. The amendments serve to clarify when and how reporting entities should apply the liquidation basis of accounting. The guidance is applicable to all reporting entities, whether they are public or private companies or not-for-profit entities. The guidance also provides principles for the recognition of assets and liabilities and disclosures, as well as related financial statement presentation requirements. Reporting entities are required to apply the requirements in ASU 2013-07 prospectively from the day that liquidation becomes imminent. The adoption of ASU 2013-07 did not have a material effect on the Company’s operating results or financial position.

On June 1, 2014, the Company adopted ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2013-11"), which sets forth explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The adoption of ASU 2013-11 did not have a material impact on the Company's financial position or results of operations.

On June 1, 2014, the Company adopted ASU 2014-10, Development Stage Entities (“ASU 2014-10”), which intends to remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. Generally Accepted Accounting Principles. In addition, the update eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The adoption of this update had a material impact on the presentation of the Company's financial statements in that the Company will no longer be required to present inception-to-date information on the statements of operations, cash flows and changes in capital deficit.

8


Sterling Group Ventures, Inc.
Notes to Condensed Interim Consolidated Financial Statements
August 31, 2014
(Stated in US Dollars)
(Unaudited)

Note 3 Mineral Properties
   

A summary of mineral properties costs for the cumulative period from the year ended May 31, 2014 to August 31, 2014 were incurred and accounted for in the consolidated statement of operations as follows:


    Gaoping  
    Phosphate  
Summary of mineral property expenditures   Property  
       
Balance, May 31, 2013 $  683,622  
Administrative   11,583  
Consulting fees   34,597  
Engineering   50,035  
Field supplies   4,513  
Recording fees   3,263  
Technical reports   36,808  
Travel & promotion   27,734  
Wages and benefits   69,008  
Balance, May 31, 2014 $  921,163  
Administrative   1,808  
Consulting fees   7,010  
Engineering   2,179  
Travel & promotion   9,346  
Wages and benefits   14,242  
Balance, August 31, 2014 $  955,748  

  a)

Gaoping Phosphate Property

     
 

On October 18, 2010, the Company signed two agreements (the "Agreements") with Chenxi County Hongyu Mining Co. Ltd. ("Hongyu") and its shareholders ("Hongyu Shareholders") regarding the Gaoping phosphate mine (the "GP Property") located in Tanjiachang village, Chenxi County, Hunan Province, China and other phosphate resources in Hunan Province. Hongyu holds a business license and a mining permit in the GP Property which is in effect until November 10, 2014.

     
 

The Agreements required an investment company to be incorporated in Hong Kong (the “Investment Company”) which was to be owned 20% by the Hongyu Shareholders and 80% by the Company. On October 13, 2010, the Investment Company was incorporated in Hong Kong under the name Silver Castle Investments Ltd. (“Silver Castle”). Silver Castle acquired 90% of Hongyu and the other 10% of Hongyu was transferred to the nominees of the Company. During the acquisition phase, the Company ensured that Hongyu’s net assets retained a minimum value of RMB 5,000,000 ($771,545). Upon completion of this acquisition, Hongyu became a Hong Kong / China joint venture company. The Company received all required approvals from Chinese authorities for the completion of its acquisition of Hongyu pursuant to the Agreements dated October 18, 2010. The Company paid RMB 200,000 ($30,934) to the Hongyu shareholders as a down payment on December 14, 2010, the Company also deferred $25,083 of legal fees related to the acquisition of Hongyu. The remaining RMB1,800,000 ($279,504) was paid on July 8, 2011, to complete the transaction, for a total of RMB 2,000,000 ($310,438).

9


Sterling Group Ventures, Inc.
Notes to Condensed Interim Consolidated Financial Statements
August 31, 2014
(Stated in US Dollars)
(Unaudited)

Note 3 Mineral Properties – (cont’d)

  a)

Gaoping Phosphate Property – (cont’d)

     
 

Pursuant to the Agreements, Hongyu agreed to surrender its future exclusive cooperative rights to the Company, and the Hongyu Shareholders agreed that the Company shall have all Hongyu's title and interest in any phosphate properties, including but not limited to the GP Property, and the Company arranged for the financing of building a mining and processing plant on the GP Property together with other facilities required for a mining operation thereon.

     
 

When requested by the Company, the Hongyu Shareholders agreed to sell their 20% interest in the Investment Company to the Company for the issuance of 10,000,000 common shares of the Company’s capital stock. On July 5, 2011, the Company issued 10,000,000 shares to the Hongyu Shareholders with the closing market price of the shares at $0.22 for acquiring the remaining 20% equity interest in Silver Castle from the Hongyu Shareholders. As a result of this transaction, the Company effectively controls 100% of Hongyu through its wholly owned subsidiary, Silver Castle Investments Ltd. which holds 90% of Hongyu with the other 10% held by the nominees of the Company.

     
 

The acquisition was treated as an acquisition of assets rather than a business combination because Hongyu does not constitute a business according to the definition of business under FASB ASC Topic 805 “Business Combinations”. The acquisition was accounted for based on the cash paid and quoted market price of the Company’s common shares issued as part of the transaction.

     
 

There were no liabilities assumed during the acquisition. Details of the purchase consideration and net assets acquired are as follows:


  Purchase price:      
         Cash consideration (1) $  310,438  
         Common shares (1)   2,200,000  
         Transaction costs (2)   27,749  
    $  2,538,187  
         
  Allocated to:      
         Environmental deposit $  122,134  
         Mineral property   3,148,740  
         Deferred tax liability   (732,687 )
    $  2,538,187  

  (1)

Consideration paid consisted of an aggregate cash payment of RMB2,000,000 ($310,438) and issuance of 10,000,000 shares of common stock at $0.22 per share which was the closing price of the Company’s shares on the date of acquisition.

     
  (2)

Incurred in connection with the acquisition were transaction costs of $27,749 which were included as part of the purchase consideration.

During the period ended August 31, 2014, the Company recorded income of $nil (2013: $6,013) through the sale of minerals extracted during the work done for the preparation of production. The amount was reported as other income in the consolidated statement of operations.

During the period ended August 31, 2014, the Company incurred mineral property expenditures of $34,585 (August 31, 2013: $95,091). As of August 31, 2014, the Company has incurred total mineral property costs of $955,748 on this property which have been expensed to the statement of operations as disclosed in the table above.

10


Sterling Group Ventures, Inc.
Notes to Condensed Interim Consolidated Financial Statements
August 31, 2014
(Stated in US Dollars)
(Unaudited)

Note 4 Equipment

      August 31, 2014     May 31, 2014  
            Accumulated     Net Book           Accumulated     Net Book  
      Cost     Depreciation     Value     Cost     Depreciation     Value  
                                       
  Computer equipment $  14,141   $  13,347   $  794   $  13,716   $  13,129   $  587  
  Automobile   60,782     29,960     30,822     59,770     26,452     33,318  
  Office equipment   3,622     2,979     643     3,562     2,633     929  
  Machinery   166,064     55,338     110,726     163,298     46,735     116,563  
    $  244,609   $  101,624   $  142,985   $  240,346   $  88,949   $  151,397  

 

The depreciation for the period ended August 31, 2014 was $11,282 (2013: $11,444).

 

 

Note 5

Related Party Transactions

 

 

The Company was charged consulting fees for administrative, corporate, financial, engineering, and management services during the three-month period ended August 31, 2014 totalling $5,548 (2013: $5,747) by companies controlled by a director of the Company.

 

 

Included in accounts payable and accrued liabilities is $450,352 (May 31, 2014: $450,126) which was due to companies controlled by the directors for their services provided in previous years.

 

 

 

These transactions were measured at the amount of consideration established and agreed to by the related parties.

 

 

Note 6

Capital Stock

 

 

 

a)        Capital Stock

 

 

 

There was no share issuance during the three-month period ended August 31, 2014 or the year ended May 31, 2014.

 

 

 

b)        Stock Options

 

 

There were no stock options granted during the three-month period ended August 31, 2014 or the year ended May 31, 2014.

 

 

At August 31, 2014, there were 5,200,000 stock options (May 31, 2014: 5,200,000) outstanding and exercisable with an exercise price at $0.25 each expiring on February 3, 2019, with an aggregate intrinsic value of $nil (May 31, 2014: $nil) and a weighted average remaining contractual term of 4.43 years (May 31, 2014: 4.68 years).

11


Sterling Group Ventures, Inc.
Notes to Condensed Interim Consolidated Financial Statements
August 31, 2014
(Stated in US Dollars)
(Unaudited)

c)        Share Purchase Warrants

There were no changes in share purchase warrants for the three-month period ended August 31, 2014 and year ended May 31, 2014. At August 31, 2014, there were 24,570,000 share purchase warrants (May 31, 2014: 24,570,000) outstanding and exercisable with weighted average exercise price at $0.204.

Share purchase warrants outstanding at August 31, 2014:

Series   Number     Price   Expiry Date
"A"   3,817,500   $  0.50   February 17, 2015
"D"   20,752,500   $  0.15   February 17, 2015
    24,570,000          

Note 7 Foreign Currency Risk
   

The Company is exposed to fluctuations in foreign currencies through amounts held in China in RMB: Cash and cash equivalents $535,309 (May 31, 2014 - $552,742).

 

 

The Company is exposed to fluctuations in foreign currencies through amounts held in Canada in CAD: Cash $70,285 (May 31, 2014 - $44,503).

 

 

The Company is exposed to fluctuations in foreign currencies through amounts held in Hong Kong in HKD: Cash $239 (May 31, 2014 - $268).

   
Note 8

Segment Information

 

 

The Company operates in Canada and China, with operations in the mineral resources sector. The Company’s assets are allocated to each country as follows:


      August 31, 2014     May 31, 2014  
      Canada     China     Total     Canada     China     Total  
                                       
  Cash and cash equivalents $  138,815   $  1,473,999   $  1,612,814   $  182,102   $  1,491,346   $  1,673,448  
  Prepaid expense and receivable   29,211     12,924     42,135     20,994     8,285     29,279  
  Equipment   459     142,526     142,985     119     151,278     151,397  
  Environmental deposit   -     128,506     128,506     -     126,366     126,366  
  Mineral properties   -     3,148,740     3,148,740     -     3,148,740     3,148,740  
    $  168,485   $  4,906,695   $  5,075,180   $  203,215   $  4,926,015   $  5,129,230  

12


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, 2014, the financial statements and related notes in this Quarterly Report for the period ended August 31, 2014, the risk factors in our 10K for the year ended May 31, 2014, 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

Business of Sterling Group Ventures Inc.

Sterling is a natural resource company engaged in acquisition, exploration and development of mineral properties. At present, the Company acquired the Gaoping phosphate Property and is developing the Gaoping phosphate property for the exploration and production of phosphate concentrate. It continues to seek out other projects to add value to the Company.

Gaoping Phosphate Property

On October 18, 2010, Sterling signed two agreements (the "Agreements") with Chenxi County Hongyu Mining Co. Ltd. ("Hongyu") and its shareholders ("Hongyu Shareholders") regarding the Gaoping phosphate mine (the "GP Property") located in Tanjiachang village, Chenxi County, Hunan Province, China and other phosphate resources in Hunan Province. Hongyu holds a business license and a mining permit in the GP Property which is in effect until November 10, 2014 and covers 42.5 hectares.

The Agreements required an investment company to be incorporated in Hong Kong (the "Investment Company") which was to be owned 20% by the Hongyu Shareholders and 80% by Sterling. On October 13, 2010, the Investment Company was incorporated in Hong Kong under the name Silver Castle Investments Ltd. ("Silver Castle"). Silver Castle acquired 90% of Hongyu and the other 10% of Hongyu was transferred to the nominees of Sterling. During the acquisition phase, Sterling ensured that Hongyu's net assets retained a minimum value of RMB 5,000,000 ($771,545). Upon completion of this acquisition, Hongyu became a Hong Kong / China joint venture company. Sterling received all required approvals from Chinese authorities for the completion of its acquisition of Hongyu pursuant to the Agreements dated October 18, 2010. Sterling paid a total RMB 2,000,000 ($310,438) to the Hongyu Shareholders with RMB 200,000 (US$30,934) paid as down payment on December 14, 2010 and the remaining RMB1,800,000 ($279,504) paid on July 8, 2011 for completion of the transaction.

Pursuant to the Agreements, Hongyu agreed to surrender its future exclusive cooperative rights to Sterling, and the Hongyu Shareholders agreed that Sterling shall have all Hongyu's title and interest in any phosphate properties, including but not limited to the GP Property, and Sterling should arrange for the financing of building a mining and processing plant on the GP Property together with other facilities required for a mining operation thereon.

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When requested by Sterling, the Hongyu Shareholders agreed to sell their 20% interest in the Investment Company to Sterling for the issuance of 10,000,000 common shares of Sterling's capital stock. On July 5, 2011, Sterling issued 10,000,000 shares to the Hongyu Shareholders with the closing market price of the shares at $0.22 for acquiring the remaining 20% equity interest in Silver Castle from the Hongyu Shareholders. As a result of this transaction, Sterling effectively controls 100% of Hongyu through its wholly owned subsidiary, Silver Castle Investments Ltd. which holds 90% of Hongyu with the other 10% held by the nominees of Sterling.

Sterling through its subsidiary company, Silver Castle Investments Ltd., also signed a letter of intent for a larger area known as Tanjiachang Exploration Concession with Chenxi County Merchants Bureau, Hunan Province, China. Tanjiachang Exploration Concession is surrounding the Gaoping Mining permit.

As mining license was obtained for the Gaoping Phosphate Property and a Chinese engineering report was completed, Hongyu is making progress on this property as follows. On February 13, 2012, Hongyu received approval for installing the power line for the Gaoping Phosphate Property. Hongyu also reached understanding for land rental with local village committee on March 17, 2012. Hongyu signed and completed land rental agreement with each family in the mining area on March 27, 2012. On April 1, 2012, Hongyu also received conditional safety approval from Supervision and Management Bureau for Safety Operation of Chenxi County and the project is essentially ready to begin production on a small scale basis to be further ramped up as the development and production plan takes effect. On April 22, 2012, Hongyu signed a mining agreement with the mining contractor, Yichang Rongchang Mining Co. Ltd., to be the operator of the mining and production activities on the project. On June 16, 2012, Hongyu completed power line construction. On July 19, 2012, Hongyu received the explosive operation permit. Accommodation for mining people has been built. An onsite office and accommodation for workers and mining management are complete. The water supply for the mining operation and living quarters is connected to the site. The road to the mining site has been completed. Three adits have been dug and they will be used to access the phosphorite along its strike length.

On March 10, 2013, Hongyu signed a profit sharing agreement with Yichang Baolin Mining Engineering Co. Ltd ("Baolin") for mining and processing phosphate rock from the Project. Baolin has a processing plant using a scrubbing processing which can process up to 100,000 t/a. However, Baolin has also built a new simple washing processing plant near Gaoping property to reduce the transportation cost. Hongyu has also signed an agreement with the Yichang Yinuo Biotech Co. Ltd ("Yinuo") to jointly produce and market bio-phosphate fertilizer. Yinuo has its own microbial inoculants and its fertilizer market brand is Mingxinglinde which is an organic biofertilizer. The aforementioned progress is presented as an interim measure to gauge the ease and efficiency of the mining process together with the efficacy of the contractual arrangements made to produce and market the phosphate rock.

As a substantial decrease of phosphate rock and phosphate fertilizer market pricing has occurred, Hongyu has halted further exploration and development since August 2013 until the world market prices rebound and has kept the property in care and maintenance mode. Such an action preserves the phosphate rock in situ and saves operating capital while world prices for phosphate rock are in a depressed state. The Company's capital contributions to the project were held to a minimum by its contracting the mining and washing functions to Yichang Baolin Mining Engineering Co. Ltd. In the interim, the Company is in the process of renewal of the mining permit for future operations on the property.

The Company has continued the services of several key employees in China to review other mining properties and opportunities. In pursuit of one such opportunity, Hongyu has obtained a registration code from Customs of People's Republic of China for the import and export business which may afford the Company the opportunity to act as an agent or distributor for the importation and exportation of fertilizer products.

As of August 31, 2014, the Gaoping mineral property is still an exploration stage property as it does not yet have proven reserves.

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.

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We believe that of our significant accounting policies, which are described in Note 2 to our annual financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, the following policies are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Basis of Presentation

These consolidated financial statements include the accounts of our Company and our wholly-owned subsidiaries, Micro Express Holdings Inc., Micro Express Ltd., Huyana Ventures Limited, Makaelo Holdings Inc., Makaelo Limited, Silver Castle Investments Limited ("Silver Castle") and our 100% controlled subsidiary, Chenxi County Hongyu Mining Co. Ltd. ("Hongyu"). All inter-company transactions and account balances have been eliminated.

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, 2014 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, 2014 annual consolidated financial statements.

Operating results for the three months ended August 31, 2014 are not necessarily indicative of the results that can be expected for the year ending May 31, 2015.

Mineral Property Costs

Costs of acquiring mineral properties are capitalized by the project area unless the mineral properties do not have proven reserves. Costs to maintain mineral rights and leases are expensed as incurred. When a property reaches the production state, the related capitalized costs are amortized using the unit of production method on the basis of annual estimates of ore reserves. The Company does not consider a resource property to be at the development stage until such time as either mineral reserve are proven or permits to operate the mineral resource property are received and financing to complete the development has been obtained. Development expenditures incurred subsequent to a development decision, and to increase or to extend the life of existing production, are capitalized and amortized on the unit of production method based upon estimated proven and probable reserves or resources.

Management reviews the carrying value of mineral properties at least annually and will recognize impairment in value based upon current exploration results, and any impairment or subsequent losses are charged to operations at the time of impairment. If a property is abandoned or sold, its capitalized costs are charged to operations. Mineral property exploration costs are expensed as incurred. Exploration activities conducted jointly with others are reflected at the Company's proportionate interest in such activities. As of August 31, 2014, the Company did not have proven or probable ore reserves.

Stock-based Compensation

In accordance with ASC Topic 718-10 compensation expenses is amortized on a straight-line basis over the requisite service period which approximates the vesting period rather than as a reduction of taxes paid. The Company has elected to use the Black-Scholes option pricing model to determine the fair value of options and the extension of the expiry date of share purchase warrants previously granted. The Company has estimated the fair value of share purchase warrants and options for the period ended August 31, 2014 and the year ended May 31, 2014 using the assumptions more fully described in Note 6(b) & (c) to the financial statements.

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Foreign Currency Translation

Our functional and reporting currency is U.S. dollars. Our consolidated financial statements are translated to U.S. dollars in accordance with ASC 830, "Foreign Currency Matters". Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. We have not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from these estimates.

Going Concern

These consolidated financial statements have been prepared on a going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. These consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary if we are unable to continue as a going concern.

In order to continue as a going concern, we require additional financing. 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 continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in the preparation of the consolidated financial statements.

At August 31, 2014, the Company had not yet achieved profitable operations and has accumulated losses of $6,938,179 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances; however there is no assurance of additional funding being available.

Results Of Operations

The Company had no operating revenue except interest income of $5,043 for the quarter ended August 31, 2014 compared with interest income of $1,639 and other income of $6,013 from the sale of minerals extracted during the work done for the preparation of production for the quarter ended August 31, 2013. The operating loss for the quarter ended August 31, 2014 was $78,594, as compared to operating loss of $126,545 for the quarter ended August 31, 2013.

Accounting, audit, legal and professional fees increased by $15,291 for the three months ended August 31, 2014 when compared to the same period in 2013.

Foreign exchange gain increased by $6,630 for the three months ended August 31, 2014 when compared to the same period in 2013 because of the exchange rate fluctuation among US dollar, Canadian dollar and RMB.

Filing fees increased by $1,061 for the three months ended August 31, 2014 when compared to the same period in 2013.

Mineral property costs decreased by $60,506 for the three months ended August 31, 2014 when compared to the same period in 2013 because developing the Gaoping phosphate property and building the mining facility was paused during the period ended August 31, 2014 since the phosphate market was getting worse.

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The Company expects the trend of losses to continue until we can achieve commercial production at the Gaoping phosphate project, of which there can be no assurance as described in Risk Factors.

Liquidity And Working Capital

As of August 31, 2014, the Company had total current assets of $1,654,949 and total current liabilities of $481,108. As of August 31, 2014, the Company had cash totaling $1,612,814, and a working capital of $1,173,841.

Cash used in operating activities for the quarter ended August 31, 2014 was $60,463 as compared to cash used in operating activities for the quarter ended August 31, 2013 was $116,575.

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. If all warrants outstanding are exercised, the Company will receive approximately $5 million in cash. The Company's current cash can meet its short term needs. The cash will be mainly used for mining property exploration and development, general administrative, corporate (accounting, audit, and legal), financing and management.

No other 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. In order to continue as a going concern, we require additional financing.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

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 mining 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 were to start appreciating 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.

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.

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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.

There is Substantial Doubt About the Company's Ability to Continue as a Going Concern

Sterling is engaged in acquisition, exploration and development of mineral properties. The Company has acquired the Gaoping phosphate properties located in Chenxi County, Hunan Province, China. 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.

Lack of Technical Training of Management

The Management of our Company has academic and scientific experience related to mining issues but lacks technical training and experience exploring for, commissioning and operating a mine. With no direct training or experience in these areas, management may not be fully aware of many of the specific requirements related to working within this industry. The decisions and choices may not take into account standard engineering or managerial approaches mineral exploration companies commonly use. Consequently, operations, earnings and the ultimate financial success of the Company could suffer irreparable harm due to management's lack of experience in this industry. The Company has hired an experienced mining engineer.

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 Gaoping property has been examined in the field by professional geologists/mining engineers. The Company received the National Instrument 43-101 report (Canadian Standard) entitled "Property Evaluation Report" (PER). The production decision announced was based on Chinese Technical Reports and the PER and not based on a Preliminary Economic Assessment (PEA) or mining study (a Prefeasibility or Feasibility Study) of mineral reserves demonstrating economic and technical viability. Resources that are not reserves do not have demonstrated economic viability. There is an increased risk of technical and economic failure because the development decision was based on inferred resources, without a preliminary economic analysis or mining study as defined by NI 43-101. Professional geologists also made an exploration proposal for the Tanjiachang Exploration Concession which is surrounding the Gaoping property which is under letter of intent with Chenxi County Merchants Bureau, Hunan Province, China. There is no assurance that the exploration license for the Tanjiachang Exploration Concession will be issued. There is no assurance that commercial quantities of ore will be discovered on the Tanjiachang Exploration Concession. There is also no assurance that, even if commercial quantities of ore are discovered, the Tanjiachang Exploration Concession will be brought into commercial production. Since 2012, the Central Government made its move to change the mining laws to provincial jurisdiction. The new application process was held. Previously issued licenses are being honored.

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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 and depending upon 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 properties may need exploration and such exploration processes shall be conducted in phases. When each phase of a particular project is completed, and upon analysis of the results thereto, the Company will make a decision on 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. The Company hired an experienced mining engineer.

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 OTCQB marketplace under the ticker symbol SGGV. As of August 31, 2014, there were 75,730,341 shares of common stock outstanding. There can be no assurance that a trading market will be sustained in the future.

Dependence on Executive Officers and Technical Personnel

The success of our business plan depends on attracting qualified personnel, and failure to retain the necessary personnel could adversely affect our business. Competition for qualified personnel is intense, and we may need to pay premium wages to attract and retain personnel. Attracting and retaining qualified personnel is critical to our business. Inability to attract and retain the qualified personnel necessary would limit our ability to implement our business plan successfully.

Need for Additional Financing

The Company believes it has sufficient capital to meet its short-term cash needs, including the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934. However, if losses continue, it may have to seek loans or equity placements to cover longer-term cash needs to continue operations and expansion.

No commitments to provide additional funds have been made by management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover operation expenses. If future operations are unprofitable, it will be forced to develop another line of business, or to finance its operations through the sale of assets it has, or enter into the sale of stock for additional capital, none of which may be feasible when needed. The Company has no specific management ability or financial resources or plans to enter any other business as of this date.

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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, which will significantly dilute the Company's stockholders.

Market Risk and Political Risks

The Company does not hold any derivatives or other investments that are subject to market risk. The carrying values of any financial instruments, approximate fair value as of those dates because of the relatively short-term maturity of these instruments, which eliminates any potential market risk associated with such instruments.

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.

The disruptions in the financial markets and economic conditions have adversely affected the US and the world economy. Turmoil in global credit markets and turmoil in the geopolitical environment in many parts of the world have adversely affected global economic conditions. There can be no assurances that government responses to the disruptions in financial markets will restore investor confidence and economic activity. This could affect our ability to raise capital. Additionally, the uncertain economic environment may cause farmers to use less fertilizer to cut costs, which will adversely affect the demand for phosphate. A similar situation occurred in 2008 leading to a sharp decline in phosphate prices. The Hongyu's phosphate deposit is located in China which, as a result of its operations, exposes the Company to political and market risks in China. Exports of phosphate rock are currently subject to an export tax due to domestic phosphate requirements.

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.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

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 22 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

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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/ Christopher Tsakok
  Christopher Tsakok, Chairman and Chief Executive Officer
Date: October 14, 2014
   
  /s/ Richard Shao
  Richard Shao, President and Chief Financial Officer
Date: October 14, 2014

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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 Company’s 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 Company’s 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).

10.6

Agreement between the Company, Hongyu Mining Co., Ltd. , and shareholders of Hongyu Mining Co., Ltd., dated October 18, 2010 (Filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on October 21, 2010, and incorporated herein by reference).

10.7

Letter of Intent between the Company and Shimen County Merchants Bureau, dated November 10, 2010 (Filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on November 16, 2010, and incorporated herein by reference).

10.8

Agreement for Termination of Joint Venture between the Company, Micro Express Holdings Inc. and Beijing Mianping Salt Lake Research Institute, dated October 31, 2011 (Filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on November 3, 2011, 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

Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

31.2

Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

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)

101.INS XBRL Instance Document. Furnished herewith.
101.SCH XBRL Taxonomy Extension Schema Document. Furnished herewith.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. Furnished herewith.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document. Furnished herewith.
101.LAB XBRL Taxonomy Extension Label Linkbase Document. Furnished herewith.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. Furnished herewith.

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