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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-KSB/A

AMENDMENT #1

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended MAY 31, 2007

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT

For the transition period from _______ to _______

Commission file number: 000-51775

STERLING GROUP VENTURES,
INC.(Exact name of small business issuer in its
charter)

|Nevada                                           | 72-1535634                          
|------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    |                                     
|                                                 |                                     
|900  789 West Pender Street                     |                                     
|Vancouver BC                                     | V6C 1H2                             
|(Address of principal executive offices)         | (Zip Code)                          

Issuers telephone number: (604) 893-8891

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

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

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

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB. [X]

The issuer's revenues for its most recent fiscal year ended May
31, 2007 were nil

Aggregate market value of the voting and non-voting share of
Common Stock held by non-affiliates was approximately $2,007,725 based on
the closing trading price for the common equity as of August 8, 2007(at
$0.084 per share closing price).

1

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**(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PAST FIVE YEARS)**

Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by a court. Yes
[   ]  No [X]

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practicable date: 43,501,490
common shares issued and outstanding as of August 8, 2007.

Transitional Small Business Disclosure Format (Check one): Yes [  
  ]   No [X]

EXPLANATORY NOTE

Sterling Group Ventures Inc. is filing this Form 10-KSB/A-1 to its Annual Report on Form 10-KSB for the year ended  May 31, 2007, as originally  filed with SEC on August 29, 2007, for the following purposes:

- Revising  the  Company's  disclosures  under  Item  8A.  "Controls and Procedures" to comply with Item 307 of Regulation S-B.

- Revising the Financial Statement to clarify the audit status of the Schedule of Mineral Property Costs.

- Revising Note 10 of the Notes to the Financial Statement under "Accounting Policies - Mineral Properties" to make it clear and appropriate.

2

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STERLING GROUP VENTURES, INC. FORM 10-KSB/AINDEX

|               |                                                                                                            | Page
|-------------- | ---------------------------------------------------------------------------------------------------------- | ----
|               |                                                                                                            |     
|               | Part
      I                                                                                               |     
|               |                                                                                                            |     
|Item
      1.  | Description
      of Business                                                                              | 4   
|               |                                                                                                            |     
|Item
      2.  | Description
      of Property                                                                              | 6   
|               |                                                                                                            |     
|Item
      3.  | Legal
      Proceedings                                                                                    | 12  
|               |                                                                                                            |     
|Item
      4.  | Submission
      of Matters to a Vote of Security Holders                                                  | 12  
|               |                                                                                                            |     
|               | Part
      II                                                                                              |     
|               |                                                                                                            |     
|Item
      5.  | Market
      for Common Equity and Related Stockholder Matters                                             | 12  
|               |                                                                                                            |     
|Item
      6.  | Management's
      Discussion and Analysis or Plan of Operation                                            | 14  
|               |                                                                                                            |     
|Item
      7.  | Financial
      Statements                                                                                 | 20  
|               |                                                                                                            |     
|Item
      8.  | Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure           | 20  
|               |                                                                                                            |     
|Item
      8A. | Controls
      and Procedures                                                                              | 21  
|               |                                                                                                            |     
|Item
      8B. | Other
      Information                                                                                    | 21  
|               |                                                                                                            |     
|               | Part
      III                                                                                             |     
|               |                                                                                                            |     
|Item
      9.  | Directors,
      Executive Officers, Promoters and Control Persons                                         | 21  
|               |                                                                                                            |     
|Item
      10. | Executive
      Compensation                                                                               | 22  
|               |                                                                                                            |     
|Item
      11. | Security
      Ownership of Certain Beneficial Owners and Management And Related
      Stockholder Matters | 24  
|               |                                                                                                            |     
|Item
      12. | Certain
      Relationships and Related Transactions                                                       | 25  
|               |                                                                                                            |     
|               | Part
      IV                                                                                              |     
|               |                                                                                                            |     
|Item
      13. | Exhibits,
      Financial Statements and Schedules and Reports on Form 8-K                                 | 25  
|               |                                                                                                            |     
|Item
      14. | Principal
      Accountant Fees and Services                                                               | 26  
|               |                                                                                                            |     
|Signatures     |                                                                                                            | 27  

3

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PART I

Item 1. Description of Business.

Cautionary Statement Regarding Forward-Looking
Statements

This annual report contains forward-looking statements as that
term is defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial performance. Some
discussions in this report may contain forward-looking statements that involve
risk and uncertainty. A number of important factors could cause our actual
results to differ materially from those expressed in any forward-looking
statements made by us in this report. Forward-looking statements are often
identified by words like: believe, expect, estimate, anticipate,
intend, project and similar expressions or words which, by their nature,
refer to future events.

In some cases, you can also identify forward-looking statements
by terminology such as may, will, should, plans, predicts, potential
or continue or the negative of these terms or other comparable terminology.
These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
"Risk Factors", that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.

Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles. All references to CA $ refer to Canadian Dollars and
all references to "common shares" refer to the common shares in our capital
stock.

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

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

Business Development During Last Three Years

We were incorporated in the state of Nevada on September 13,
2001. Since our incorporation, we have engaged in the business of exploration
and development of a mineral property. We have not been involved in any
bankruptcy, receivership or similar proceeding, nor has there been any material
reclassification or merger, consolidation or purchase or sale of a significant
amount of assets not in the ordinary course of business.

Our Current Business

We were incorporated in the State of Nevada on September 13,
2001 and established a fiscal year end of May 31. We are a start-up, exploration
stage company engaged in the search and exploration of lithium and related
minerals; There is no assurance a commercially viable mineral deposit exists on
any of our properties. Further exploration will be required before a final
evaluation as to the economic and legal feasibility of our claims is determined.
We have not yet generated or realized any revenues from our business operations.
Our statutory registered agent's office is located at 2050 Russett Way, Carson
City, Nevada 89703 and our business office is located at 900  789 West Pender
Street, Vancouver, B.C., Canada, V6C 1H2. Our telephone number is: (604)
893-8891.

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DXC SALT LAKE PROJECT

On July 11, 2005, the Company signed a letter of intent with
Beijing Mianping Salt Lake Research Institute for the development of
Dangxiongcuo (DXC) salt lake property in Nima county of Naqu district in Tibet,
China. Pursuant to the Letter of Intent, the parties have agreed to set up a
Joint Venture Company in Tibet, China to share the benefits, risks and losses of
the project.

On September 16, 2005, the Company through its wholly owned
subsidiary, Micro Express Holdings Inc. (MEH), signed an agreement with
Beijing Mianping Salt Lake Research Institute (Mianping) for the development
of Dangxiongcuo salt lake property in Nima county of Naqu district in Tibet,
China. The Agreement follows a Letter of Intent signed between the parties on
July 11, 2005.

Pursuant to the Agreement, the parties have agreed to set up a
Cooperative Company, Tibet Saline Lake Mining High-Science & Technology Co.
Ltd. (the Cooperative) to develop DXC Salt Lake. The objective of the
Cooperative is to use the funds provided by Sterling through MEH and the skills
and technology provided by Mianping to produce lithium carbonate (Li2CO3) and
borate from brine. MEH is to own 65% and Mianping 35% of the Cooperative. It is
anticipated that the total investment in the Cooperative will be approximately
240 million RMB Yuan (or approximately US$31 million) and will result in
production of 5,000 tonnes per year of lithium carbonate and by products (sodium
borate). Mianping guarantees the production cost of lithium carbonate will be
less than 11,000 RMB yuan per tonne (or approximately US $1,500 per tonne).

On July 3, 2007, MEH received a letter from Mianping stating
that the agreement between MEH and Mianping should be deemed terminated as a
result of lack of progress in the approval for the establishment of the joint
venture company and is considering a lawsuit against the Company and MEH. MEH
has responded that Mianpings claim has no legal grounds as the lack of progress
is not caused by MEH.

Lithium carbonate is the starting point in the manufacturing of
lithium and various lithium chemicals which are used in batteries, ceramics and
glass, in primary aluminum production, in the manufacture of lubricants and
greases, drugs and others products. According to the Mineral Information
Institute (MII), most lithium is recovered from brine, or water with a high
concentration of lithium carbonate. Brines trapped in the Earths crust (called
subsurface brines) are the major source material for lithium carbonate. These
sources, which are recovered generally through solar evaporation, are less
expensive to mine than sources from rock such as spodumene, petalite, and other
lithium-bearing minerals.

JIAJIKA PROJECT

On September 16, 2003, the Company, through its wholly owned
subsidiary, Micro Express Ltd. (Micro), entered into an agreement (the
Agreement) with Sichuan Province Mining Ltd. to acquire a 75% interest in a
30-year mining joint venture company. The joint venture company will hold the
mining licenses to develop the Jiajika spodumene property located in the Sichuan
Province of China for the extraction of lithium and lithium salts. Pursuant to
the Agreement, the total investment required is estimated at 88.5 million
Chinese Yuan (US$10.8 million) for the initial capacity of 240,000 tonnes/annum.
The initial registered capital is 56 million Chinese Yuan (US$6.8 million).
Sichuan Province Mining Ltd. will contribute 14 million Chinese Yuan (US$1.7
million) including the mining permits to hold 25% of the JV company. Micro will
contribute 42 million Chinese Yuan (US$ 5.1 million) to hold 75% of the JV
company.

On May 24, 2004, the Jiajika mining permit was issued to
Sichuan Province Mining Ltd.

On April 5, 2005, the Company through Micro, signed a joint
venture contract with Sichuan Province Mining Ltd. for the establishment of
Jihai Lithium Ltd. and the development of the Jiajika lithium deposit. Pursuant
to the Contract, the project will be developed in two (2) stages.

On March 3, 2006, the Company, through its wholly owned
subsidiary, Micro Express Ltd. (Micro), signed an agreement (the Agreement)
with Sichuan Province Mining Ltd. (SPM) with respect to Micros early
investment in the Sichuan Jiajika Spodumene project.

Pursuant to the Agreement, the parties agreed to terminate the
joint venture and confirmed that Micros early investment of 2.48 million Yuan
(RMB) to the Sichuan Jiajika Spodumene project should be paid back at a rate of
1.2 million Yuan (RMB) before April 15, 2006 and 1.28 million Yuan (RMB) before
March 30, 2007. Payment should be made directly to Micro by SPM. If SPM does not
make the payment of 1.28 million to Micro before

5

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March 30, 2007, then 1.28 million yuan will be converted into
Micros interest in the Jiajika project of SPM using the formula: 1.28 million
Yuan divided by the registered capital contribution in the Jiajika project by
SPM, multiplied by 100%. Neither party shall have any other liabilities to the
other party and the Agreement shall replace all previously signed agreements,
contracts and MOU between Micro and SPM. SPM has made payment of 800,000 Yuan
(RMB) as of May 31, 2007, and another 500,000 Yuan (RMB) on June 15, 2007.

DX POLYMETALLIC PROJECT

On March 2, 2005, the Company, through its wholly owned
subsidiary, Makaelo Limited (Makaelo), a BVI company, entered into a Joint
Venture Agreement with Aifeng Li, an individual residing in Anyang, Henan
Province of China. Pursuant to the Agreement, the parties will set up a Joint
Venture company in Inner Mongolia for the exploration and development of copper
and silver in the areas of Donggou and Xiaoxigou. Aifeng Li will contribute all
the necessary exploration licenses, achievements and geological data to the
Joint Venture in exchange for 48% of the Joint Venture company, while the
Company will finance the cost of exploration in return for 52% of the Joint
Venture company. The Company expects the cost of exploration to be approximately
RMB 5,200,000 to be contributed over three years with the first year
contributing not less than RMB 2,000,000. As a joint venture contract with the
property owner could not be completed on acceptable terms, the Company decided
not to proceed with this project.

LUSHI PROJECT

On April 10, 2004, the Company, through Micro, entered into a
formal joint venture agreement with Lushi Guanpo Minerals Development Ltd. of
Lushi in Henan Province of China. The purpose of the joint venture agreement was
to bring the project into production, with Micro holding a 90% interest in the
project. Micro shall contribute the total investment in the project. Due to the
negative results of due diligence performed for the LUSHI project, the Company
decided not to proceed with this project.

DAHONGLIUTAN (DHLT) PROJECT

On May 21, 2005, the Company, through its wholly-owned
subsidiary, Huyana Ventures Limited (Huyana), signed a letter of intent
(LOI) with Xinjiang Hetian Xinlong Mining Co. Ltd. for the development of
Dahongliutan (DHLT) spodumene deposit. Pursuant to the LOI, the parties agreed
to set up a Joint Venture Company in Hetian City of Xinjiang Province in China
to share the benefits, risks and losses of the project. However, due to the
negative results of the due diligence performed on the DHLT project, the Company
decided not to proceed with this project and the letter of intent expired.

Item 2. Description of Property

Overview

On January 20, 2004, the Company acquired all the issued and
outstanding shares of Micro Express Ltd. (Micro) for 25,000,000 common shares
of the Company. Micro is a company incorporated in the British Virgin Islands
and has been inactive from incorporation until the year 2003. Since then, Micro
has entered into several agreements to develop industrial mineral properties in
China.

Through the acquisition of Micro, the Company holds the
following property interests:

(a) Jiajika Spodumene Property

On September 16, 2003, Micro entered into an agreement with
Sichuan Province Mining Ltd. to acquire 75% interest in a 30-year mining joint
venture company. The joint venture company will hold the mining licenses to
develop the Jiajika spodumene property located in Sichuan Province of China for
the extraction of lithium and lithium salts. Pursuant to the Agreement, the
initial capacity of the mine will be 240,000 tonnes/annum (t/a) and will be
increased to 900,000 t/a in stages. The Company, through Micro, is required to
contribute an estimated 42 million Chinese Yuan (US$ 5.1 million) as registered
capital to earn its 75% interest in the joint venture company for the initial
capacity of 240,000 t/a. An initial contribution of $150,000 was made by the
Company as part of the

6

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contribution to obtain the mining permit according to the
contract signed between our Chinese partner and the Sichuan Bureau of Land and
Resources.

On April 5, 2005, Micro signed a joint venture contract (the
Agreement) with a Chinese partner for the establishment of a joint venture
company, Jihai Lithium Ltd. (Jihai), and the development of the Jiajika
lithium deposit in Kangding District, Sichuan Province, China. Pursuant to the
Agreement, the project will be developed in two (2) stages with the development
of a production facility with an initial processing capacity of 240,000 tonnes
of spodumene ore per year in Stage I and then the processing capacity will be
increased to 900,000 t/a in Stage II.

On March 3, 2006, Micro signed an agreement (the Agreement)
with Sichuan Province Mining Ltd. (SPM) with respect to Micros early
investment in the Sichuan Jiajika Spodumene project.

Pursuant to the Agreement, the parties agreed to terminate the
joint venture and confirmed that Micros early investment of 2.48 million Yuan
(RMB) to the Sichuan Jiajika Spodumene project should be paid back at a rate of
1.2 million Yuan (RMB) before April 15, 2006 and 1.28 million Yuan (RMB) before
March 30, 2007. Payments should be made directly to Micro by SPM. If SPM does
not make the payment of 1.28 million to Micro before March 30, 2007, then 1.28
million yuan will be converted into Micros interest in Jiajika project of SPM
using the formula: 1.28 million Yuan divided by the registered capital
contribution in Jiajika project by SPM, multiplied by 100%. Neither party shall
have any other liabilities to the other party and the Agreement shall replace
all previously signed agreements, contracts and MOU between Micro and SPM.

As at May 31, 2007, the Company had incurred $398,407 in the
Jiajika Spodumene Property before the cumulative cost recovery of RMB 800,000
($102,731) for the year ended May 31, 2007.

The location of the property is shown in the following map.



7

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(b) Lushi Spodumene Property

On December 28, 2003, Micro entered into a Letter of Intent to
earn an interest of between 90% to 92% in a 30-year mining joint venture. The
Joint Venture will hold the rights to develop the Lushi spodumene property
located in Henan Province, China. The Company shall contribute the total
investment in the project. The amount of the investment will be determined by a
pre-feasibility study. On April 10, 2004, the Company entered the formal
joint-venture agreement with the Chinese party with the intent of bringing the
project into production and in exchange for 90% of the interest of the joint
venture. However, due to the negative results of the due diligence performed on
the Lushi project, the Company decided not to proceed with this project.

As at May 31, 2006, the Company incurred expenses of $72,912
related to the Lushi Spodumene Property.

The location of the property is shown in the following map.



8

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Through its wholly-owned subsidiary, Makaelo Limited
(Makaelo), the Company has the following property interest:

(a) DX Polymetallic Project

On March 2, 2005, Makaelo entered into a joint venture
Agreement with a Chinese citizen who holds two exploration permits for a copper
project (the Project) in Inner Mongolia, China.

The Project is comprised of two exploration permits, Donggou
and Xiaoxigou, covering an area of about 52 square kilometers. The Project is
located in the Inner Mongolia region of China. The Company has the right to earn
52% of a cooperative joint venture company by spending RMB 5,200,000 ($650,000)
for the exploration in the permit areas over three years with the first year
contributing not less than RMB2,000,000 ($240,900). As a joint venture contract
with the property owner could not be completed on acceptable terms, the Company
decided not to proceed with this project.

As at May 31, 2006, the Company had incurred a total of $51,757
in the DX Polymetallic Property and during the year ended May 31, 2007 has
abandoned the property.

The location of the property is shown in the following map.



9

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Through its wholly-owned subsidiary, Huyana Ventures Limited
(Huyana), the Company has the following property interest:

(a) DHLT Spodumene Property

On May 21, 2005, Huyana signed a letter of intent (the LOI)
with a Chinese partner for the development of Dahongliutan (DHLT) spodumene
deposit located in Xinjiang Province of China. A joint venture company in Hetian
City of Xinjiang Province in China will be set up for the development and
operation of the DHLT spodumene deposit in the areas that the Chinese partner
has mining permit and where the Chinese partner is applying for additional
mining permits. The business of the joint venture company will include mining
and processing spodumene and comprehensive utilization of other associated rare
metals. The Company shall contribute the total investment in the project in
exchange for an 80% interest in the joint venture. Pursuant to the LOI, the
terms of the joint venture were to be decided upon further negotiations and due
diligence between the parties and would have been subject to a formal contract
to be signed by both parties. However, due to the negative results of due
diligence for DHLT project, the Company decided not to proceed with this project
and the letter of intent expired.

As at May 31, 2006, the Company incurred expenses of $8,209
related to the DHLT Spodumene Property.

The location of the property is shown in following map.



Through its wholly-owned subsidiary, Micro Express Holdings
Inc. (MEH), the Company has the following property interests:

10

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(a) DXC Salt Lake Property

On July 11, 2005, the Company signed a letter of intent with
Beijing Mianping Salt Lake Research Institute for the development of
Dangxiongcuo (DXC) salt lake property in Nima county of Naqu district in
Tibet, China. Pursuant to the Letter of Intent, the parties have agreed to set
up a Joint Venture Company in Tibet, China to share the benefits, risks and
losses of the project.

On September 16, 2005, MEH signed an agreement with Beijing
Mianping Salt Lake Research Institute (Mianping) for the development of
Dangxiongcuo salt lake property in Nima county of Naqu district in Tibet, China.
The Agreement follows a Letter of Intent signed between the parties on July 11,
2005.

Pursuant to the Agreement, the parties agreed to set up a
Cooperative Company, Tibet Saline Lake Mining High-Science & Technology Co.
Ltd. (the Cooperative), to develop the DXC Salt Lake property. The objective
of the Cooperative is to use the funds provided by Sterling through MEH and the
skills and technology provided by Mianping to produce lithium carbonate (Li2CO3)
and borate from brine. MEH is to own 65% and Mianping 35% of the Cooperative. It
is anticipated that the total investment in the Cooperative will be
approximately RMB240,000,000 (approximately $31,440,000).

On June 23, 2007, the Company entered into a consulting
agreement with a Chinese company to assist the Company in obtaining certain
government approvals to facilitate the establishment of a joint venture company
that is required for the Company to continue the exploration and development of
this project in Tibet. If the Chinese company is successful in its efforts, then
it will be compensated by receiving from the Company an amount of shares equal
to 10% of the Companys then issued and outstanding capital.

On July 3, 2007, MEH received a letter from Mianping stating
that the agreement between MEH and Mianping should be deemed terminated as a
result of lack of progress in the approval for the establishment of the joint
venture company and is considering a lawsuit against the Company and MEH. MEH
has responded that Mianpings claim has no legal grounds as the lack of progress
is not caused by MEH.

As at May 31, 2007, the Company incurred expenses of $911,167
related to the DXC Salt Lake Property.

The location of the property is shown in following map.



11

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Employees

At present, we have no employees, other than our officers and
directors. Our officers and directors do not have employment agreements with us,
except consulting agreements which can be cancelled on 30-days notice.

Item 3. Legal Proceedings

We know of no material, active or pending legal proceedings
against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial shareholder,
is an adverse party or has a material interest adverse to our interest.

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

Within the current fiscal year, no matters have been submitted
to a vote of security holders.

PART II

Item 5. Market for Common Equity and Related Stockholder
Matters

Overview

Our common stock is traded on the OTC Bulletin Board under the
symbol SGGV. The table below sets forth the high and low sales prices for the
Companys common stock for the fiscal years ended May 31, 2005 and 2006 and
2007. The quotations below reflect inter-dealer prices, without retail markup,
markdown or commission and may not represent actual transactions.

Year
    Quarter
    High ($)
    Low ($)2005
    First
    1.03
    0.85Second
    0.93
    0.43Third
    0.55
    0.18Fourth
    0.32
    0.142006
    First
    0.44
    0.16Second
    0.25
    0.15Third
    0.26
    0.15Fourth
    0.26
    0.162007
    First
    0.20
    0.13Second
    0.20
    0.08Third
    0.17
    0.08Fourth
    0.16
    0.08August 8, 2007*
    0.10
    0.08


12

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* Indicates partial period

Pacific Stock Transfer Company is the registrar and transfer
agent for our common shares, and is located at Suite 240, 500 East Warms Springs
Road, Las Vegas, Nevada 89119 (Telephone: (702) 361-3033; Facsimile: (702)
433-1979).

As of May 31, 2007, the shareholders' list of our common shares
showed 35 registered shareholders and 43,501,490 shares outstanding.

We have not declared any dividends since incorporation and do
not anticipate that we will do so in the foreseeable future. Although there are
no restrictions that limit the ability to pay dividends on our common shares,
our intention is to retain future earnings for use in our operations and the
expansion of our business.

Equity Compensation Plan Information

On May 12, 2004, the Company registered a 2004 incentive stock
option plan consisting of 3,636,000 common shares. As of the year ended May 31,
2007, 3,636,000 options were issued and outstanding to various consultants,
officers or directors. The above options are exercisable at US$0.50 per share
with expiry date of February 3, 2009. Pursuant to the stock option plan, the
number of shares that may be issued under the plan may not exceed 15% of the
issued and outstanding shares of the company. 15% of the issued and outstanding
shares of the Company is 6,525,223 as of May 31, 2007. As of the date of this
report, none of the above options have been exercised.

Recent Sales of Unregistered Securities

In February 2004, the Company commenced a private placement of
up to 5,000,000 units at $0.50 per unit for total proceeds of $2,500,000. Each
unit consists of one common share and one non-transferable share purchase
warrant entitling the holder to purchase one common share for two years, at
$0.50 per share in the first year or $0.75 in the second year (A warrant),
with an expiry date on February 16, 2006. Upon exercising an A warrant, the
holder of each unit will have one additional non-transferable share purchase
warrant at $1.00 (B warrant) for another year, with an expiry date on February
16, 2007. As at May 31, 2007, the Company had received total subscriptions of
$1,858,000 for 3,716,000 units , which were issued. A finder's fee of 101,500
units was issued under the same abovementioned terms. The private placement was
closed without issuing the remaining 1,284,000 units.

On December 18, 2004, the Company issued 100,000 shares with a
fair value of $42,000 to a consultant for investor relation services for a
period of one year.

In August 2006, the Company commenced a private placement of up
to 5,000,000 units at $0.15 per unit for total proceeds of $750,000. Each unit
consists of one common share and one non-transferable share purchase warrant
(C warrant). Each C warrant will be exercisable to acquire one additional
common share expiring on December 29, 2006 at a price of $0.18 per share. The
proceeds from this private placement will be used for general working capital.

On September 20, 2006, the Company issued 2,873,990 units for
$0.15 per unit under the private placement, of which 2,750,300 units were issued
for a gross proceed of $412,545 and 123,690 units were issued as a 7% finders
fees. Each unit consists of one common share and one non-transferable share
purchase warrant (C warrant). Each C warrant will be exercisable to acquire
one additional common share expiring on December 29, 2006 at a price of $0.18
per share. The private placement was closed without issuing the remaining
2,249,700 units.

Share Purchase Warrants

During the year ended May 31, 2007, 2,873,990 Series C
warrants were issued, including 123,690 warrants for a finders fee. Each Series
C warrant entitles the holder thereof the right to purchase one common share
at $0.18 per share expiring on December 29, 2006. No warrant was exercised or
cancelled during the period.

On December 22, 2006, the Company extended the expiry date of
the 2,873,990 Series C Share Purchase Warrants from December 29, 2006 to
February 29, 2008. The exercise price of the warrants remains unchanged at $0.18
per share.

13

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On February 14, 2006, the Company reduced the exercise price of
the 3,817,500 Series A Share Purchase Warrants from $0.75 to $0.50 each and
extended the terms of Series A Share Purchase Warrants for two years to the
earlier of:

|(i)  | February 16, 2008; or                                                                                                                                             
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ii) | The 90th day after the day on which the weighted average
      trading price of the Companys shares exceed $0.85 per share for 30
      consecutive trading days.

Upon exercise of the Series A Share Purchase Warrants at
$0.50 each, the holder will receive one Common Share of the Company and a Series
B Share Purchase Warrant exercisable at $1.00 expiring one year after the
occurrence of either (i) or (ii) as described above.

As at May 31, 2007, the Company has a total of 3,817,500 and
2,873,990 Series A and C share purchase warrants outstanding,
respectively.

Changes in Securities

On January 20, 2004, the Registrant completed the acquisition
of all of the issued and outstanding shares of Micro Express Ltd. pursuant to an
Acquisition Agreement, filed as an exhibit to the Registrants Current Report on
the 8-K filed January 29, 2004 and April 2, 2004. Pursuant to the transaction,
the Registrant issued an aggregate of 25,000,000 shares of the Registrants
common stock to the stockholders of Micro in exchange for 100% of the shares of
Micro common stock. A majority of the shares were issued to Cobilco Inc. of
which Raoul Tsakok is the owner (15,000,000 shares), and Richard Shao (4,000,000
shares). Mr. Tsakok and Mr. Shao are officers or directors of the
Registrant.

As of May 31, 2007, the Company had 43,501,490 common shares
issued and outstanding.

Item 6. Management's Discussion and Analysis or Plan of
Operation

Safe Harbor Statement under the United States Private
Securities Litigation Reform Act of 1995: Except for the statements of
historical fact contained herein, the information constitutes "forward-looking
statements" within the meaning of the Private Securities Litigation reform Act
of 1995. Such forward looking statements, including but not limited to those
with respect to the price of lithium, lithium carbonate, other metals and
chemicals, the timing and amount of estimated production, costs of production,
reserve determination and reserve conversion rates, involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievement of the Company to be materially different from any
future results, performance or achievements expressed or implied by such forward
looking statements. Such factors include, among others, risks relating to the
integration of the acquisition, risks that the company may not be able to raise
the necessary capital, risks relating to international operations, risks
relating to joint venture operations, the actual results of current exploration
activities, the actual results of current reclamation activities, conclusions of
economic evaluations, changes in project parameters as plans continue to be
refined, future prices of lithium, beryllium, niobium, tantalum, and other
metals, as well as those factors affecting the mineral industry. Although the
Company has attempted to identify important factors that could cause actual
results to differ materially, there may be other factors that cause results not
to be as anticipated, estimated or intended. There can be no assurance that such
statements will prove to be accurate as actual results and future events could
differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements.

Introduction

The information presented here should be read in conjunction
with Sterling Group Venture Inc.'s financial statements and other information
included in this Form 10-KSB. When used in this Form 10-KSB, the words
"expects," "anticipates," "estimates" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to risks and
uncertainties, including those set forth below under "Risks and Uncertainties,"
that could cause actual results to differ materially from those projected. These
forward-looking statements speak only as of the date hereof. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in

14

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the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any statement is based.

Plan of Operations

Sterling is an exploration stage company and there is no
assurance a commercially viable mineral deposit exists on any of the properties
the company has claims over. Further exploration will be required before final
evaluation as to the economic and legal feasibility of the claims is determined.

On January 20, 2004, the Company completed the acquisition of
all of the issued and outstanding shares of Micro Express Ltd., a British Virgin
Islands corporation (Micro) pursuant to an Acquisition Agreement, filed as an
exhibit to a Form 8-K on January 29, 2004. Pursuant to the transaction, the
Company issued an aggregate of 25,000,000 shares of common stock to the
stockholders of Micro in exchange for 100% of the shares of Micro common
stock.

Micro is a party to an agreement with Sichuan Province Mining
Ltd, which is 40% owned by the Bureau of Sichuan Geology and Resources of
Sichuan Government. Under the terms of the agreement, Micro has the right to
acquire at least 75% of the shares of a co-operative joint-venture company. The
Joint-venture will hold the necessary mining licenses. The business of the
joint-venture company is to develop the Jiajika spodumene property for the
extraction of lithium, lithium salts, and other minerals. The initial registered
capital is 56 million Chinese Yuan (US$6.8 million). Sichuan Province Mining
Ltd. will contribute 14 million Chinese Yuan (about US$1.7 million) including
the mining permits and previous works to hold 25% of the JV company. Micro will
contribute 42 million Chinese Yuan (about US$5.1 million) to hold 75% of the JV
company. An initial contribution of $150,000 has been made by the Company as
part of the contribution to obtain the mining permit pursuant to the contract
signed between our Chinese partner and Sichuan Bureau of Land and Resource.

On April 10, 2004, Micro signed a joint venture agreement with
Lushi Guanpo Minerals Development Ltd. (Lushi) of the Henan Province of China.
Under the Agreement, Micro may earn more than 90% of the lithium project by
taking the project into production. However, due to the negative results of due
diligence for the Lushi project, the Company decided not to proceed with this
project.

On March 2, 2005, the Company through its wholly-owned
subsidiary, Makaelo Limited (Makaelo), a BVI company, entered into a Joint
Venture Agreement with Aifeng Li, an individual residing in Anyang, Henan
Province of China. Pursuant to the Agreement, the parties will set up a Joint
Venture company in Inner Mongolia for the exploration and development of copper
and silver in the areas of Donggou and Xiaoxigou. Aifeng Li will contribute all
the necessary exploration licenses, achievements and geological data to the
Joint Venture in exchange for 48% of the Joint Venture company, while the
Company will finance the cost of exploration in return for 52% of the Joint
Venture company. The Company expects the cost of exploration to be approximately
$630,000 to be contributed over three years. As a joint venture contract with
the property owner could not be completed on acceptable terms, the Company
decided not to proceed with this project.

On April 5, 2005, the Company through Micro, signed a joint
venture contract with Sichuan Province Mining Ltd. for the establishment of
Jihai Lithium Ltd. and the development of the Jiajika lithium deposit.

On May 21, 2005, the Company through its wholly-owned
subsidiary, Huyana Ventures Limited (Huyana), signed a letter of intent with
Xinjiang Hetian Xinlong Mining Co. Ltd. for the development of Dahongliutan
(DHLT) spodumene deposit. Pursuant to the LOI, the parties have agreed to set up
a Joint Venture Company in Hetian City of Xinjiang Province in China to share
the benefits, risks and losses of the project. Due to the negative results of
due diligence for DHLT project, the Company decided not to proceed with this
project and the letter of intent expired.

On July 11, 2005, the Company signed a letter of intent (the
LOI) with Beijing Mianping Salt Lake Research Institute for the development of
Dangxiongcuo salt lake property (DXC Salt Lake) in Nima county of Naqu
district in Tibet, China. Pursuant to the LOI, the parties have agreed to set up
a joint venture company in Tibet, China to share the benefits, risks and losses
of the project.

On September 16, 2005, the Company through its wholly owned
subsidiary, Micro Express Holdings Inc. (MEH), signed an agreement with
Beijing Mianping Salt Lake Research Institute (Mianping) for the development
of

15

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Dangxiongcuo salt lake property in Nima county of Naqu district
in Tibet, China. The Agreement follows a Letter of Intent signed between the
parties on July 11, 2005.

Pursuant to the Agreement, the parties have agreed to set up a
Cooperative Company, Tibet Saline Lake Mining High-Science & Technology Co.
Ltd. (the Cooperative) to develop DXC Salt Lake. The objective of the
Cooperative is to use the funds provided by Sterling through MEH and the skills
and technology provided by Mianping to produce lithium carbonate (Li2CO3) and
borate from brine. MEH is to own 65% and Mianping 35% of the Cooperative.

It is anticipated that the total investment in the Cooperative
will be approximately 240 million RMB Yuan (or approximately US$31 million) and
will result in production of 5,000 tonnes per year of lithium carbonate and by
products (sodium borate). Mianping guarantees the production cost of lithium
carbonate will be less than 11,000 RMB yuan per tonne (or approximately US
$1,500 per tonne).

On March 3, 2006, the Company, through its wholly owned
subsidiary, Micro Express Ltd. (Micro), signed an agreement (the Agreement)
with Sichuan Province Mining Ltd. (SPM) regarding Micros early investment in
the Sichuan Jiajika Spodumene project.

Pursuant to the Agreement, the parties agreed to terminate the
joint venture and confirmed that Micros early investment of 2.48 million Yuan
(RMB) to the Sichuan Jiajika Spodumene project should be paid back 1.2 million
Yuan (RMB) before April 15, 2006 and 1.28 million Yuan (RMB) before March 30,
2007. Payments should be made directly to Micro by SPM. If SPM does not make the
payment of 1.28 million to Micro before March 30, 2007, then 1.28 million yuan
will be converted into Micros interest in Jiajika project of SPM using the
formula: 1.28 million Yuan divided by registered capital contribution in Jiajika
project by SPM, multiplied by 100%. Neither party shall have any other
liabilities to the other party and the Agreement shall replace all previous
signed agreements, contracts and MOU between Micro and SPM. SPM had made payment
of 800,000 Yuan (RMB) as of May 31, 2007. On June 15, 2007, the Company received
RMB500,000 from SPM.

Results of Operations

The Company had no operating revenue except interest income of
$6,410 for the year ended May 31, 2007 and interest income of $4,193 for the
year ended May 31, 2006. The Company incurred expenses of $911,276 stemming from
Accounting audit and legal fees, consulting fees, Mineral property costs ,
travel, and general and administrative expenditures as compared to $218,686 for
the same period last year. The increase of $692,590 was mainly due to the
mineral property costs in 2007 compared to 2006.

The following table shows the companys mineral property costs
in 2006 and 2007. The mining permit cost for DXC Salt Lake Property
significantly increased its mineral property costs for the year ending May 31,
2007:

DXC
    
    
    Jiajika
    
    
    DX
    
    
    Lushi
    
    
    DHLTSalt Lake
    
    
    Spodumene
    
    
    Polymetallic
    
    
    Spodumene
    
    
    SpodumeneProperty
    
    
    Property
    
    
    Property
    
    
    Property
    
    
    Property
    
    
    TotalBalance, May 31, 2005
    
    -
    
    
    375,748
    
    
    39,446
    
    
    70,670
    
    
    707
    
    
    486,571Administrative
    
    5,560
    
    
    2,100
    
    
    577
    
    
    -
    
    
    50
    
    
    8,287Consulting fees
    
    46,629
    
    
    12,062
    
    
    9,688
    
    
    2,242
    
    
    -
    
    
    70,621Engineering studies
    
    26,933
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    26,933Feasibility study
    
    29,080
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    29,080Geophysical study
    
    31,114
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    31,114Legal fees
    
    623
    
    
    -
    
    
    -
    
    
    -
    
    
    247
    
    
    870Topography
    
    32,266
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    32,266measurementTravel
    
    30,953
    
    
    8,009
    
    
    2,046
    
    
    -
    
    
    7,205
    
    
    48,213Wages and benefits
    
    33,601
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    33,601Cost recovery
    
    -
    
    
    (309,058
    )
    
    -
    
    
    -
    
    
    -
    
    
    (309,058
    )Balance, May 31, 2006
    
    236,759
    
    
    88,861
    
    
    51,757
    
    
    72,912
    
    
    8,209
    
    
    458,498Administrative
    
    5,200
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    5,200


16

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Consulting fees
    
    134,580
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    134,580Engineering studies
    
    38,063
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    38,063Mining permit
    
    382,920
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    382,920Topography
    
    15,001
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    15,001measurementLegal fees
    
    9,695
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    9,695Travel
    
    53,262
    
    
    488
    
    
    -
    
    
    -
    
    
    -
    
    
    53,750Wages and benefits
    
    35,687
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    35,687Balance, May 31, 2007
    $
    911,167
    
    $
    89,349
    
    $
    51,757
    
    $
    72,912
    
    $
    8,209
    
    $
    1,133,394


The Company also incurred expenses on the following related
party transactions during year ended May 31, 2007:

| | (a) | The Company was charged consulting fees during the year
      ended May 31, 2007 totalling $115,722 (2006: $123,173) by companies
      controlled by two directors of the Company.                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                      
| | (b) | The Company was charged rental fees included in General
      and Administrative during the year ended May 31, 2007 totalling $13,869
      (2006: $10,016) by a company controlled by a director of the
    Company.
| |     |                                                                                                                                                                                                                      
| | (c) | The Company was charged mineral property costs -
      consulting during the year ended May 31, 2007 in the amount of $45,008
      (2006: $43,296) by a company controlled by a director of the
    Company.        
| |     |                                                                                                                                                                                                                      
| | (d) | Included in accounts payable is $219,501 (2006: $23,814)
      which is due to the companies controlled by the directors of the Company
      for their services provided.                                           

The Company expects the trend of losses to continue at an
increasing rate until we can achieve commercial production on some of the
mineral properties. However, there can be no assurance that commercial
production will be possible on any of the properties in the near or distant
future.

Liquidity and Working Capital

As of May 31, 2007, the Company had total current assets of
$314,611, and total liabilities of $272,456. The Company has a working capital
surplus of $42,155 as a result of the proceeds of $412,545 from a private
placement commenced in August 2006.

The Company has no other capital resources other than the
ability to use its common stock to achieve additional capital or the exercise of
the warrants by the unit holders.

RISKFACTORS

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.

17

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Limited Operating History; Anticipated Losses;
Uncertainty of Future Results

Sterling is an exploration stage company and there is no
assurance a commercially viable mineral deposit exists on any of the properties.
Further exploration will be required before final evaluation as to the economic
and legal feasibility is determined.

Sterling Group Ventures, Inc. has only a limited operating
history upon which an evaluation of the Company and its prospects can be based.
The Company's prospects must be evaluated with a view to the risks encountered
by a company in an early stage of development, particularly in light of the
uncertainties relating to the new and evolving distribution methods with which
the Company intends to operate and the acceptance of the Company's business
model. To the extent that such expenses are not subsequently followed by
commensurate revenues, the Company's business, results of operations and
financial condition will be materially adversely affected. There can be no
assurance that the Company will be able to generate sufficient revenues from the
sale of its products. If cash generated by operations is insufficient to satisfy
the Company's liquidity requirements, the Company may be required to sell
additional equity or debt securities. The sale of additional equity or
convertible debt securities would result in additional dilution to the Company's
stockholders.

Lack of Technical Training of Management

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

Exploration Risk

Development of mineral properties is contingent upon obtaining
satisfactory exploration results. Mineral exploration and development involves
substantial expenses and a high degree of risk, which even a combination of
experience, knowledge and careful evaluation may not be able to adequately
mitigate.

The companys 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 Companys
exploration properties. There is also no assurance that, even if commercial
quantities of ore are discovered, a mineral property will be brought into
commercial production. The discovery of mineral deposits is dependent upon a
number of factors not the least of which is the technical skill of the
exploration personnel involved. The commercial viability of a mineral deposit,
once discovered, is also dependent upon a number of factors, some of which are
the particular attributes of the deposit, such as size, grade and proximity to
infrastructure, metal prices and government regulations, including regulations
relating to royalties, allowable production, importing and exporting of
minerals, and environmental protection. In addition, assuming discovery of a
commercial ore body, depending on the type of mining operation involved, several
years can elapse from the initial phase of drilling until commercial operations
are commenced. Most of the above factors are beyond the control of the Company.

The exploration process is conducted in phases. When each phase
of a project is completed, and upon analysis of the results of that phase, the
Company will make a decision whether to proceed with each successive phase of
the exploration program. There is no assurance that projects will be carried to
completion.

Limited Management Resource Development Experience

The Company does not have a track record of exploration and
mining operation history. The Company's management has limited experience in
mineral resource development and exploitation, and has relied on and may
continue to rely upon consultants and others for development and operation
expertise.

Limited Financial Resources

18

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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 May 31, 2007, there were approximately
43,501,490 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.

The effects of inflation have not had a material impact on its
operation, nor is it expected to in the immediate future.

Political Risks

The market in China is monitored by the government, which could
impose taxes or restrictions at any time which would make operations
unprofitable and infeasible and cause a write-off of investment in the mineral
properties. Other factors include political policy on foreign ownership,
political policy to open the doors to foreign investors, and political policy on
mineral claims and metal prices.

Market Risk

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

Other Risks and Uncertainties

The business of mineral deposit exploration and 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,

19

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statutory and regulatory requirements, fluctuations in mineral
prices and foreign currency, share price volatility, title risks, and
uncertainty of additional financing.

The Company has sought to identify what it believes to be the
most significant risks to its business, but cannot predict whether or to what
extent any of such risks may be realized, nor can there be any assurances that
the Company has identified all possible risks that might arise. Investors should
carefully consider all of such risk factors before making an investment decision
with respect to the Company's stock.

OUTLOOK

The Company is under going feasibility studies and engineering
studies for the development of the DXC salt lake property in Tibet and seeking
the approval for the establishment of Joint Venture Company from Tibet
regulatory authorities. The Company is also seeking to identify undervalued
mineral assets in China and other countries.

Application of Critical Accounting Policies

Our consolidated financial statements and accompanying notes
are prepared in accordance with generally accepted accounting principles in the
United States. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies. We believe that
understanding the basis and nature of the estimates and assumptions involved
with the following aspects of our consolidated financial statements is critical
to an understanding of our financial statements.

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.

Item 7. Financial Statements.

The response to this item is included as a separate Exhibit to
this report. Please see pages F-1 through F-22

Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.

The Report of Independent Auditor's by Amisano Hanson for the
audited consolidated financial statements for the year ended May 31, 2007 are
included herein immediately preceding the audited financial statements.

Item 8. Changes In & Disagreements With Accountants on
Accounting & Financial Disclosure

Amisano Hanson, Chartered Accountants (the New Accountant)
has been engaged as principle independent accountants for Sterling Group
Ventures, Inc. (the "Company") effective June 17, 2004 and until the New
Accountant chooses to resign or the Company chooses to dismiss them. Amisano
Hanson, Chartered Accountants replaces Cordovano and Honeck, P.C. (the "Former
Accountant") as principal independent accountants as of June 17, 2004, the date
the Former Accountants were dismissed by the Company. The decision to change
accountants has been approved by the Company's board of directors.

20

---

Other than as disclosed in the previous paragraph, there have
been no changes in or disagreements with our accountants on issues of accounting
or financial disclosure since inception of Sterling on September 13, 2001.

Item 8A. Controls and Procedures

Based on an evaluation as of the date of the end of the period covered by this report,  the Company's Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the  effectiveness of the design and operation of the Company's disclosure controls and procedures,  as required by Exchange Act Rule 13a-15. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.

There were no changes in the Company's internal controls over financial reporting  that occurred during the year ended May 31, 2007 that have materially affected, or are reasonably likely to  materially affect, the Company's  internal control over financial reporting.

Item 8B. Other Information

None.

PART III

Item 9. Directors, Executive Officers, Promoters and Control
Persons

All directors of our company hold office until the next annual
general meeting of the shareholders or until their successors are duly elected
and qualified. The officers of our company are appointed by our board of
directors and hold office until the earlier of death, retirement, resignation or
removal.

Our directors, executive officers and other significant
employees, their ages, positions held and duration each person has held that
position, are as follows:

Name
    Position Held with the
      Company
    Age
    Date First Elected /
      AppointedRichard Shao
    President, Director
    44
    January 21, 2004Raoul Tsakok
    Chairman
    57
    January 21, 2004Gerald Runolfson
    Director
    67
    April 5, 2004Robert Smiley
    Director
    63
    June 6, 2007


Business Experience

The following sets forth the business experience of each of the
Registrant's directors and executive officers:

Raoul N. Tsakok, Chairman

Mr. Tsakok has worked in the Investment Management business for
over 30 years. He has been chairman of Sagit Investment Management Ltd. since
1987. He has been Chairman of Richco Investors Inc. for almost 20 years. He
holds an MBA degree and is a Chartered Financial Analyst (CFA).

Xuxin (Richard) Shao, President and Director

Mr. Shao was born and educated in China. He received his
degrees from engineering schools in China, specializing in mineral processing.
Between his Bachelor and Ph.D. degrees, he held a research engineer position
with the Chemical Mines Design and Research Institute of the Ministry of
Chemical Industry in Lianyun Harbour, Jiangsu, China. During his graduate
studies at the China University of Mining and Technology, he conducted research
on

21

---

phosphate flotation using interfacial, colloidal and solution
chemical theories and authored and coauthored more than 50 research reports and
publications on this and other related subjects. After receiving his Ph.D. in
1990 from China University of Mining and Technology, Mr. Shao taught as an
associate Professor and was acting Department Head in Mineral Processing at the
China University of Mining and Technology for six years.

In 1996, Mr. Shao accepted a position as Research Scientist for
the Center for Applied Energy Research at the University of Kentucky in
cooperation with the Department of Energy of the US Federal Government. Since
1998, Dr. Shao has worked as an advisor to a number of companies in the
evaluation and processing of minerals in North America and China.

Gerald Runolfson, Professional Engineer, Director

Mr. Runolfson is a professional engineer (P. Eng.) and has been
in the construction industry for over 35 years. He is currently President and
controlling shareholder of Elkon Products Inc., a company that has the exclusive
distribution rights for all silica fume produced in Canada. Silica fume is used
in oil well cementing operation and concrete construction. Major customers
include Halliburton and BJ Services. Mr. Runolfson has been a Director of a
number of public companies.

Robert G. Smiley, L.L.B., Director

Mr. Smiley is a business consultant working with junior
companies. He has been self-employed in this capacity for the past ten years. He
is a former lawyer who specialized in oil and gas and securities law for
twenty-five years. He is currently president of Richco Investors Inc. and
Drucker, Inc. and a director of Canadian Imperial Ventures Corp., Teuton
Resource Corp. and Silver Grail Resources Inc. He has served on the boards of a
number of junior and intermediate companies in the past.

Our directors, executive officers and control persons have not
been involved in any of the following events during the past five years:

| | 1. | any bankruptcy petition filed by or against any business
      of which such person was a general partner or executive officer either at
      the time of the bankruptcy or within two years prior to that
  time;                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | any conviction in a criminal proceeding or being subject
      to a pending criminal proceeding (excluding traffic violations and other
      minor offences);                                                                                                                                                                 
| | 3. | being subject to any order, judgment, or decree, not
      subsequently reversed, suspended or vacated, of any court of competent
      jurisdiction, permanently or temporarily enjoining, barring, suspending or
      otherwise limiting his involvement in any type of business, securities or
      banking activities; or
| | 4. | being found by a court of competent jurisdiction (in a
      civil action), the Commission or the Commodity Futures Trading Commission
      to have violated a federal or state securities or commodities law, and the
      judgment has not been reversed, suspended, or
vacated.                                           

Item 10. Executive Compensation.

(a) Officers' Compensation.

Compensation paid by the Company for all services provided up
to the fiscal year ended May 31, 2007 to each of the executive officers and to
all officers as a group is set forth below.

SUMMARY COMPENSATION TABLE OF EXECUTIVES

Cash
        Compensation
      
      
      Security GrantsName and
      Year
      Salary
      Bonus
      Annual
      Restricted
      Securities
      Long Term
      LTIP
      All OtherPrincipal
      
      ( $)
      
      Compensation
      Stock
      Underlying
      Compensation
      Payments
      CompensationPosition
      
      
      
      / Other
      Awards
      Options /
      / Options( $)
      
      SARs (#)(SHARES)


22

---

Richard Shao
      2004
    0
    0
    7,869
    0
    800,000(1)
    0
    0
    0President
      2005
    0
    0
    54,417
    0
    0
    0
    0
    02006
    0
    0
    61,852
    0
    0
    0
    0
    02007
    0
    0
    64,298
    0
    0
    0
    0
    0Raoul Tsakok
      2004
    0
    0
    0
    0
    800,000(2)
    0
    0
    0Chairman
      2005
    0
    0
    63,000
    0
    0
    0
    0
    02006
    0
    0
    84,000
    0
    0
    0
    0
    02007
    0
    0
    75,000
    0
    0
    0
    0
    0Kathy Wang
      2004
    0
    0
    4,722
    0
    200,000(3)
    0
    0
    0Secretary
      2005
    0
    0
    19,490
    0
    0
    0
    0
    02006
    0
    0
    20,617
    0
    0
    0
    0
    02007
    0
    0
    21,432
    0
    0
    0
    0
    0Officers as A
      2004
    0
    0
    12,591
    0
    1,800,000
    0
    0
    0Group
      2005
    0
    0
    136,907
    0
    0
    0
    0
    02006
    0
    0
    166,469
    0
    0
    0
    0
    02007
    0
    0
    160,730
    0
    0
    0
    0
    0


| | (1) | 800,000 options to purchase shares at $0.50 per
    share.
| | --- | ----------------------------------------------------------
| | (2) | 800,000 options to purchase shares at $0.50 per
    share.
| | (3) | 200,000 options to purchase shares at $0.50 per
    share.

(b) Directors' Compensation

Directors who are also officers receive no cash compensation
for services as a director. However, the directors will be reimbursed for
out-of-pocket expenses incurred in connection with attendance at board and
committee meetings. The Company has granted options to directors under its 2004
Incentive Stock Option Plan subsequently adopted.

SUMMARY COMPENSATION TABLE OF DIRECTORS(For fiscal
year ended May 31, 2007)

Cash Compensation
      
      Security GrantsName and
      Year
      Annual
      Meeting
      Consulting
      Number
      Securities
      LTIP
      All OtherPrincipal Position
      
      Retainer
      Fees ($)
      Fees/ Other
      of Shares
      Underlying
      Payments
      CompensationFees ($)
      
      Fees
      (#)
      Options /( $)
      
      SARs (#)(SHARES)Raoul Tsakok
      2004
      0
      0
      0
      0
      800,000(1)
      0
      0Director
      2005
      0
      0
      0
      0
      0
      0
      02006
      0
      0
      0
      0
      0
      0
      02007
      0
      0
      0
      0
      0
      0
      0Brian Doutaz
      2004
      0
      0
      0
      0
      0
      0
      0Director(Resigned on April5, 2004)Richard Shao
      2004
      0
      0
      0
      0
      800,000 (2)
      0
      0Director
      2005
      0
      0
      0
      0
      0
      0
      02006
      0
      0
      0
      0
      0
      0
      02007
      0
      0
      0
      0
      0
      0
      0Patrick Chan
      2004
      0
      0
      0
      0
      300,000(3)
      0
      0Director
      2005
      0
      0
      0
      0
      0
      0
      0(Resigned onJune 4, 2007)
      2006
      0
      0
      0
      0
      0
      0
      02007
      0
      0
      0
      0
      0
      0
      0Gerald Runolfson
      2004
      0
      0
      0
      0
      300,000(4)
      0
      0Director
      2005
      0
      0
      0
      0
      0
      0
      02006
      0
      0
      0
      0
      0
      0
      02007
      0
      0
      0
      0
      0
      0
      0


23

---

James Hutchison
      2004
    0
    0
    0
    0
    0
    0
    0Director(Resigned onJan. 21, 2004)Directors as a
      2004
    0
    0
    0
    0
    2,200,000
    0
    0Group
      2005
    0
    0
    0
    0
    0
    0
    02006
    0
    0
    0
    0
    0
    0
    02007
    0
    0
    0
    0
    0
    0
    0


| | (1) | 800,000 options to purchase shares at $0.50 per
    share.
| | --- | ----------------------------------------------------------
| | (2) | 800,000 options to purchase shares at $0.50 per
    share.
| | (3) | 300,000 options to purchase shares at $0.50 per
    share.
| | (4) | 300,000 options to purchase shares at $0.50 per
    share.

During the year ended May 31, 2004, we granted 2,100,000 stock
options to our directors or officers. The options were granted at an exercise
price of $0.50 per share with an expiry date of February 3, 2009. During the
year ended May 31, 2007, no stock options were granted to our directors or
officers.

Directors are entitled to reimbursement for reasonable travel
and other out-of-pocket expenses incurred in connection with attendance at
meetings of our board of directors. Our board of directors may award special
remuneration to any director undertaking any special services on our behalf
other than services ordinarily required of a director. No director received
and/or accrued any compensation for their services as a director, including
committee participation and/or special assignments.

There are no management agreements with our directors or
executive officers and we do not anticipate that written agreements will be put
in place in the foreseeable future.

We have no plans or arrangements in respect of remuneration
received or that may be received by our executive officers to compensate such
officers in the event of termination of employment (as a result of resignation,
retirement, change of control) or a change of responsibilities following a
change of control.

There are no plans or arrangements in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the Board of Directors or
a committee thereof.

Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.

The following table sets forth, as of August 8, 2007, certain
information with respect to the beneficial ownership of our common shares by
each shareholder known to us to be the beneficial owner of 5% of our common
shares, and by each of our officers and directors. Each person has sole voting
power with respect to the common shares, except as otherwise indicated.
Beneficial ownership consists of a direct interest in the common shares, except
as otherwise indicated. As of August 8, 2007, there were 43,501,490 common
shares issued and outstanding.

Title of Class
    Name and Address of Beneficial
      Owner (1)
    Amount and Nature of Beneficial
      Ownership
    Percentage of Class(2)Common stock
    Raoul Tsakok
    15,800,000 (3) (4)
    36.3%Common stock
    Richard Shao
    4,800,000 (5)
    11.0%Common stock
    Gerald Runolfson
    1,800,000 (7) (8)
    4.1%Common stock
    Robert Smiley
    0
    0TOTAL
    22,400,000
    51.4%


24

---

|(1) | The address of each beneficial owner is 900  789 West
      Pender Street, Vancouver, BC V6C 1H2 Canada                                                                                                                                                                                                   
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Based on 43,501,490 shares outstanding as of August 8,
      2007 and, as to a specific person, shares issuable pursuant to the
      conversion or exercise, as the case may be, of currently exercisable or
      convertible debentures, share purchase warrants and stock options within
      60 days.
|(3) | 15,000,000 common shares held through Cobilco
  Inc.                                                                                                                                                                                                                                                       
|(4) | Raoul Tsakok has 800,000 options to purchase shares at
      $0.50 per share.                                                                                                                                                                                                                              
|(5) | Includes 800,000 options to purchase shares at $0.50 per
      share.                                                                                                                                                                                                                                      
|(6) | Patrick Chan has 300,000 options to purchase shares at
      $0.50 per share.                                                                                                                                                                                                                              
|(7) | Includes 600,000 common shares and 300,000 A warrants,
      300,000 B warrants and 300,000 C warrants held through Elkon Products
      Inc.                                                                                                                                                        
|(8) | Gerald Runolfson has 300,000 options to purchase share at
      $0.50 per share.                                                                                                                                                                                                                           

Changes in Control

We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change in control of our
company.

Item 12. Certain Relationships and Related Transactions.

There have been no transactions, or proposed transactions,
which have materially affected or will materially affect us in which any
director, executive officer or beneficial holder of more than 10% of the
outstanding common stock, or any of their respective relatives, spouses,
associates or affiliates, has had or will have any direct or material indirect
interest.

As at the date of this annual report, we do not have any
policies in place with respect to whether we will enter into agreements with
related parties in the future.

PART IV

Item 13. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.

|a) | Financial Statements and Schedules. The following
      financial statements and schedules for the Company as of May 31, 2007 and
      2006 are filed as part of this report.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                               
|   | (1) Financial Statements of Sterling Group Ventures,
      Inc.                                                                                                               

| |                                                                    | Page              
| | ------------------------------------------------------------------ | ------------------
| |                                                                    |                   
| | Report
      of Independent Registered Public Accounting Firm      | F-2               
| |                                                                    |                   
| | Consolidated
      Balance Sheets                                  | F-3               
| |                                                                    |                   
| | Consolidated
      Statements of Operations                        | F-4               
| |                                                                    |                   
| | Consolidated
      Statements of Stockholders Equity (Deficiency) | F-5
      - F-7   
| |                                                                    |                   
| | Consolidated
      Statements of Cash Flows                        | F-8
      - F-9   
| |                                                                    |                   
| | Notes
      to Consolidated Financial Statements                   | F-10
      to F-22

(2) Financial Statement Schedules

All schedules are omitted because they
are not applicable or the required information is shown in the financial
statements or notes thereto.

25

---







STERLING GROUP VENTURES, INC.

(An Exploration Stage Company)

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2007 and 2006

(Stated in US Dollars)





F-1

---

|A PARTNERSHIP OF INCORPORATED PROFESSIONALS | AMISANOHANSON       
|------------------------------------------- | --------------------
|                                            | CHARTEREDACCOUNTANTS



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders, 
  Sterling Group Ventures, Inc.

We have audited the accompanying consolidated balance sheets
  of Sterling Group Ventures, Inc. (An Exploration Stage Company) and its subsidiaries
  as of May 31, 2007 and 2006 and the related consolidated statements of operations,
  stockholders' equity (deficiency) and cash flows for the years ended May 31,
  2007 and 2006 and for the period from date of inception, July 27, 1994 to May
  31, 2006. These consolidated financial statements are the responsibility of
  the Company's management. Our responsibility is to express an opinion on these
  financial statements based on our audits.

We conducted our audits in accordance with the standards of the
  Public Company Accounting Oversight Board (United States of America). Those
  standards require that we plan and perform an audit to obtain reasonable assurance
  about whether the financial statements are free of material misstatement. An
  audit includes examining on a test basis, evidence supporting the amounts and
  disclosures in the financial statements. An audit also includes assessing the
  accounting principles used and significant estimates made by management, as
  well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  Sterling Group Ventures, Inc. and its subsidiaries as of May 31, 2007 and 2006
  and the results of their operations and their cash flows for the years ended
  May 31, 2007 and 2006 and for the period from date of inception, July 27, 1994
  to May 31, 2007, in conformity with accounting principles generally accepted
  in the United States of America.

The accompanying consolidated financial statements referred to
  above have been prepared assuming that the Company will continue as a going
  concern. As discussed in Note 1 to the financial statements, the Company is
  in the exploration stage, and has no established source of revenue and is dependent
  on its ability to raise capital from shareholders or other sources to sustain
  operations. These factors, along with other matters as set forth in Note 1,
  raise substantial doubt that the Company will be able to continue as a going
  concern. The financial statements do not include any adjustments that might
  result from the outcome of these uncertainties.

|Vancouver, Canada | AMISANO HANSON     
|----------------- | ---------------------
|August 1, 2007    | Chartered Accountants

F-2

750 WEST PENDER STREET, SUITE 604
      TELEPHONE: 604-689-0188VANCOUVER CANADA
      FACSIMILE: 604-689-9773V6C 2T7
      E-MAIL: amishan@telus.net


---

STERLING GROUP VENTURES, INC.(An Exploration Stage Company) 
  CONSOLIDATED BALANCE SHEETS 
  May 31, 2007 and 2006 
  (Stated in US Dollars)

|                                                           |   | 2007       |   |   | 2006       |  
|---------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                           |   |            |   |   |            |  
|**ASSETS**                                                 |  
|                                                           |   |            |   |   |            |  
|Current                                                    |   |            |   |   |            |  
|Cash and cash equivalents  Note 6                         | $ | 289,330    |   | $ | 349,954    |  
|GST receivable                                             |   | 9,128      |   |   | 13,787     |  
|Prepaid expenses                                           |   | 1,964      |   |   | 1,196      |  
|Advance receivable 
      Notes 3 and 6                   |   | 14,189     |   |   | 36,531     |  
|                                                           |   |            |   |   |            |  
|Total current assets                                       |   | 314,611    |   |   | 401,468    |  
|                                                           |   |            |   |   |            |  
|Mineral property deposit  Note 4                          |   | -          |   |   | 124,600    |  
|Equipment  Note 5                                         |   | 2,911      |   |   | 2,986      |  
|                                                           |   |            |   |   |            |  
|Total Assets                                               | $ | 317,522    |   | $ | 529,054    |  
|                                                           |   |            |   |   |            |  
|LIABILITIES                                                |  
|                                                           |   |            |   |   |            |  
|Current                                                    |   |            |   |   |            |  
|Accounts payable and accrued
      liabilities  Note 6    | $ | 272,456    |   | $ | 77,361     |  
|                                                           |   |            |   |   |            |  
|STOCKHOLDERS EQUITY                                       |  
|                                                           |   |            |   |   |            |  
|Capital stock  Notes 4 and 7                              |   |            |   |   |            |  
|Common stock, $0.001 par value                             |   |            |   |   |            |  
|500,000,000
      authorized                               |   |            |   |   |            |  
|43,501,490 issued
      and outstanding (2006: 40,277,500) |   | 43,502     |   |   | 40,278     |  
|Additional paid-in capital                                 |   | 2,633,768  |   |   | 2,190,611  |  
|Warrants                                                   |   | 51,587     |   |   | 40,110     |  
|Accumulated other comprehensive loss                       |   | (583       | ) |   | (583       | )
|Deficit accumulated during the exploration stage           |   | (2,683,208 | ) |   | (1,818,723 | )
|                                                           |   |            |   |   |            |  
|Total stockholders equity                                 |   | 45,066     |   |   | 451,693    |  
|                                                           |   |            |   |   |            |  
|Total Liabilities and Stockholders Equity                 | $ | 317,522    |   | $ | 529,054    |  
|                                                           |   |            |   |   |            |  
|Nature and Continuance of Operations  Note 1              |   |            |   |   |            |  
|Commitments  Notes 4 and 7                                |   |            |   |   |            |  
|Subsequent Events  Note 4                                 |   |            |   |   |            |  

F-3

SEE ACCOMPANYING NOTES

---

STERLING GROUP VENTURES, INC.(An Exploration Stage Company) 
  CONSOLIDATED STATEMENTS OF OPERATIONS 
  for the years ended May 31, 2007 and 2006 and 
  for the period from July 27, 1994 (Date of Inception) to May 31, 2007 
  (Stated in US Dollars)

|                                                                          |   |             |   |   |               |   |   | July 27, 1994 |  
|------------------------------------------------------------------------- | - | ----------- | - | - | ------------- | - | - | ------------- | -
|                                                                          |   |             |   |   |               |   |   | (Date of      |  
|                                                                          |   | Years ended |   |   | Inception) to |  
|                                                                          |   | May 31,     |   |   | May 31,       |  
|                                                                          |   | 2007        |   |   | 2006          |   |   | 2007          |  
|                                                                          |   |             |   |   |               |   |   |               |  
|Expenses                                                                  |   |             |   |   |               |   |   |               |  
|Accounting, audit and legal
      fees                                    | $ | 90,297      |   | $ | 60,509        |   | $ | 276,192       |  
|Bank charges                                                              |   | 360         |   |   | 171           |   |   | 1,303         |  
|Consulting fees 
      Note 6                                            |   | 116,655     |   |   | 126,741       |   |   | 446,571       |  
|Depreciation                                                              |   | 2,708       |   |   | 1,829         |   |   | 5,871         |  
|Filing and transfer agent
      fees                                      |   | 2,724       |   |   | 6,023         |   |   | 32,863        |  
|Foreign exchange loss (gain)                                              |   | (11,047     | ) |   | (5,906        | ) |   | (13,383       | )
|General and administrative
       Note 6                                 |   | 19,288      |   |   | 13,006        |   |   | 52,247        |  
|Mineral property costs (recovery) 
      Schedule A and Notes 4(b) and 6 |   | 674,896     |   |   | (28,073       | ) |   | 1,133,394     |  
|Printing and mailing                                                      |   | -           |   |   | 1,523         |   |   | 16,883        |  
|Shareholder information and investor relations                            |   | -           |   |   | 21,553        |   |   | 59,700        |  
|Stock-based compensation                                                  |   | -           |   |   | -             |   |   | 368,641       |  
|Travel and entertainment                                                  |   | 15,395      |   |   | 21,310        |   |   | 119,084       |  
|                                                                          |   |             |   |   |               |   |   |               |  
|Loss before other item                                                    |   | (911,276    | ) |   | (218,686      | ) |   | (2,499,366    | )
|                                                                          |   |             |   |   |               |   |   |               |  
|Other items                                                               |   |             |   |   |               |   |   |               |  
|Interest income                                                           |   | 6,410       |   |   | 4,193         |   |   | 22,485        |  
|Recovery of doubtful collection 
      Note 4(b)                         |   | 40,381      |   |   | -             |   |   | 40,381        |  
|Allowance for doubtful
      collection  Note 4(b)                       |   | -           |   |   | (246,708      | ) |   | (246,708      | )
|                                                                          |   |             |   |   |               |   |   |               |  
|                                                                          |   | 46,791      |   |   | (242,515      | ) |   | (183,842      | )
|                                                                          |   |             |   |   |               |   |   |               |  
|Net loss for the period                                                   | $ | (864,485    | ) | $ | (461,201      | ) | $ | (2,683,208    | )
|                                                                          |   |             |   |   |               |   |   |               |  
|Basic and diluted loss per share                                          | $ | (0.02       | ) | $ | (0.01         | ) |   |               |  
|                                                                          |   |             |   |   |               |   |   |               |  
|Weighted average number of shares outstanding                             |   | 42,508,578  |   |   | 40,277,500    |   |   |               |  

F-4

SEE ACCOMPANYING NOTES

---

STERLINGGROUPVENTURES,INC.(An Exploration Stage Company) 
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY) 
  for the period from July 27, 1994 (Date of Inception) to May 31, 2007 
  (Stated in US Dollars)

DeficitAccumulated
      
      
      AccumulatedAdditional
      
      
      
      
      
      Other
      
      
      During theCommon
        Shares
      
      
      Paid-in
      
      
      
      
      
      Comprehensive
      
      
      ExplorationNumber
      
      
      Par
        Value
      
      
      Capital
      
      
      Warrants
      
      
      Loss
      
      
      Stage
      
      
      TotalBalance, July 27, 1994 (Date of Inception)
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -Common stock
      1
      
      
      1
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      1Amount contributed by director
      -
      
      
      -
      
      
      1,881
      
      
      -
      
      
      -
      
      
      -
      
      
      1,881Net loss for the periods
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (7,902
      )
      
      (7,902
      )Balance, May 31, 2001
      1
      
      
      1
      
      
      1,881
      
      
      -
      
      
      -
      
      
      (7,902
      )
      
      (6,020
      )Net loss for the year
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (1,860
      )
      
      (1,860
      )Balance, May 31, 2002
      1
      
      
      1
      
      
      1,881
      
      
      -
      
      
      -
      
      
      (9,762
      )
      
      (7,880
      )Net loss for the year
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (1,360
      )
      
      (1,360
      )Balance, May 31, 2003
      1
      
      
      1
      
      
      1,881
      
      
      -
      
      
      -
      
      
      (11,122
      )
      
      (9,240
      )Reverse acquisition
      (1
      )
      
      (1
      )
      
      (1,881
      )
      
      -
      
      
      -
      
      
      -
      
      
      (1,882
      )Issuance of common shares for reverseacquisition
      25,000,000
      
      
      25,000
      
      
      (23,119
      )
      
      -
      
      
      -
      
      
      -
      
      
      1,881Outstanding common shares of Companyprior to acquisition
      11,360,000
      
      
      11,360
      
      
      (10,883
      )
      
      -
      
      
      (583
      )
      
      -
      
      
      (106
      )Issuance of shares for cash pursuant to aprivate placement - at
      1,766,000
      
      
      1,766
      
      
      881,234
      
      
      -
      
      
      -
      
      
      -
      
      
      883,000$0.50Stock-based compensation
      -
      
      
      -
      
      
      368,641
      
      
      -
      
      
      -
      
      
      -
      
      
      368,641Net loss for the year
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (527,446
      )
      
      (527,446
      )


/contd

F-5

SEE ACCOMPANYING NOTES

---

| | STERLING GROUP VENTURES, INC.                                               | Continued
| | --------------------------------------------------------------------------- | ---------
| | (An Exploration Stage Company)                                              |          
| | CONSOLIDATED STATEMENTS OF STOCKHOLDERS
      EQUITY (DEFICIENCY)          |          
| | for the period from July 27, 1994 (Date of Inception)
      to May 31, 2006 |          
| | (Stated in US Dollars)                                                      |          

DeficitAccumulated
      
      
      AccumulatedAdditional
      
      
      
      
      
      Other
      
      
      During theCommon
        Shares
      
      
      Paid-in
      
      
      
      
      
      Comprehensive
      
      
      ExplorationNumber
      
      
      Par
        Value
      
      
      Capital
      
      
      Warrants
      
      
      Loss
      
      
      Stage
      
      
      TotalBalance, May 31, 2004
      38,126,000
      
      
      38,126
      
      
      1,215,873
      
      
      -
      
      
      (583
      )
      
      (538,568
      )
      
      714,848Issuance of shares for cash pursuant to a privateplacement                                 
                   - at $0.50
      1,950,000
      
      
      1,950
      
      
      973,050
      
      
      -
      
      
      -
      
      
      -
      
      
      975,000Issuance of shares for finders fee of privateplacement                                           
         - at $0.50
      101,500
      
      
      102
      
      
      50,648
      
      
      -
      
      
      -
      
      
      -
      
      
      50,750Finders fees
      -
      
      
      -
      
      
      (50,750
      )
      
      -
      
      
      -
      
      
      -
      
      
      (50,750
      )Fair value of share purchase warrants (findersfees)
      -
      
      
      -
      
      
      (40,110
      )
      
      40,110
      
      
      -
      
      
      -
      
      
      -Issuance of shares for services rendered
        - at $0.42
      100,000
      
      
      100
      
      
      41,900
      
      
      -
      
      
      -
      
      
      -
      
      
      42,000Net loss for the year
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (818,954
      )
      
      (818,954
      )Balance, May 31, 2005
      40,277,500
      
      
      40,278
      
      
      2,190,611
      
      
      40,110
      
      
      (583
      )
      
      (1,357,522
      )
      
      912,894Net loss for the year
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (461,201
      )
      
      (461,201
      )


/contd

F-6

SEE ACCOMPANYING NOTES

---

| | STERLING GROUP VENTURES, INC.                                               | Continued
| | --------------------------------------------------------------------------- | ---------
| | (An Exploration Stage Company)                                              |          
| | CONSOLIDATED STATEMENTS OF STOCKHOLDERS
      EQUITY (DEFICIENCY)          |          
| | for the period from July 27, 1994 (Date of Inception)
      to May 31, 2006 |          
| | (Stated in US Dollars)                                                      |          

DeficitAccumulated
      
      
      AccumulatedCommon
        Shares
      
      
      Additional
      
      
      
      
      
      Other
      
      
      During theNumber
      
      
      Par
        Value
      
      
      Capital
      
      
      Warrants
      
      
      Loss
      
      
      Stage
      
      
      TotalBalance, May 31, 2006
      40,277,500
      
      
      40,278
      
      
      2,190,611
      
      
      40,110
      
      
      (583
      )
      
      (1,818,723
      )
      
      451,693Issuance of shares for cash pursuant toa private placement                            
        - at $0.15
      2,750,300
      
      
      2,750
      
      
      409,795
      
      
      -
      
      
      -
      
      
      -
      
      
      412,545Issuance of shares for finders fee ofprivate placement                               
        - at $0.175
      123,690
      
      
      124
      
      
      21,522
      
      
      -
      
      
      -
      
      
      -
      
      
      21,646Finders fees
      -
      
      
      -
      
      
      (21,646
      )
      
      -
      
      
      -
      
      
      -
      
      
      (21,646
      )Share issuance costs
      -
      
      
      -
      
      
      (3,687
      )
      
      -
      
      
      -
      
      
      -
      
      
      (3,687
      )Fair value of share purchase warrants(finders fees)
      -
      
      
      -
      
      
      (9,895
      )
      
      9,895
      
      
      -
      
      
      -
      
      
      -Revaluation of share purchase warrants
      -
      
      
      -
      
      
      (1,582
      )
      
      1,582
      
      
      -
      
      
      -
      
      
      -Issuance of shares for services rendered-
        at $0.14
      350,000
      
      
      350
      
      
      48,650
      
      
      -
      
      
      -
      
      
      -
      
      
      49,000Net loss for the year
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (864,485
      )
      
      (864,485
      )Balance, May 31, 2007
      43,501,490
      
      $
      43,502
      
      $
      2,633,768
      
      $
      51,587
      
      $
      (583
      )
      $
      (2,683,208
      )
      $
      45,066


F-7

SEE ACCOMPANYING NOTES

---

STERLING GROUP VENTURES, INC.(An Exploration Stage Company) 
  CONSOLIDATED STATEMENTS OF CASH FLOWS 
  for the years ended May 31, 2007 and 2006 and 
  for the period from July 27, 1994 (Date of Inception) to May 31, 2007 
  (Stated in US Dollars)

|                                                                      |   |             |   |   |                |   |   | July 27, 1994 |  
|--------------------------------------------------------------------- | - | ----------- | - | - | -------------- | - | - | ------------- | -
|                                                                      |   |             |   |   |                |   |   | (Date of      |  
|                                                                      |   | Years ended |   |   | (Inception) to |  
|                                                                      |   | May 31,     |   |   | May 31,        |  
|                                                                      |   | 2007        |   |   | 2006           |   |   | 2007          |  
|                                                                      |   |             |   |   |                |   |   |               |  
|Cash Flows from Operating Activities                                  |   |             |   |   |                |   |   |               |  
|Net loss for the
      period                                         | $ | (864,485    | ) | $ | (461,201       | ) | $ | (2,683,208    | )
|Adjustments to reconcile net loss
      to net cash provided by (used |   |             |   |   |                |   |   |               |  
|in) operating activities:                                             |   |             |   |   |                |   |   |               |  
|Stock compensation
      expenses                                     |   | -           |   |   | -              |   |   | 368,641       |  
|Depreciation                                                          |   | 2,708       |   |   | 1,829          |   |   | 5,871         |  
|Permit and engineering
      studies                                  |   | -           |   |   | -              |   |   | 150,000       |  
|Shareholder
      information and investor relations                  |   | -           |   |   | -              |   |   | 20,447        |  
|Accounting, audit
      and legal fees                                |   | 49,000      |   |   | -              |   |   | 49,000        |  
|Foreign
      exchange translation adjustment                         |   | -           |   |   | -              |   |   | (106          | )
|Change in non-cash working capital
      items related to operations: |   |             |   |   |                |   |   |               |  
|GST
      receivable                                                  |   | 4,659       |   |   | (693           | ) |   | (9,128        | )
|Prepaid expenses                                                      |   | (768        | ) |   | 26,897         |   |   | 19,589        |  
|Advance
      receivable                                              |   | 22,342      |   |   | (36,531        | ) |   | (14,189       | )
|Accounts payable and
      accrued liabilities                        |   | 195,095     |   |   | 31,634         |   |   | 272,456       |  
|                                                                      |   |             |   |   |                |   |   |               |  
|Cash flows used in operating activities                               |   | (591,449    | ) |   | (438,065       | ) |   | (1,820,627    | )
|                                                                      |   |             |   |   |                |   |   |               |  
|Cash Flows from Investing Activities                                  |   |             |   |   |                |   |   |               |  
|Advance on investment                                                 |   | -           |   |   | -              |   |   | (150,000      | )
|Mineral property deposit                                              |   | 124,600     |   |   | (124,600       | ) |   | -             |  
|Additions to equipment                                                |   | (2,633      | ) |   | (724           | ) |   | (8,782        | )
|                                                                      |   |             |   |   |                |   |   |               |  
|Cash flows provided by (used in) investing
      activities           |   | 121,967     |   |   | (125,324       | ) |   | (158,782      | )
|                                                                      |   |             |   |   |                |   |   |               |  
|Cash Flows from Financing Activities                                  |   |             |   |   |                |   |   |               |  
|Net proceeds on issuance of common
      stock                        |   | 408,858     |   |   | -              |   |   | 2,266,858     |  
|Amounts contributed
      by director                                 |   | -           |   |   | -              |   |   | 1,881         |  
|                                                                      |   |             |   |   |                |   |   |               |  
|Cash flows provided by financing activities                           |   | 408,858     |   |   | -              |   |   | 2,268,739     |  

/contd

F-8

SEE ACCOMPANYING NOTES

---

| | STERLING GROUP VENTURES, INC.                                               | Continued
| | --------------------------------------------------------------------------- | ---------
| | (An Exploration Stage Company)                                              |          
| | CONSOLIDATED STATEMENTS OF CASH FLOWS                                       |          
| | for the years ended May 31, 2007 and 2006 and                               |          
| | for the period from July 27, 1994 (Date of Inception)
      to May 31, 2007 |          
| | (Stated in US Dollars)                                                      |          

|                                                                              |   |             |   |   |                |   |   | July 27, 1994 | 
|----------------------------------------------------------------------------- | - | ----------- | - | - | -------------- | - | - | ------------- | 
|                                                                              |   |             |   |   |                |   |   | (Date of      | 
|                                                                              |   | Years ended |   |   | (Inception) to |  
|                                                                              |   | May 31,     |   |   | May 31,        |  
|                                                                              |   | 2007        |   |   | 2006           |   |   | 2007          | 
|                                                                              |   |             |   |   |                |   |   |               | 
|Net increase (decrease) in cash and cash equivalents                          |   | (60,624     | ) |   | (563,389       | ) |   | 289,330       | 
|                                                                              |   |             |   |   |                |   |   |               | 
|Cash and cash equivalents, beginning of the
      period                      |   | 349,954     |   |   | 913,343        |   |   | -             | 
|                                                                              |   |             |   |   |                |   |   |               | 
|Cash and cash equivalents, end of the period                                  | $ | 289,330     |   | $ | 349,954        |   | $ | 289,330       | 
|                                                                              |   |             |   |   |                |   |   |               | 
|Cash and cash equivalents consist of:                                         |   |             |   |   |                |   |   |               | 
|Cash                                                                          | $ | 118,034     |   | $ | 274,463        |   | $ | 118,034       | 
|Term deposits                                                                 |   | 171,296     |   |   | 75,491         |   |   | 171,296       | 
|                                                                              |   |             |   |   |                |   |   |               | 
|                                                                              | $ | 289,330     |   | $ | 349,954        |   | $ | 289,330       | 
|                                                                              |   |             |   |   |                |   |   |               | 
|Supplemental Information:                                                     |   |             |   |   |                |   |   |               | 
|Cash paid for:                                                                |   |             |   |   |                |   |   |               | 
|Interest                                                                      | $ | -           |   | $ | -              |   | $ | -             | 
|Income
      taxes                                                            |   | -           |   |   | -              |   |   | -             | 
|                                                                              |   |             |   |   |                |   |   |               | 
|Non-cash Transactions:                                                        |   |             |   |   |                |   |   |               | 
|Issuance of shares for
      commission paid to broker for private placement  | $ | 21,646      |   | $ | 50,750         |   | $ | 72,396        | 
|Issuance of shares for services rendered                                      |   | 49,000      |   |   | 42,000         |   |   | 91,000        | 
|Issuance of share purchase
      warrants for finders fee paid to broker for |   |             |   |   |                |   |   |               | 
|private placement                                                             |   | 11,477      |   |   | -              |   |   | 11,477        | 

F-9

SEE ACCOMPANYING NOTES

---

STERLING GROUP VENTURES, INC.(An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  May 31, 2007 and 2006 
  (Stated in US Dollars)

|Note 1 | Nature and Continuance of
        Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | The Company is in the exploration
        stage. The Company has entered into several 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,
        confirmation of the Companys interest in the underlying property,
        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 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 and 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. At May 31, 2007, the Company had not yet achieved profitable
        operations, has accumulated losses of $2,683,208 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.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | 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 parent and the Company
        being the accounting subsidiary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Note 2 | Summary of Significant Accounting
        Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | The consolidated financial statements
        of the Company have been prepared in accordance with generally accepted
        accounting principles in the United States of America. Because a precise
        determination of many assets and liabilities is dependent upon future
        events, the preparation of consolidated financial statements for a period
        necessarily involves the use of estimates, which have been made using
        careful judgement. Actual results may vary from these estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-10

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 2

|Note 2 | Summary of Significant Accounting Policies (contd)
|------ | ----------------------------------------------------

The consolidated financial statements
  have, in managements opinion, been properly prepared within the framework
  of the significant accounting policies summarized below:

Exploration Stage Company

The Company complies with Financial
  Accounting Standard Board Statement No. 7 and Securities and Exchange Commission
  Act Guide 7 for its characterization of the Company as an exploration stage
  company.

Principles of Consolidation

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. The Companys subsidiaries are all incorporated
  under the laws of the Territory of the British Virgin Islands on the following
  dates: Micro Express Holdings Inc. was incorporated on February 25, 2004; Micro
  Express Ltd. was incorporated on July 27, 1994; Huyana Ventures Limited was
  incorporated on August 18, 2004; Makaelo Holdings Inc. was incorporated on March
  21, 2005 and Makaelo Limited was incorporated on February 14, 2005.

Cash and Cash Equivalents

For the purposes of the statements of
  cash flows, the Company considers all highly liquid investments with original
  maturities of three months or less to be cash equivalents.

Mineral Properties

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.  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.

F-11

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 3

|Note 2 | Summary of Significant Accounting Policies
      (contd)
|------ | ----------------------------------------------------------

Impairment of Long-lived Assets

In accordance with Financial Accounting
  Standards Board (FASB) Statement of Financial Accounting Standards
  (SFAS) No. 144, Accounting for the Impairment or Disposal
  of Long-Lived Assets, the carrying value of intangible assets and other
  long-lived assets are reviewed on a regular basis for the existence of facts
  or circumstances that may suggest impairment. The Company recognizes impairment
  when the sum of the expected undiscounted future cash flows is less than the
  carrying amount of the asset. Impairment losses, if any, are measured as the
  excess of the carrying amount of the asset over its estimated fair value.

Asset Retirement Obligations

The Company recognizes the fair value
  of a liability for an asset retirement obligation in the year in which it is
  incurred when a reasonable estimate of fair value can be made. The carrying
  amount of the related long-lived asset is increased by the same amount as the
  liability.

Changes in the liability for an asset
  retirement obligation due to the passage of time will be measured by applying
  an interest method of allocation. The amount will be recognized as an increase
  in the liability and an accretion expense in the statement of operations. Changes
  resulting from revisions to the timing or the amount of the original estimate
  of undiscounted cash flows are recognized as an increase or a decrease in the
  carrying amount of the liability for an asset retirement obligation and the
  related asset retirement cost capitalized as part of the carrying amount of
  the related long-lived asset.

Equipment

Equipment is stated at cost. Depreciation
  is provided on a straight-line basis over 3 years.

Income Taxes

The Company follows SFAS No. 109, Accounting
  for Income Taxes, which requires the use of the asset and liability method
  for accounting for income taxes. Under the asset and liability method of FAS
  No. 109, deferred tax assets and liabilities are recognized for the future tax
  consequences attributable to temporary differences between the financial statements
  carrying amounts of existing assets and liabilities and loss carry-forwards
  and their respective tax bases. Deferred tax assets and liabilities are measured
  using enacted tax rates expected to apply to taxable income in the year in which
  those temporary differences are expected to be recovered or settled.

F-12

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 4

|Note 2 | Summary of Significant Accounting Policies
      (contd)
|------ | ----------------------------------------------------------

Financial Instruments

The carrying value of cash and cash
  equivalents, advance receivable and accounts payable and accrued liabilities
  approximates fair value because of the short maturity of these instruments.
  Unless otherwise noted, it is managements opinion that the Company is
  not exposed to significant interest, currency or credit risks arising from these
  financial instruments.

Concentration of Credit Risk

The Company places its cash and cash
  equivalents with high credit quality financial institutions. As of May 31, 2007,
  the Company had no deposit in a bank beyond insured limits.

Basic Loss per Share

The Company reports basic loss per share
  in accordance with SFAS No. 128, Earnings Per Share. Basic loss
  per share is computed using the weighted average number of shares outstanding
  during the years. Diluted loss per share has not been provided as it would be
  antidilutive.

Comprehensive Loss

The Company reports comprehensive income
  (loss) in accordance with SFAS No. 130, Reporting Comprehensive Income.
  Comprehensive loss is comprised of foreign currency translation adjustments.

Foreign Currency Translation

Foreign currency transactions are translated
  into US dollars, the functional and reporting currency, by the use of the exchange
  rate in effect at the date of the transaction, in accordance with SFAS No. 52,
  Foreign Currency Translation.

Assets and liabilities denominated in
  a foreign currency are translated at the exchange rate in effect at the period
  end and capital accounts are translated at historical rates. Income statement
  accounts are translated at the average rates of exchange prevailing during the
  period. Translation adjustments from the use of different exchange rates from
  period to period are included in the Comprehensive Income account in Stockholders
  Equity, if applicable.

Transactions undertaken in currencies
  other than the functional currency of the entity are translated using the exchange
  rate in effect as of the transaction date. Any exchange gains and losses are
  included in the Statement of Operations.

F-13

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 5

|Note 2 | Summary of Significant Accounting Policies
      (contd)
|------ | ----------------------------------------------------------

Stock-based Compensation

On June 1, 2006, the Company adopted
  the fair value recognition provisions of FAS No. 123(R), Share-Based Payment,
  (FAS 123R). Prior to June 1, 2006, the Company accounted for stock-based
  payments under the recognition and measurement provisions of APB Opinion No.
  25, Accounting for Stock Issued to Employees (APB 25), and related
  Interpretations, as permitted by FAS No. 123, Accounting for Stock-Based Compensation
  (FAS 123). In accordance with APB 25, no compensation cost was required
  to be recognized for options granted that had an exercise price equal to the
  market value of the underlying common stock on the date of grant.

The Company adopted FAS 123R using the
  modified-prospective transition method. Under that transition method, compensation
  cost recognized for the year ended May 31, 2007 and thereafter will include:
  (a) compensation costs for all share-based payments granted prior to, but not
  yet vested as of June 1, 2006, based on the grant-date fair value estimated
  in accordance with the original provisions of FAS 123, and (b) compensation
  cost for all share-based payments granted subsequent to June 1, 2006, based
  on the grant-date fair value estimated in accordance with the provisions of
  FAS 123R. The financial results for the prior periods have not been restated.
  The Company will amortize stock compensation cost rateable over the requisite
  service period. Adoption of FAS123R has no impact on the financial statements
  of the Company.

New Accounting Pronouncements

In June 2006, the Financial Accounting
  Standards Board (FASB) issued FASB Interpretation No. 48, Accounting
  for Uncertainties in Income Taxes, (FIN 48). FIN 48 clarifies
  the accounting for uncertainty in income taxes and prescribes a recognition
  threshold and measurement attribute for the financial statement recognition
  and measurement of a tax position taken or expected to be taken in a tax return.
  FIN 48 is effective for financial statements as of December 15, 2006. The adoption
  of FIN 48 is expected to have no impact on the Company's financial statements.

In September 2006, the FASB issued Statement
  of Financial Accounting Standards No. 157, Fair Value Measurements(FAS
  157). FAS 157 defines fair value, establishes a framework for measuring
  fair value and expands disclosures about fair value measurements but does not
  require any new fair value measurements. FAS 157 is effective for financial
  statements issued for fiscal years beginning after November 15, 2007, and interim
  periods within those fiscal years. The Company has not yet determined the impact
  of applying FAS 157.

F-14

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 6

|Note 2 | Summary of Significant Accounting
        Policies (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | New Accounting Pronouncements (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | In September 2006, the FASB
        issued Statement of Financial Accounting Standards No. 158, Employers
        Accounting for Defined Benefit Pension and Other Postretirement Plans,
        (FAS 158). FAS 158 requires an employer to recognize the overfunded
        or underfunded status of a defined benefit postretirement plan (other
        than a multiemployer plan) as an asset or liability in its statement of
        financial position and to recognize changes in that funded status in the
        year in which the changes occur through comprehensive income. FAS 158
        is effective for financial statements as of December 31, 2006. The adoption
        of FAS No. 158 is expected to have no impact on the Company's financial
        statements.                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | In February 2007, the FASB issued
        FAS No. 159, The Fair Value Option for Financial Assets
        and Financial Liabilities - Including an amendment of FASB Statement No.
        115, (FAS 159) which permits entities to choose
        to measure many financial instruments and certain other items at fair
        value at specified election dates. A business entity is required to report
        unrealized gains and losses on items for which the fair value option has
        been elected in earnings at each subsequent reporting date. This statement
        is expected to expand the use of fair value measurement. FAS 159 is effective
        for financial statements issued for fiscal years beginning after November
        15, 2007, and interim periods within those fiscal years. The Company has
        not yet determined the impact of applying FAS159.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Note 3 | Advance Receivable
        Note 6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | Advance receivable is intended
        to be utilized against expenses in the year ended May 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Note 4 | Mineral Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| | a) | Dangxiongcuo Salt Lake Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | On September 16, 2005, the Company, through its wholly
        owned subsidiary, Micro Express Holdings Inc. (Micro), signed
        an agreement (the Agreement) for the development of Dangxiongcuo
        salt lake property (DXC Salt Lake) in Nima county of Naqu
        district in Tibet, China. The Agreement follows a Letter of Intent signed
        between the parties on July 11, 2005.                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Pursuant to the Agreement, the parties have agreed to
        set up a Cooperative Company, (the Cooperative) to develop
        the DXC Salt Lake. The objective of the Cooperative is to use the funds
        provided by the Company and the skills and technology provided by the
        other party to produce lithium carbonate and borate from brine. The Company,
        through Micro, will own 65% of the Cooperative. It is anticipated that
        the total investment in the Cooperative will be approximately RMB240,000,000
        (approximately $31,440,000).

F-15

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 7

|Note 4 | Mineral Properties (contd)
|------ | ----------------------------

| | a) | Dangxiongcuo Salt Lake Project  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | As of May 31, 2007, the Company has incurred a total
        of $911,167 in mineral property costs. At May 31, 2006, the Company had
        an outstanding advance of RMB1,000,000 ($124,600).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | On June 23, 2007, the Company entered into a consulting
        agreement with a Chinese company to assist the Company in obtaining certain
        government approvals to facilitate the establishment of a joint venture
        company that is required for the Company to continue the exploration and
        development of this project in Tibet. If the Chinese company is successful
        in its efforts, then it will be compensated by receiving from the Company
        an amount of shares equal to 10% of the Companys then issued and
        outstanding capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | On July 3, 2007, Micro received a letter from the other
        party to the agreement stating that the agreement between Micro and the
        other party should be deemed terminated as a result of lack of progress
        in the approval for the establishment of the joint venture company and
        is considering a lawsuit against the Company and Micro. Micro has responded
        that the other partys claim has no legal grounds as the lack of
        progress is not caused by Micro.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | b) | Jiajika Spodumene Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | On April 5, 2005, the Company, through its wholly-owned
        subsidiary Micro Express Ltd. (MEL), signed a joint venture
        contract with a Chinese partner for the establishment of a joint venture
        company, Jihai Lithium Ltd. and the development of the Jiajika lithium
        deposit in Kangding District, Sichuan Province, China. On March 3, 2006,
        both parties agreed to terminate the joint venture and the Chinese partner
        will pay back RMB2,480,000 ($309,058) incurred by MEL on the project.
        The Chinese partner shall pay RMB1,200,000 ($149,520) and RMB1,280,000
        ($159,538) before April 15, 2006 and March 30, 2007, respectively. If
        the Chinese partner does not pay the RMB1,280,000, the amount will be
        converted into an interest in the Jiajika project based on the percentage
        of MELs investment as to the registered capital contribution in
        Jiajika project by the Chinese partner. As at May 31, 2006, the Company
        had received RMB500,000 ($62,350) and a receivable of RMB1,980,000 ($246,708)
        was recorded. As the Chinese partner has not paid the remaining RMB700,000
        ($87,170) and the recoverability of the RMB1,280,000 ($159,538) was uncertain,
        the Company recorded an allowance for doubtful collection totaling $246,708
        for the year ended May 31, 2006.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | During the year ended May 31, 2007, the Company received
        RMB300,000 ($40,381) from the Chinese partner. This amount was reported
        as recovery of doubtful collection in the Consolidated Statements of Operation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

F-16

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 8

|Note 4 | Mineral Properties (contd)
|------ | ----------------------------

| | b) | Jiajika Spodumene Property  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | On June 15, 2007, the Company received RMB500,000 ($65,596)
        from the Chinese partner.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | As at May 31, 2007, the Company had incurred $398,407
        in the Jiajika Spodumene Property before the cumulative cost recovery
        of RMB800,000 ($102,731) for the year ended May 31, 2007.                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | c) | DX Polymetallic Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | On March 2, 2005, the Company, through its wholly-owned
        subsidiary, Makaelo Limited, entered into a joint venture agreement with
        a Chinese citizen who holds two exploration permits for a copper project
        (the Project) in Inner Mongolia, China.                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Project is comprised of two exploration permits,
        Donggou and Xiaoxigou, covering an area of about 52 square kilometers.
        The Project is located in Inner Mongolia. The Company has the right to
        earn 52% of a cooperative joint venture company by spending RMB 5,200,000
        ($650,000) for the exploration in the permit areas over three years with
        the first year contributing not less than RMB2,000,000 ($240,900). The
        Company did not complete the required expenditures within the first year
        and was attempting to renegotiate this agreement.   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | As at May 31, 2006, the Company had incurred a total
        of $51,757 in the DX Polymetallic Property and during the year ended May
        31, 2007 has abandoned the property.                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | d) | Lushi Spodumene Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | On December 28, 2003, the Company, through MEL, entered
        into a Letter of Intent to earn an interest of between 90% to 92% in a
        30-year mining joint venture which will hold the rights to develop the
        Lushi Spodumene property located in Henan Province, China. The Company
        shall contribute the total investment in the project. The amount of the
        investment will be determined by a pre-feasibility study. On April 10,
        2004, the Company entered into a formal joint venture agreement with its
        Chinese partner to commence earning its 92% interest.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | As at May 31, 2006, the Company had incurred $72,912
        in the Lushi Spodumene Property and had abandoned the property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-17

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 9

|Note 4 | Mineral Properties (contd)
|------ | ----------------------------

| | e) | DHLT Spodumene Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | On May 21, 2005, the Company, through its wholly-owned
        subsidiary, Huyana Ventures Limited (Huyana), signed a letter
        of intent (the LOI) with a Chinese partner for the development
        of Dahongliutan (DHLT) spodumene deposit located in Xinjiang
        Province of China. A joint venture company in Hetian City of Xinjiang
        Province in China will be set up to conduct the development and operation
        of the DHLT spodumene deposit in the areas that the Chinese partner has
        mining permits and where the Chinese partner is applying for additional
        mining permits. The business of the joint venture company will include
        mining and processing spodumene and comprehensive utilization of other
        associated rare metals. The Company shall contribute the total investment
        in the project for an 80% interest in the joint venture. The terms of
        the joint venture will be decided upon further negotiations and due diligence
        between the parties and will be subject to a formal contract to be signed
        by both parties.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | As at May 31, 2006, the Company had incurred $8,209
        in the DHLT Spodumene Property and had abandoned the property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|Note 5 | Equipment
|------ | ---------

| |                    |   |       |  |   | 2007         |  |   |       | 
| | ------------------ | - | ----- |  | - | ------------ |  | - | ----- | 
| |                    |   |       |  |   | Accumulated  |  |   |       | 
| |                    |   | Cost  |  |   | Depreciation |  |   | Net   | 
| |                    |   |       |  |   |              |  |   |       | 
| | Computer equipment | $ | 8,782 |  | $ | 5,871        |  | $ | 2,911 | 

| |                    |   |       |  |   | 2006         |  |   |       | 
| | ------------------ | - | ----- |  | - | ------------ |  | - | ----- | 
| |                    |   |       |  |   | Accumulated  |  |   |       | 
| |                    |   | Cost  |  |   | Depreciation |  |   | Net   | 
| |                    |   |       |  |   |              |  |   |       | 
| | Computer equipment | $ | 6,149 |  | $ | 3,163        |  | $ | 2,986 | 

|       | The equipment is located in Canada and China.                                                                                                                                                                                                                                                                                                                                     
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                   
|Note 6 | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                   
|       | The Company was charged consulting
        fees during the year ended May 31, 2007 totalling $115,722 (2006: $123,173)
        by companies controlled by two directors of the Company.
      The Company was charged consulting fees  mineral
        property costs during the year ended May 31, 2007 totalling $18,657 (2006:
        $9,579) by the Vice President of Micro.

F-18

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 10

|Note 6 | Related Party Transactions (contd)                                                                                                                                                                                         
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                              
|       | The Company was charged rental
        fees included in General and Administrative during the year ended May
        31, 2007 totalling $13,869 (2006: $10,016) by a company controlled by
        a director of the Company.
|       |                                                                                                                                                                                                                              
|       | The Company was charged mineral
        property costs - consulting during the year ended May 31, 2007 in the
        amount of $45,008 (2006: $43,296) by a company controlled by a director
        of the Company.        
|       |                                                                                                                                                                                                                              
|       | Cash and cash equivalents at
        May 31, 2007 include $66,136 (2006: $290,194) held in trust by a director
        of the Company.                                                                                       
|       |                                                                                                                                                                                                                              
|       | Included in advance receivable
        is $14,189 (2006: $33,595) advanced to the Vice-President of Micro. This
        is intended to be utilized against expenses in the year ended May 31,
        2008.                  
|       |                                                                                                                                                                                                                              
|       | Included in accounts payable
        is $219,501 (2006: $23,814) which is due to the companies controlled by
        the directors of the Company for their services provided.                                               
|       |                                                                                                                                                                                                                              
|Note 7 | Capital Stock
        Note 4                                                                                                                                                                                                
|       |                                                                                                                                                                                                                              
|       | Commitments:                                                                                                                                                                                                                 

| | a) | Capital Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Company planned a private placement of up to 5,000,000
        units at $0.15 per unit for a total proceeds of $750,000. Each unit consists
        of one common share and one share purchase warrant entitling the holder
        the right to purchase one common share at $0.18 per share expiring on
        December 29, 2006 (the Series C Share Purchase Warrants).
        A 7% finders fee will be paid in relation to the private placement.
        As at May 31, 2007, the Company had received total subscriptions of $412,545
        for 2,750,300 units. The private placement was closed without issuing
        the remaining 2,249,700 units. Finder's fee of 123,690 units with the
        aforementioned terms was issued.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | b) | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | On February 3, 2004, the Board of Directors of the Company
        has 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 years ended May 31, 2007 and 2006, no stock
        options were granted, exercised or cancelled.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | As at May 31, 2007, there were a total of 3,636,000
        stock options outstanding to directors and officers of the Company exercisable
        at $0.50 per share, expiring on February 3, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

F-19

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 11

|Note 7 | Capital Stock Note 4  (contd)
|------ | --------------------------------
|       |                                 
|       | Commitments (contd)           

| | c) | Share Purchase Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | During the year ended May 31, 2007, 2,873,990
        Series C warrants were issued, including 123,690 warrants
        with a fair value of $11,477 for a finders fee. Each Series C
        warrant entitles the holder thereof the right to purchase one common share
        at $0.18 per share expiring on December 29, 2006. No warrant was exercised
        or cancelled during the period. On December 22, 2006, the Company extended
        the expiry date of the 2,873,990 Series C Share Purchase Warrants
        from December 29, 2006 to February 29, 2008. The exercise price of the
        warrants remains unchanged at $0.18 per share.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The fair value of the Series C
        warrants granted to the finders was $0.08 per share and was estimated
        on the date of grant using the Black-Scholes option valuation model with
        the following assumptions used: dividend yield of 0%, expected volatility
        of 98.91%, risk-free interest rate of 5.0%, and an expected life of 1.3
        years.                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | As at May 31, 2007, the Company has a total
        of 3,817,500 and 2,873,990 Series A and C share
        purchase warrants outstanding, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | Each Series A warrant entitled
        the holder thereof the right to purchase one common share at $0.50 per
        share expiring on the earlier of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Upon exercise of the Series A
  Share Purchase Warrant at $0.50 each, the holder will receive one Common Share
  of the Company and a Series B Share Purchase Warrant exercisable
  at $1.00 expiring one year after the occurrence of either (i) or (ii) as described
  above.

|Note 8 | Deferred Tax Assets                                                                                                                                                                                                                                                                                                                                                                          
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                              
|       | There is no current or deferred
        tax expense for the years ended May 31, 2007 and 2006, due to the Company's
        loss position. The Company has fully reserved for any benefits of these
        losses. The deferred tax consequences of temporary differences in reporting
        items for financial statement and income tax purposes are recognized,
        as appropriate.

F-20

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 12

|Note 8 | Deferred Tax Assets (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | Realization of the future tax
        benefits related to the deferred tax assets is dependent on many factors,
        including the Companys ability to generate taxable income within
        the net operating loss carryforward period. Management has considered
        these factors in reaching its conclusion as to the valuation allowance
        for financial reporting purposes. The income tax effect of temporary differences
        comprising the deferred tax assets and deferred tax liabilities on the
        accompanying consolidated balance sheets is a result of the following:

| |                         |   | 2007     |   |   | 2006     |  
| | ----------------------- | - | -------- | - | - | -------- | -
| |                         |   |          |   |   |          |  
| | Deferred tax assets     | $ | 329,452  |   | $ | 252,182  |  
| | Valuation allowance     |   | (329,452 | ) |   | (252,182 | )
| |                         |   |          |   |   |          |  
| | Net deferred tax assets | $ | -        |   | $ | -        |  

|        | All of the net operating loss
        carryforwards was generated by the parent company. The Company does not
        file a consolidated tax return because all of its subsidiaries are foreign
        corporations. Pursuant to the Tax Reform Act of 1986, annual utilization
        of the Companys net operating loss carryforwards may be limited
        if a cumulative change in ownership of more than 50% is deemed to occur
        within any three year period.
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Note 9  | Foreign Currency Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | The Company is exposed to fluctuations
        in foreign currencies through amounts held in China in RMB:                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | -     
        cash $66,121; and                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | -     
        cost recovery receivable $206,327.                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Note 10 | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | No provision for income taxes
        has been provided for in these financial statements due to the net loss.
        At May 31, 2007, the Company has net operating loss carryforwards, which
        expire commencing in 2022, totaling approximately $968,975, the benefit
        of which has not been recorded in the financial statements.                                                                                                                             

F-21

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  May 31, 2007 and 2006
  (Stated in US Dollars)  Page 13

Note 11     Schedule of Mineral Property Costs

| | STERLING GROUP VENTURES, INC.                                              
| | ---------------------------------------------------------------------------
| | (An Exploration Stage Company)                                             
| | SCHEDULE OF MINERAL PROPERTY COSTS                                         
| | for the years ended May 31, 2007 and 2006 and                              
| | for the period from July 27, 1994 (Date of Inception)
      to May 31, 2007
| | (Stated in US Dollars)                                                     

DXC
      
      
      Jiajika
      
      
      DX
      
      
      Lushi
      
      
      DHLTSalt Lake
      
      
      Spodumene
      
      
      Polymetallic
      
      
      Spodumene
      
      
      SpodumeneProperty
      
      
      Property
      
      
      Property
      
      
      Property
      
      
      Property
      
      
      TotalBalance, May 31, 2003
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -Administrative
      
      -
      
      
      471
      
      
      -
      
      
      276
      
      
      -
      
      
      747Consulting fees
      
      -
      
      
      9,263
      
      
      -
      
      
      3,027
      
      
      -
      
      
      12,290Travel
      
      -
      
      
      2,763
      
      
      -
      
      
      1,953
      
      
      -
      
      
      4,716Balance, May 31, 2004
      
      -
      
      
      12,497
      
      
      -
      
      
      5,256
      
      
      -
      
      
      17,753Administrative
      
      -
      
      
      6,598
      
      
      843
      
      
      1,357
      
      
      186
      
      
      8,984Consulting fees
      
      -
      
      
      33,799
      
      
      6,552
      
      
      18,925
      
      
      -
      
      
      59,276Feasibility study
      
      -
      
      
      157,769
      
      
      -
      
      
      35,969
      
      
      -
      
      
      193,738Exploration costs
      
      -
      
      
      -
      
      
      30,266
      
      
      -
      
      
      -
      
      
      30,266Permit costs
      
      -
      
      
      150,000
      
      
      -
      
      
      -
      
      
      -
      
      
      150,000Travel
      
      -
      
      
      15,085
      
      
      1,785
      
      
      9,163
      
      
      521
      
      
      26,554Balance, May 31, 2005
      
      -
      
      
      375,748
      
      
      39,446
      
      
      70,670
      
      
      707
      
      
      486,571Administrative
      
      5,560
      
      
      2,100
      
      
      577
      
      
      -
      
      
      50
      
      
      8,287Consulting fees
      
      46,629
      
      
      12,062
      
      
      9,688
      
      
      2,242
      
      
      -
      
      
      70,621Engineering studies
      
      26,933
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      26,933Feasibility study
      
      29,080
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      29,080Geophysical study
      
      31,114
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      31,114Legal fees
      
      623
      
      
      -
      
      
      -
      
      
      -
      
      
      247
      
      
      870Topography measurement
      
      32,266
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      32,266Travel
      
      30,953
      
      
      8,009
      
      
      2,046
      
      
      -
      
      
      7,205
      
      
      48,213Wages and benefits
      
      33,601
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      33,601Cost recovery  Note 4(b)
      
      -
      
      
      (309,058
      )
      
      -
      
      
      -
      
      
      -
      
      
      (309,058
      )Balance, May 31, 2006
      
      236,759
      
      
      88,861
      
      
      51,757
      
      
      72,912
      
      
      8,209
      
      
      458,498Administrative
      
      5,200
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      5,200Consulting fees  Note 6
      
      134,580
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      134,580Engineering studies
      
      38,063
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      38,063Mining permit
      
      382,920
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      382,920Topography measurement
      
      15,001
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      15,001Legal fees
      
      9,695
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      9,695Travel
      
      53,262
      
      
      488
      
      
      -
      
      
      -
      
      
      -
      
      
      53,750Wages and benefits
      
      35,687
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      35,687Balance, May 31, 2007
      $
      911,167
      
      $
      89,349
      
      $
      51,757
      
      $
      72,912
      
      $
      8,209
      
      $
      1,133,394


F-22

---

(3) Exhibits

The exhibits listed below are required
by Item 601 of Regulation S-K. Each management contract or compensatory plan or
arrangement required to be filed as an exhibit to this Form 10-K has been
identified.

The following are exhibits to this Annual Report

|31.1 | Certification of
        Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
        Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                   
|31.2 | Certification of
        Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
        Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|     |                                                                                                                                                                   
|32.1 | Certification of
        Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
        Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     |                                                                                                                                                                   
|32.2 | Certification of
        Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
        Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

b)        The following
reports on Form 8-K were filed during the year ended May 31, 2007:

On June 29, 2006, the Company filed a report on Form 8-K under
Items 8.01, and 9.01 disclosing that the Company received a qualifying report
detailing the initial assessment on the mining prospects of the DXC Salt Lake
Property in Nima county of Naqu district in Tibet, China.

On September 20, 2006, the Company filed a report on Form 8-K
under Items 8.01, and 9.01 disclosing that the Company received approval for the
reserve auditing of the Dangxiongcuo salt lake property (DXC Salt Lake) from
the Ministry of Land and Resources of China.

On October 2, 2006, the Company filed a report on Form 8-K
under Items 3.02 disclosing that The Company issued 2,873,990 units at a price
of $0.15 per unit in a private placement.

On December 22, 2006, the Company filed a report on Form 8-K
under Items 8.01 announcing that the Company extended the expiry date of
2,873,990 Share Purchase Warrants (the Series C share purchase Warrants) from
December 29, 2006 to February 29, 2008.

On June 8, 2007, the Company filed a report on Form 8-K under
Items 5.02 disclosing that the Company received and accepted the resignation of
Mr. Patrick Chan from its Board of Directors and appointed Mr. Robert Smiley to
the Board of Directors.

On June 28, 2007, the Company filed a report on Form 8-K under
Items 1.01, and 9.01 disclosing that the Company entered into a consulting
agreement with Zhongchuan Mining Co. Ltd. for obtaining certain government
approvals in China to facilitate the establishment of a joint venture company in
Tibet, China.

On July 10, 2007, the Company filed a report on Form 8-K under
Items 8.01 updating the development of DXC salt lake project in Tibet, China.

Item 14. Principal Accountant Fees and Services.

Audit Fees

Amisano Hanson ("AH") provided audit services to the Company in
connection with its annual report for the fiscal year ended May 31, 2007 and
2006. The aggregate fees owned to AH for the May 31, 2007 year ended audit of
the Companys annual financial statements was $10,000 and the aggregate fees
billed by AH for the fiscal year 2007 quarterly reviews of the Company was
$13,070. The aggregate fees billed by AH for the May 31, 2006 year ended

26

---

audit of the Company's annual financial statements was $18,416
and the aggregate fees billed by AH for the fiscal year 2006 quarterly reviews
of the Company was $11,165.

Audit Related Fees

No fees were billed by AH to the Company for professional
services that are reasonably related to the audit or review of the Company's
financial statements that are not disclosed in "Audit Fees" above.

Tax Fees

No fees were billed by AH to the Company in 2007 for
professional services rendered in connection with the preparation of the
Company's tax returns for the period. No fees were billed by AH to the Company
in 2006 for professional services rendered in connection with the preparation of
the Company's tax returns for the year ended May 31, 2006.

All Other Fees

No fees were billed by AH to the Company for other professional
services rendered or any other services not disclosed above during the period
from June 1, 2006 to May 31, 2007 and no fees were billed by AH to the Company
for other professional services rendered or any other services not disclosed
above during the period from June 1, 2005 to May 31, 2006.

Audit Committee Pre-Approval

The Company's Board acts as the audit committee and had no
"pre-approval policies and procedures" in effect for the auditors' engagement
for the audit year 2007 and 2006.

All audit work was performed by the auditors' full time employees.

SIGNATURES

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

| | STERLING GROUP VENTURES, INC.
| | -----------------------------
| | (Registrant)                 
| | By:                          
| |                              
| |                              
| | By:                          
| |                              
| |                              
| |                              

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

| | By: | /s/ Richard Shao                                         
| | --- | ---------------------------------------------------------
| |     | Richard Shao, President and Chief
      Financial Officer
| |     |                                                          
| | By: | /s/ Raoul Tsakok                                         
| |     | Raoul Tsakok, Chairman and Chief
      Executive Office  
| |     |                                                          
| |     | Date: February 19, 2008                                  

27

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