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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

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

For the fiscal year endedMay 31, 2010OR

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

For the transition period from_____________ to _____________.

Commission file number: 000-51775

STERLING GROUP VENTURES,
INC.(Exact name of registrant as specified in its
charter)

|Nevada                                           | 72-1535634                          
|------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    |                                     
|                                                 |                                     
|4743  350 S. E. Marine Drive                    |                                     
|Vancouver BC Canada                              | V5X 2S5                             
|(Address of principal executive offices)         | (Zip Code)                          

Registrants telephone number, including area code(604)
689-4407

Securities registered pursuant to Section 12(b) of the Act:

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|None                | None                                     

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001(Title of class)

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ 
 ]    No [X]

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Act. Yes [  
]    No [X]

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]    No
[   ]

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

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

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

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

The aggregate market value of the voting and non-voting share of
Common Stock held by non-affiliates of the registrant was approximately
$1,441,570 based on the closing trading price for the common equity as of
November 30, 2009 (at $0.06 per share closing price).

The number of shares of common stock, par value $0.001 per
share, outstanding as of August 26, 2010 was 43,826,175.

Documents incorporated by reference: None.

1

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STERLING GROUP VENTURES INC.Form 10-K TABLE OF CONTENTS

|             |                                                                                                                    | Page
|------------ | ------------------------------------------------------------------------------------------------------------------ | ----
|             |                                                                                                                    |     
|PART
      I
|Item 1.      | Business                                                                                                           | 4   
|Item 1A.     | Risk Factors                                                                                                       | 7   
|Item 1B.     | Unresolved Staff Comments                                                                                          | 9   
|Item 2.      | Properties                                                                                                         | 9   
|Item 3.      | Legal Proceedings                                                                                                  | 11  
|Item 4.      | Submission of Matters to a Vote of Security Holders                                                                | 11  
|             |                                                                                                                    |     
|PART II     
|Item 5.      | Market for Registrant's Common
      Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 11  
|Item 6.      | Selected Financial Data                                                                                            | 13  
|Item 7.      | Management's Discussion and
      Analysis of Financial Condition and Results of Operations                        | 13  
|Item 7A.     | Quantitative and Qualitative Disclosures About Market Risk                                                         | 16  
|Item 8.      | Financial Statements and Supplementary Data                                                                        | 16  
|Item 9.      | Changes in and Disagreements With Accountants on Accounting
      and Financial Disclosure                         | 39  
|Item 9A.     | Controls and Procedures                                                                                            | 39  
|Item 9B.     | Other Information                                                                                                  | 39  
|             |                                                                                                                    |     
|PART III    
|Item 10.     | Directors, Executive Officers and Corporate Governance                                                             | 40  
|Item 11.     | Executive Compensation                                                                                             | 42  
|Item 12.     | Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters               | 43  
|Item 13.     | Certain Relationships and Related Transactions and Director
      Independence                                     | 43  
|Item 14.     | Principal Accountant Fees and Services                                                                             | 44  
|             |                                                                                                                    |     
|PART IV     
|Item 15.     | Exhibits and Financial Statement Schedules                                                                         | 45  
|             |                                                                                                                    |     
|SIGNATURES  

2

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Cautionary Statement Regarding Forward-Looking Statements

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, potash, 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, lithium carbonate,
potash, and other metals and chemicals, 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.

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", which 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  $ refer to US Dollars, all
references to CA $ refer to Canadian Dollars , all references to RMB refer
to Chinese Yuan 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",
the Company 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.

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PART I

ITEM 1. BUSINESS.

General

We were incorporated in the state of Nevada on September 13,
2001 and established a fiscal year end of May 31. Since our incorporation, we
have engaged in the business of exploration and development of a mineral
property. On January 20, 2004, Sterling completed the acquisition of all of the
issued and outstanding shares of Micro Express Ltd. (Micro), which was
incorporated on July 17, 1994. Pursuant to the transaction, the Company issued
an aggregate of 25,000,000 shares of Sterlings common stock to the stockholders
of Micro in exchange for 100% of the shares of Micro common stock. 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.

We are a start-up, exploration stage company engaged in the
search and exploration of lithium and related minerals. We have not yet
generated or realized any revenues from our business operations. Our statutory
registered agent's office is located at 123 West Nye Lane, Suite 129, Carson
City, Nevada 89706 and our business office is located at 4743  350 S. E. Marine
Drive, Vancouver, B.C., Canada, V5X 2S5. Our telephone number is (604) 689-4407
and fax number is (604) 408-8515

Lithium and Lithium Carbonate Overview

Lithium is a solid soft alkali metal which has an atomic number
of 3 and is the lightest of all metals, with a density of about half of that of
water. The metal is naturally occurring in minute amounts in ore and brine
deposits. The major ores used to mine lithium are spodumene, petalite and
lepidolite. While spodumene is the most common lithium ore mined, it is also
more expensive than mining brine deposits as the process is more
complicated.

Lithium carbonate (Li2CO3) occurs naturally in brine or salt
lake deposits or water and 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.

DXC Salt Lake Project

On July 11, 2005, the Company signed a letter of intent with
Beijing Mianping Salt Lake Research Institute (Mianping) 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 (the
Mianping Agreement) with Beijing Mianping Salt Lake Research Institute 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.

Mianping which is a private company holds the exploration
permit on the Dangxiongcuo Salt Lake and the surrounding area issued by Tibet
Bureau of Land and Resources of China. Dangxiongcuo Salt Lake is a classic brine
type deposit. The number of the exploration permit is 5400000620013. The area
covered by the permit is 89.06 km2 (8,906 hectares) and it was valid until Feb
23, 2007. The recording date is February 24, 2006. Mianping has renewed its
permit on March 4th 2007. The new number is 5400000730283. The area
covered by the permit is 89.06 km2 (8,906 hectares) and it was valid until March
14th 2008. The recording date is March 4, 2007. The license is now
under renewal process. There is a mandated routine for converting this
exploration permit into a mining permit.

Pursuant to the Mianping Agreement signed on September 16,
2005, the parties agreed to set up a Cooperative Company (the Cooperative) to
develop DXC Salt Lake. The objective of the Cooperative was to use the funds
provided by Sterling through MEH and the skills and technology provided by
Mianping to produce lithium carbonate (Li2CO3), potash and other chemicals from
brine. MEH was to own 65% and Mianping to own 35% of the Cooperative. It was
anticipated that the total investment in the Cooperative shall be approximately
240 million RMB (or approximately US$35 million) and would result in production
of 5,000 tonnes per year of lithium carbonate and by products (potash and other
chemicals). Mianping guaranteed the production cost of lithium carbonate would
be less than 11,000 RMB per tonne (or approximately US $1,600 per tonne).

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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 was considering a lawsuit against the Company and MEH. MEH
had responded that Mianpings claim had no legal grounds as the lack of progress
was not caused by MEH or the Company. There has been no legal action to date and none is
expected. By letter dated August 25, 2008, Mianping had confirmed to the
Companys auditor that the agreement dated Sept. 16, 2005 was terminated
effective July 8, 2008. This agreement was replaced by the agreement with Zhong
Chuan International Mining Holdings Co. Ltd. dated July 8, 2008.

On July 8, 2008, the Company signed an agreement (the
"Agreement") with Zhong Chuan International Mining Holding Co., Ltd. ("Zhong
Chuan"), Ximing Sun and Charles Yan - shareholders of Monte Sea Holdings Ltd.
(collectively hereinafter "Monte Sea Shareholders") to restructure the
transactions contemplated under the Mianping Agreement signed by Mianping and
MEH on September 16, 2005. Pursuant to the Agreement, the parties wish to
establish a Sino-foreign cooperative joint venture company ("CJV") for the
purpose of applying for and holding required approvals, permits and licenses
with respect to the development of the Dangxiongcuo Salt Lake property (the
"Property") located in Tibet of China.

Zhong Chuan is a Chinese mining company with connections and
mineral properties in Tibet, China. Zhong Chuan is interested in expanding into
lithium business. Zhong Chuan has also acquired interests in certain other salt
lakes in Tibet ("Other Interests"). Monte Sea Shareholders are the shareholders
holding all the issued and outstanding shares in the stock of Monte Sea Holdings
Ltd. ("Monte Sea"), a company incorporated in Hong Kong.

Under the Agreement, the Mianping Agreement between Mianping
and the Company shall be replaced and superseded by this Agreement upon this
Agreement becoming effective. Upon this Agreement being effective and
termination of the Mianping Agreement, Zhong Chuan shall cause Mianping to repay
to the Company RMB 6,000,000 ($875,000) by depositing the said amount into an
account designated by the Company. Mianping has not paid the Company the
required amount anticipated from the termination of the agreement.

The Parties agree that Zhong Chuan shall cause an operating
company ("Opco") to be established in Tibet prior to the establishment of the
CJV for the purpose of applying for and holding required approvals, permits and
licenses with respect to the development of the Property. The Opco shall hold
all such approvals, permits and licenses in trust for the CJV, and pursuant to
the letters and spirit of this Agreement.

Under the Agreement, Monte Sea Shareholders and Zhong Chuan
shall cause the CJV to be established within 90 days from date of this
Agreement, subject to required regulatory approval and based on a joint venture
agreement by way of acquisition of interest in the Opco by Monte Sea, or by way
of incorporation under the Chinese laws. Monte Sea shall hold up to 65% but no
less than 51% of shares in the CJV. CJV shall own and hold all Mianping's
(and/or Opco's) title to and interest in any exploration or mining licenses in
lithium resources in Tibet including the Exploration license and Other
Interests.

If for any Chinese regulatory or policy reasons, Monte Sea is
not permitted to have more than fifty-one percent (51%) interest in the CJV,
then Monte Sea and Zhong Chuan shall cause the JV Agreement to be revised such
that:

(a) Mont Sea shall have a forty-nine percent (49%) interest in
the CJV;

(b) Mont Sea shall be entitled to receive returns on its
investment in the CJV on a priority and accelerated basis until its investment
in the CJV and the Property is fully recovered; and

(c) Mont Sea shall be permitted to manage the daily operation
of the CJV pursuant to a management agreement to be entered into between Mont
Sea and Zhong Chuan, on terms and conditions satisfactory to Sterling.

The Parties shall cause all necessary corporate actions to be
taken to approve and effect the transactions contemplated above, and to make any
adjustment, registration or filings necessary to meet applicable regulatory
requirements.

Upon signing of this Agreement and subject to applicable
regulatory approval, Monte Sea Shareholders shall subscribe for 5,000,000 units
(the "Units") to be issued by the Company at $0.15 per unit. Each Unit shall
consist of One (1) common share in the stock of the Company, and One (1) warrant
which shall entitle Monte Sea Shareholders to purchase One (1) common share in
the stock of the Company at $0.16 per share within two (2) years from the date
of the issuance of the Units.

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Subject to applicable regulatory approval, the Company shall
  cause 200,000,000 shares to be issued to Monte Sea Shareholders within ten (10)
  working days from the date transfer of the Exploration License to the CJV is
  approved by the Chinese regulators, in exchange for all the shares then issued
  and outstanding in the stock of Monte Sea and held by Monte Sea shareholders
  (the "Share Exchange"). The Share Exchange may be conducted and completed at an
  earlier date so long as the Company and Monte Sea Shareholders may agree in
  writing.

Subject to applicable regulatory approval, the Company shall
  cause 87,910,000 shares in the capital of the Company to be issued to Monte Sea
  Shareholders at no additional cost, upon receipt by the CJV of a mining license
  and such other permits or approvals for the Property, permitting the full
  exploitation and development of the Property.

The Company shall use its best efforts to secure business
  relationships with selected major companies outside China in the form of equity
  participation or off-take arrangement for lithium products from the CJV.

The Company intends to, when and as required by the CJV,
  arrange and complete financing for the operation of the CJV. There are no
  assurances that the Company will be able to obtain such financing.

Zhong Chuan shall, together with Monte Sea Shareholders,
provide funds no less than RMB 100,000,000 (or US dollar equivalent thereof) for
the purpose of meeting registered capital payment requirements in the
registration and operation of the CJV. Zhong Chuan shall keep other Parties
informed of any development in the registration of the CJV and transfer of the
Exploration License.

Monte Sea Shareholders shall, together with Zhong Chuan, make
funds available for the purpose of acquisition and meeting registered capital
payment requirements in the registration and operation of the CJV.

CJV will be located in Tibet, China and will develop
Dangxiongcuo lithium property, extract and process commercially lithium
carbonate using internationally advanced technologies.

In July 2009, the Company received verbal termination of the
Agreement with Zhong Chuan, as advised by third party legal counsel, at a
meeting in Beijing, China. Formal written notice has not been received from
Zhong Chuan. The Agreement in effect, allows Zhong Chuan to terminate the
Agreement if it pays the Company double the amount of funds paid by the Company
to date to secure and develop the DXC Project. Zhong Chuan has not repaid the
required amount as anticipated by the Agreement to date. This unfortunate delay
on the part of Zhong Chuan places the termination it gave the Company in dispute
as the termination is conditional upon repayment of the required funds. At this
point then, the termination is incomplete. The Company is pursuing Zhong Chuan
to complete the termination, as the Company deems, is mandated by the Agreement.

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 would hold the
mining licenses to develop the Jiajika spodumene property located in Sichuan
Province, China for the extraction of lithium and lithium salts. Pursuant to the
Agreement, the total investment required was estimated at 88.5 million RMB
(US$10.8 million) for the initial capacity of 240,000 tonnes/annum. The initial
registered capital was 56 million RMB (US$6.8 million). Sichuan Province Mining
Ltd. would contribute 14 million RMB (US$1.7 million) including the mining
permits to hold 25% of the JV Company. Micro would contribute 42 million RMB
(US$ 5.1 million) to hold 75% of the JV Company.

On April 5, 2005, the Company through Micro, signed a joint
venture contract (JV Contract) with Sichuan Province Mining Ltd. for setting
up a joint venture company, Jihai Lithium Ltd., and the development of the
Jiajika lithium deposit. The Contract follows an agreement signed between the
parties on September 16, 2003.

Sichuan Province Mining Ltd. (SPM) which is a private Chinese
company holds the mining permit on the Jiajika spodumene property in Kangding,
Sichuan province, China issued by the Sichuan Bureau of Land and Resources of
China. The property is an albite  spodumene pegmatite deposit. The number of
mining permit is 5100000410234. The area is 0.88 km2 (88 hectares) and it was
valid until November 11, 2006. The recording date is May 24, 2004. Sterling was
required to contribute 42 million RMB in order to earn 75% of the Joint Venture
to be set up by Sterling and SPM to build an initial capacity of 240,000 tonnes
per year mining and processing plant.

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

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Pursuant to the Termination Agreement, the parties agreed to
  terminate the joint venture and confirmed that Micros early investment of 2.48
  million RMB to the Sichuan Jiajika Spodumene project should be paid back at a
  rate of 1.2 million RMB before April 15, 2006 and 1.28 million RMB before March
  30, 2007. Payment should be made directly to Micro by SPM. 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 of
  May 31, 2009, the Company had received the full amount of RMB 2.48 million
  ($309,058) from SPM.

ITEM 1A. RISK FACTORS

We have sought to identify what we believe to be the most
  significant risks to our business. However, we cannot predict whether, or to
  what extent, any of such risks may be realized nor can we guarantee that we have
  identified all possible risks that might arise. Investors should carefully
  consider all of such risk factors before making an investment decision with
  respect to our Common Stock. We provide the following cautionary discussion of
  risks, uncertainties and possible inaccurate assumptions relevant to our
  business. These are factors that we think could cause our actual results to
  differ materially from expected results. Other factors besides those listed here
  could adversely affect us.

Factors That May Affect Future Results and Market Price
  of Stock

The business of the Company involves a number of risks and
  uncertainties that could cause actual results to differ materially from results
  projected in any forward-looking statement, or statements, made in this report.
  These risks and uncertainties include, but are not necessarily limited to the
  risks set forth below. The Company's securities are speculative and investment
  in the Company's securities involves a high degree of risk and the possibility
  that the investor will suffer the loss of the entire amount invested.

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

Sterling is in the exploration stage. The Company has entered
into joint venture agreements to explore and develop mineral properties located
in China and has not yet determined whether these properties contain reserves
that are economically recoverable. The Company has not yet achieved profitable
operations and is dependent on its ability to raise capital from shareholders or
other sources to meet its obligations and repay its liabilities arising from
normal business operations when they come due. These factors raise substantial
doubt that the Company will be able to continue as a going concern.

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.

7

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

Limited Management Resource Development Experience

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

Limited Financial Resources

Furthermore, the Company has limited financial resources with
  no assurance that sufficient funding will be available to it for future
  exploration and development or to fulfill its obligations under current
  agreements. There is no assurance that the Company will be able to obtain
  adequate financing in the future or that the terms of such financing will be
  favorable. Failure to obtain such additional financing could result in delay or
  indefinite postponement of further exploration and development of its
  projects.

Limited Public Market, Possible Volatility of Share
  Price

The Company's Common Stock is currently quoted on the NASD OTC
  Bulletin Board under the ticker symbol SGGV and is listed on Berlin Bremen Stock
  Exchange under the symbol GD7. As of May 31, 2010, there were approximately
  43,826,175 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.

Dilution to the Existing Shareholders

The Company has no other capital resources other than the
ability to use its common stock to raise additional capital or the exercise of
the warrants by the unit holders. Pursuant to the agreement signed on July 8,
2008 with Zhong Chuan, the Company shall cause total 292,910,000 shares to be
issued to Monte Sea Shareholders for the DXC Salt Lake project, which will
significantly dilute the Company's stockholders.

Political Risks

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

8

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Circumstances related to Tibet political activities and
  resulting political upheaval are beyond the control of the Company and
  constitute a risk to investors.

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

Since October 2008, a severe general downturn in the U. S.
  economy and global economy slowdown which already affected the securities
  markets took place. Such a deleterious turn of events has made it much more
  difficult for the Company to access financing should it be required to do so.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTY

DXC Salt Lake Property

Dangxiongcuo Salt Lake (DXC) is located in the south-western
  part of Xizang plateau in Nima County, Tibet of China. The geographic
  co-ordinates are between 86°38'00" and 86°49'00" east and 31°30'00" to 31°40'00"
  north.

The location of the property is shown in following map.



9

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Access to Tibet is through Lhasa which has a good efficient
international airport. Road access into the property area is difficult at best.
The road heads northwest from Lhasa to the town of Zamsar then northeast. This
first 200 km is good paved road. Then down into the valley turning right onto a
rough gravel road near the Nam Tsho Salt Lake. Thence around the eastern and
northern side of the Nam Tsho Lake and on 300 kilometers to the isolated village
of Pankgo. Thence proceed 400 kilometers to the City of Nima. Thence proceed
another 90 kilometers of very rough road down to the DXC. The trip takes 26
hours of difficult 4X4 driving from Lhasa.

The deposit is a large salt lake 55.53 km2 (5,553 hectares) in
  area with a maximum depth of 14 m. Brines are a common source of lithium and the
  DXC Salt Lake is a classic surface brine type deposit as compared with
  subsurface brine deposit in South America. This type of deposit is known
  throughout the world where ever desert climates allow evaporite deposits to
  form. Mineralization in the lake is in the form of dissolved salts of sodium,
  potassium, lithium and boron, as chlorides, oxides, sulfates and carbonates.
  These can be recovered through fractional precipitation of the various salts by
  the evaporation of the water. Variations in salinity, pH and temperature
  determine which compound will form crystals and precipitate from the brine.

In 1980s, 1: 1,000,000 regional geology was conducted by the
  Tibet Regional Geology Brigade. 1: 250,000 regional geology was conducted by the
  Jiangxi Regional Geology Brigade in 2004. In 1999, two Chinese geologists
  conducted preliminary study in the area. In 2002, Mianping started exploration
  work in the area. 1:50,000 geology investigation and hydrogeology was
  conducted.1:2,000 salt field site engineering geology and topography mapping was
  conducted. 20,000 square meters salt field was built in 2003. In 2004, 10,000
  square meters of the salt field was revamped. In December 2005, Sterling and
  Mianping commissioned the Tibet Geothermal brigade to conduct measurements for
  the 20 km2 salt field (1:2,000 and 1:5,000). In March 2006, Sterling and
  Mianping commissioned the Zhengzhou Comprehensive Utilization Institute of China
  Academy of Geology to conduct the purification test for the DXC salt lake rough
  concentrate. In 2006, the Tibet Geothermal Brigade conducted the geothermalexploration work. In May 2006, a Canadian standard NI 43-101 report was
  conducted by a qualified geologist. In June 2006, Mianping finished Chinese
  geology report and the report has passed the auditing of Ministry of Land and
  Resources of China. Since 2005, a technical team from Mianping has been working
  on the DXC Salt Lake site to conduct salt field technical test, weather
  monitoring and related tests and monitoring according to the plan designed by
  Sterling and Mianping.

There is almost no local infrastructure. The only solar power,
  water, and roads are those installed by the Mianping. Beicun village at the head
  of the lake appeared to have perhaps 300 people, local Tibetan herdsman of the
  Han ethnic group. They are mainly occupied with herding yaks, sheep, goats, and
  a few horses. They plant small gardens of barley and vegetables but are not self
  sufficient and import food stuffs from outside. Although people would be
  available from this village to work on a project in this area the skill level
  would be very low. Communication with the outside world is by satellite
  telephone. The nearest land line is at Nima a distance of 90 km away. Shipment
  of product does not seem to be a problem as numerous heavy trucks were noted all
  along the road to the property. National rail service is available from Naqu
  about 700 km distance to the east.

Generally, the physiography could be termed basin and range
  with broad valleys between sharp ridges and arretes. The valleys are generally
  gentle in profile both laterally and longitudinally with small to medium rivers
  coursing through the bottoms of the valleys. Few of the rivers are bridged and most of the crossings are by shallow fords.
  Along these tracks for much of the route were seen numerous large trucks of 30 
  40 tonnes. Most were freighting bagged material, probably salt from one of the
  salt lake operations. There are no services along the route except for Pankgo
  and Nima. The DXC Salt Lake sits in a rather confined basin between high rugged
  ridges. There are numerous benches or beaches around the lake indicating lake
  levels at one time were 200 meters above the present levels of the lake, as the
  last glaciation receded.

Vegetation throughout the plateau is sparse grasses which have
been grazed down to the root level. Sheep, goats and yaks graze in large herds
on what appeared to be very lean fodder. Herdsmen and herdswomen tend these
flocks with no visible support and often many miles from the nearest shelter.
Some of the herdsmen seem to rely on the 125cc motor bike for transportation.
The women appeared mainly to walk. Occasional five tonne trucks were seen
hauling personal belongings grossly overloaded with household items and people.

In June 2006, Mianping finished a Chinese geology report
(Chinese reserve report) and the report passed the auditing of the Ministry of
Land and Resources of China on September 13, 2006 which is the basis for
converting the exploration permit into a mining permit. Mianping led by
Professor Mianping Zheng, an academician of Chinese Academy of Engineering, is
still collecting information such as yearly weather information, wind
information and brine chemistry using a test pond system. Development plans are
being studied.

Mianping has installed solar power, water, and roads on the
site. Water comes from mountain springs. There are several rivers which flow
into the lake area.

10

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DXC salt lake Sampling by Mianping was done on a 2 km X 2 km
  grid with 106 samples taken at 16 sample points at various depths. Location
  control was provided by GPS. If the water depth was less than 2 meters deep, one
  sample was taken; if the water depth was between 2 and 10 meters, then two
  samples were taken at 3 and 8 meters and if the water was deeper than 10 meters
  then three samples were taken. Each sample consisted of two 500 ml. bottles of
  brine.

The sampling method used a standard water sampling technique
  where a bottle is lowered into the lake to the required depth, the stopper
  removed, and the bottle allowed to fill. AAS analytical techniques were used to
  determine the composition of the brine sample. This sampling program was
  repeated several times during the various seasons of the year. Several hundred
  samples have been collected in this way and analyzed by Mianping at their AAS
  laboratory on site.

Two samples were collected by Norm Tribe, an independent
  geologist, for the confirmation of Mianpings assay and analyzed by an
  independent laboratory, ALS Canada Ltd., in Vancouver, BC, Canada in June 2006.
  The results indicate that the concentration of salts is comparable with the
  results provided by Mianping. The lake water returned values of 376 ppm lithium,
  893 ppm boron and 11,300 ppm potassium. This sample was collected from DXC Lake
  at a depth of 1.0 meter.

Mianpings analytical procedures were also reviewed by the
  Resources & Reserve Audit Center of Ministry of Land and Resources of China.

As of the date of this report, the application to establish a joint venture
  has not yet been approved by the regulators in Tibet, China

As at May 31, 2010,
  the Company incurred expenses of $1,042,167 related to the DXC Salt Lake Property.

For further discussion of our interests in DXC Salt Lake
  Property, see the discussion of the agreements under "DXC Salt Lake Project"
  contained in Item 1, Business.

ITEM 3. LEGAL PROCEEDINGS

We have no knowledge of any pending or threatened material
  litigation, settlement of litigation, or other material claim involving us.

ITEM 4. Submission of Matters to a Vote of Security Holders

None

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED
  STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

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, 2009 and 2010. The
  quotations below reflect inter-dealer prices, without retail markup, markdown or
commission and may not represent actual transactions.

|Quarter Ended     | High ($) | Low ($)
|----------------- | -------- | -------
|                  |          |        
|August 31, 2008   | 0.16     | 0.04   
|                  |          |        
|November 30, 2008 | 0.10     | 0.01   
|                  |          |        
|February 28, 2009 | 0.04     | 0.01   
|                  |          |        
|May 31, 2009      | 0.04     | 0.003  
|                  |          |        
|August 31, 2009   | 0.12     | 0.01   
|                  |          |        
|November 30, 2009 | 0.06     | 0.03   
|                  |          |        
|February 28, 2010 | 0.08     | 0.03   
|                  |          |        
|May 31, 2010      | 0.04     | 0.03   

11

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Pacific Stock Transfer Company is the registrar and transfer
  agent for our common shares, and is located at Suite 403 - 4045 South Spencer Street, Las Vegas, NV 89119 (Telephone: (702) 361-3033; Facsimile: (702)
  433-1979).

On May 31, 2010, we had 43,826,175 shares of common stock
  outstanding and we had approximately 30 stockholders of record plus common
  shares held by brokerage clearing houses, depositories or other entity.

We currently intend to retain all future earnings to fund the
  development and growth of our business. We have not paid dividends on our common
  stock and do not anticipate paying cash dividends in the immediate future. We
  did not repurchase any of our equity securities and have not adopted a stock
  repurchase program.

Recent Sales of Unregistered Securities

None.

Equity Compensation Plan Information

On February 3, 2004, the Board of Directors of the Company
  approved the 2004 Stock Option Plan which allows the Company to grant up to
  3,636,000 stock options as an incentive to directors, officers, employees and
  consultants.

On May 12, 2004, the Company registered a 2004 incentive stock
  option plan consisting of 3,636,000 common shares. 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 was 6,573,926 as of May 31, 2010.

During the years ended May 31, 2010 and 2009, no stock options
  were granted or exercised. On February 3, 2009, a total of 3,636,000 stock
  options with an exercise price of $0.50 per share expired unexercised.

At May 31, 2010, there were no outstanding stock options

Share Purchase Warrants

During the year ended May 31, 2010, no warrant was exercised or
  cancelled.

As at May 31, 2010 the Company has a total of 3,817,500 and
  2,873,990 Series A and C share purchase warrants outstanding,
  respectively.

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.

12

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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.

On February 7, 2008, the Company extended the expiry date of
the 3,817,500 Series A Share Purchase Warrants from February 16, 2008 to
February 16, 2009. The exercise price of the warrants remains unchanged at $0.50
per share. The Company also extended the expiry date of the 2,873,990 Series C
Share Purchase Warrants from February 29, 2008 to February 27, 2009. The
exercise price of the warrants remains unchanged at $0.18 per share.

On February 6, 2009, the Company re-extended the expiry date of
3,817,500 Series "A" Share Purchase Warrants from February 16, 2009 to February
16, 2010. The exercise price of the warrants remains unchanged at $0.50 per
share. The Company also re-extended the expiry date of 2,873,990 Series "C"
Share Purchase Warrants from February 27, 2009 to February 26, 2010. The
exercise price of the warrants remains unchanged at $0.18 per share.

On February 12, 2010, the Company re-extended the expiry date
of 3,817,500 Series "A" Share Purchase Warrants from February 16, 2010 to
February 16, 2011. The exercise price of the warrants remains unchanged at $0.50
per share. The Company also re-extended the expiry date of 2,873,990 Series "C"
share purchase Warrants from February 26, 2010 to February 16, 2011. The
exercise price of the warrants remains unchanged at $0.18 per share.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

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-K. When used in this Form 10-K, 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 the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any statement is
based.

Overview

Sterling is an exploration stage company, and its objective is
to become a recognized leader in mineral property acquisition, exploration,
development and production.

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

On July 8, 2008, the Company signed an agreement (the
"Agreement") with Zhong Chuan International Mining Holding Co., Ltd. ("Zhong
Chuan"), Ximing Sun and Charles Yan - shareholders of Monte Sea Holdings Ltd.
(collectively hereinafter "Monte Sea Shareholders") to complete an equity
financing, to accelerate the development of the DXC salt lake deposits in China
and to restructure the transactions contemplated under the Mianping Agreement
signed by Beijing Mianping Salt Lake Research Institute ("Mianping") and Micro
Express Holdings Inc. ("MEH") on September 16, 2005. Pursuant to the Agreement,
the parties wish to establish a Sino-foreign cooperative joint venture company
("CJV") for the purpose of applying for and holding required approvals, permits
and licenses with respect to the development of the DXC Salt Lake property (the
"Property") located in Tibet of China.

In July 2009, the Company received verbal termination of the
Agreement with Zhong Chuan, as advised by third party legal counsel, at a
meeting in Beijing, China. Formal written notice has not been received from
Zhong Chuan. The Agreement in effect, allows Zhong Chuan to terminate the Agreement if it pays the Company double the
amount of funds paid by the Company to date to secure and develop the DXC
Project. Zhong Chuan has not repaid the required amount as anticipated by the
Agreement to date. This unfortunate delay on the part of Zhong Chuan places the
termination it gave the Company in dispute as the termination is conditional
upon repayment of the required funds. At this point then, the termination is
incomplete. The Company is pursuing Zhong Chuan to complete the termination, as
the Company deems, is mandated by the Agreement.

13

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Results of Operations

The Company had no operating revenue except interest income of
$412 for the year ended May 31, 2010 and interest income of $3,678 for the year
ended May 31, 2009. The operating loss decreased to $214,116 for the year ended
May 31, 2010, as compared to $249,083 for the year ended May 31, 2009 mainly due
to the decrease of consulting fees, mineral property cost and general and
administrative expenses; these cost decreases were offset by the Company not
recognizing a recovery of doubtful accounts as it did in the year ended May 31,
2009, as well, incurring a foreign exchange loss of $6,083 in the current year
compared to a gain of $ 6,197 in the year ended May 31, 2009 , and also offset
by the increase of stock-based compensation expense of $91,704 with respect to
revaluing the extension of Class A and Class C Share Purchase Warrants and the
increase in accounting & audit fees in current year.

For the year ended May 31, 2010 relative to the year ended May
31, 2009, consulting fees decreased by $101,539, mineral property costs
decreased by $52,724, and general and administrative decreased by $767, but
accounting & audit fees increased by $10,839, Stock-based compensation
expense increased by $7,852, and foreign exchange loss increased by $12,280.

The Company also incurred expenses on the following related
party transactions during the year ended May 31, 2010:

| | (a) | The Company was charged consulting fees for
      administrative, corporate, financial, engineering, and management services
      during the year ended May 31, 2010 totalling $22,625 (2009: $123,726) by
      companies controlled by two directors of the Company.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                        
| | (b) | The Company was charged rental fees included in general
      and administrative expense during the year ended May 31, 2010 totalling
      $12,847 (2009: $17,072) by a company controlled by a director of the
      Company.                                        
| |     |                                                                                                                                                                                                                                                                        
| | (c) | The Company was charged consulting fees included in
      mineral property costs during the year ended May 31, 2010 in the amount of
      $nil (2009: $22,042) by a company controlled by a director of the
      Company.                                            
| |     |                                                                                                                                                                                                                                                                        
| | (d) | Included in accounts payable and accrued liabilities is
      $509,990 (2009: $459,043) which was due to companies controlled by the
      directors of the Company for their services provided.                                                                       
| |     |                                                                                                                                                                                                                                                                        
| | (e) | The Company was charged consulting fees included in
      mineral property costs during the year ended May 31, 2010 in the amount of
      $nil (2009: $4,094) by the Vice President of Micro.                                                                         
| |     |                                                                                                                                                                                                                                                                        
| | (f) | Cash and cash equivalents at May 31, 2010 include $33
      (2009: $55,320) held in trust by a director of the
  Company.                                                                                                                                              

The Company expects the trend of losses to continue at an
increasing rate.

Liquidity and Working Capital

As of May 31, 2010, the Company had total current assets of
$196,547, and total liabilities of $522,516. As of May 31, 2010, the Company had
cash and cash held in trust of $192,535 and negative working capital of
$325,969.

Cash used in operating activities for the year ended May 31,
2010 was $54,787 as compared to cash used in operating activities for the year
ended May 31, 2009 of $126,805. The decrease in cash used in operating
activities was primarily due to the decrease in cash expenditures for consulting
and mineral property costs as well as the increase in accounts payable and
accrued liabilities.

According to the agreement signed with Zhong Chuan on July 8,
2008, Mianping will repay the Company RMB 6,000,000 ($875,000) and Monte Sea
Shareholders shall subscribe for 5,000,000 units (the "Units") to be issued by
the Company at $0.15 per unit so the Company will raise working capital in the
amount of $750,000 to meet its short term working capital requirements.

In July 2009, the Company received verbal termination of the
Agreement with Zhong Chuan, as advised by third party legal counsel, at a
meeting in Beijing, China. Formal written notice has not been received from
Zhong Chuan. The Agreement in effect, allows Zhong Chuan to terminate the
Agreement if it pays the Company double the amount of funds paid by the Company
to date to secure and develop the DXC Project. Zhong Chuan has not repaid the
required amount as anticipated by the Agreement to date. This unfortunate delay
on the part of Zhong Chuan places the termination it gave the Company in dispute
as the termination is conditional upon repayment of the required funds. At this
point then, the termination is incomplete. The Company is pursuing Zhong Chuan
to complete the termination, as the Company deems, is mandated by the Agreement.

14

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The Company has no other capital resources other than the
ability to use its common stock to raise additional capital or the exercise of
the warrants by the unit holders. The Companys current cash can provide the
Company with working capital for over one year since consulting fees are being
accrued. Estimated cash needed for next 12 months is about $80,000. The cash
will be mainly used for general administrative, corporate (legal, accounting and
audit), financing and management.

No commitments to provide additional funds have been made by
management or other stockholders except as set forth above. Accordingly, there
can be no assurance that any additional funds will be available to the Company
to allow it to cover operation expenses except as set forth in the agreement
dated July 8, 2008 where under, Zhong Chuan and Monte Sea Shareholders will
provide RMB 100,000,000 (US$14,584,000) to put the DXC property into production.
As a result of the Companys financial condition, this raises substantial doubt
that the Company will be able to continue as a going concern unless additional
capital is raised.

Off-Balance Sheet Arrangements

As of May 31, 2010, we were not involved in any form of
off-balance sheet arrangement.

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.

Impairment of Long-lived Assets

In accordance with Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 360-10, Property,
Plant and Equipment - Overall (prior authoritative literature: 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 is 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.

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. Exploration activities conducted jointly with others are reflected at
the Companys proportionate interest in such activities. As at May 31, 2010 and
2009, the Company did not have proven or probable ore reserves.

Stock-based Compensation

On June 1, 2006, the Company adopted the fair value recognition
provisions of ASC Topic 718-10, Compensation - Stock Compensation 
Overall (prior authoritative literature: SFAS No. 123R, Accounting for
Stock-Based Compensation). 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 SFAS No. 123, Accounting for Stock-Based
Compensation. 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.

15

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The Company adopted ASC Topic 718-10,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 ASC Topic 718-10,, 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 ASC Topic 718-10,. The financial results for the prior periods
have not been restated. The Company will amortize stock compensation cost
ratably over the requisite service period. Adoption of ASC Topic 718-10 had no
impact on the consolidated financial statements of the Company.

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.

The Company is in the exploration stage, has not yet achieved
profitable operations and is dependent on its ability to raise capital from
shareholders or other sources to meet its obligations and repay its liabilities
arising from normal business operations when they come due. These factors raise
substantial doubt that the Company will be able to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of these uncertainties.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

In addition to the U.S. Dollar, we conduct our business in
Chinese Yuan (RMB) and Canadian Dollar and, therefore, are subject to foreign
currency exchange risk on cash flows related to expenses and investing
transactions. In July 2005, the Chinese government began to permit the Chinese
Yuan to float against the U.S. Dollar. All of our costs to operate our Chinese
project are paid in Chinese Yuan and all of our costs to operate our principal
executive office in Canada are paid in Canadian dollar. Our exploration costs in
China may be incurred under contracts denominated in Chinese Yuan or U.S.
Dollars. If the Chinese Yuan continues to appreciate with respect to the U.S.
Dollar, our costs in China may increase. If the Canadian Dollar continues to
appreciate with respect to the U.S. Dollar, our costs in Canada may increase. To
date we have not engaged in hedging activities to hedge our foreign currency
exposure. In the future, we may enter into hedging instruments to manage our
foreign currency exchange risk or continue to be subject to exchange rate risk.

Although inflation has not materially impacted our operations
in the recent past, increased inflation in China or Canada could have a negative
impact on our operating and general and administrative expenses, as these costs
could increase. China has recently experienced inflationary pressures, which
could increase our costs associated with our operations in China. If there are
material changes in our costs, we may seek to raise additional funds earlier
than anticipated.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

| |                                                                                    | Page 
| | ---------------------------------------------------------------------------------- | -----
| | Report
      of Independent Registered Public Accounting Firm                      | 17   
| | Consolidated
      Balance Sheets                                                  | 18   
| | Consolidated
      Statements of Operations                                        | 19   
| | Consolidated
      Statements of Changes in Stockholders' Equity (Capital Deficit) | 20   
| | Consolidated
      Statements of Cash Flows                                        | 21   
| | Notes
      to the Consolidated Financial Statements                               | 22-38

16

---

|                  | Tel: 604 688 5421           | BDO Canada LLP
|----------------- | --------------------------- | --------------
|Fax: 604 688 5132 | 600 Cathedral Place        
|vancouver@bdo.ca  | 925 West Georgia Street    
|www.bdo.ca        | Vancouver BC V6C 3L2 Canada

|                                                       
|-------------------------------------------------------
|Report of Independent Registered Public Accounting Firm
|                                                       

To the Stockholders,Sterling Group Ventures,
      Inc.(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheets of
  Sterling Ventures Group Inc. (the Company) (An Exploration Stage Company) and
  its subsidiaries as of May 31, 2010 and 2009, and the related consolidated
  statements of operations, cash flows and changes in stockholders equity
  (capital deficit) for the years then ended and for the period from July 27, 1994
  (Date of Inception) to May 31, 2010. These 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). Those standards
  require that we plan and perform the audit to obtain reasonable assurance about
  whether the financial statements are free of material misstatement. The Company
  is not required to have, nor were we engaged to perform, an audit of its
  internal control over financial reporting. Our audit included consideration of
  internal control over financial reporting as a basis for designing audit
  procedures that are appropriate in the circumstances, but not for the purpose of
  expressing an opinion on the effectiveness of the Companys internal control
  over financial reporting. Accordingly, we express no such opinion. An audit also
  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 presentation of the financial statements. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  Sterling Ventures Group Inc. and its subsidiaries as of May 31, 2010 and 2009,
  and the results of its operations and their cash flows for the years then ended
  and for the period from July 27, 1994 (Date of Inception) to May 31, 2010, in
  conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared
  assuming that the Company will continue as a going concern. As discussed in Note
  1 to the consolidated financial statements, the Company is in the exploration
  stage, has not yet achieved profitable operations and is dependent on its
  ability to raise capital from shareholders or other sources to meet its
  obligations and repay its liabilities arising from normal business operations
  when they come due. These factors, along with other matters as set forth in Note
  1, raise substantial doubt about the Companys ability to continue as a going
  concern. The financial statements do not include any adjustments that might
  result from the outcome of this uncertainty.

/s/ BDO Canada LLP

Chartered Accountants

Vancouver, Canada 
  August 26, 2010

BDO Canada LLP, a Canadian
  limited liability partnership, is a member of BDO International Limited, a UK
  company limited by guarantee, and forms part of the international BDO network of
  independent firms.

17

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STERLING GROUP VENTURES, INC.
  (An Exploration Stage
  Company)CONSOLIDATED BALANCE SHEETSMay 31, 2010 and 2009

|Stated in U.S.
      dollars                                  |   | 2010       |   |   | 2009       |  
|------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                              |   |            |   |   |            |  
|ASSETS                                                        |   |            |   |   |            |  
|                                                              |   |            |   |   |            |  
|Current Assets                                                |   |            |   |   |            |  
|Cash                                                          | $ | 192,502    |   | $ | 192,002    |  
|Cash held in trust - Note 4                                   |   | 33         |   |   | 55,320     |  
|GST receivable                                                |   | 4,000      |   |   | 9,577      |  
|Prepaid expenses and other
      receivable                   |   | 12         |   |   | 270        |  
|Total current assets                                          |   | 196,547    |   |   | 257,169    |  
|                                                              |   |            |   |   |            |  
|Equipment                                                     |   | 47         |   |   | 454        |  
|Total Assets                                                  | $ | 196,594    |   | $ | 257,623    |  
|                                                              |   |            |   |   |            |  
|LIABILITIES AND CAPITAL DEFICIT                               |   |            |   |   |            |  
|                                                              |   |            |   |   |            |  
|Current Liabilities                                           |   |            |   |   |            |  
|Accounts payable and other accrued liabilities
      - Note 4 | $ | 522,516    |   | $ | 461,545    |  
|Commitments and contingencies                                 |   | -          |   |   | -          |  
|                                                              | $ | 522,516    |   | $ | 461,545    |  
|Capital Deficit                                               |   |            |   |   |            |  
|Common Stock : $0.001 Par Value - Note 5                      |   |            |   |   |            |  
|Authorized :
      500,000,000                                |   |            |   |   |            |  
|Issued and
      Outstanding : 43,826,175                     |   | 43,826     |   |   | 43,826     |  
|Additional Paid In Capital                                    |   | 2,652,924  |   |   | 2,652,924  |  
|Warrants - Note 5                                             |   | 636,668    |   |   | 544,964    |  
|Accumulated Other
      Comprehensive Loss                    |   | (583       | ) |   | (583       | )
|Deficit accumulated during the exploration
      stage        |   | (3,658,757 | ) |   | (3,445,053 | )
|Total Capital Deficit                                         |   | (325,922   | ) |   | (203,922   | )
|Total Liabilities and Capital Deficit                         | $ | 196,594    |   | $ | 257,623    |  

See accompanying notes to consolidated financial statements

18

---

STERLING GROUP VENTURES, INC.
  (An Exploration Stage
  Company)CONSOLIDATED STATEMENTS OF OPERATIONSFor the years
    ended May 31, 2010 and 2009 andfor the period from July 27, 1994 (date of inception) to May 31, 2010

|                                                     |   |                           |   |   |            |   |   | July 27, 1994 |  
|---------------------------------------------------- | - | ------------------------- | - | - | ---------- | - | - | ------------- | -
|                                                     |   |                           |   |   |            |   |   | (Date of      |  
|                                                     |   |                           |   |   |            |   |   | inception)    |  
|                                                     |   | Years
      ended May 31, |   |   | to May 31, |  
|Stated in U.S.
      dollars                         |   | 2010                      |   |   | 2009       |   |   | 2010          |  
|                                                     |   |                           |   |   |            |   |   |               |  
|Expenses                                             |   |                           |   |   |            |   |   |               |  
|Accounting, audit and legal fees                     | $ | 64,716                    |   | $ | 53,877     |   | $ | 435,024       |  
|Bank charges                                         |   | 228                       |   |   | 168        |   |   | 1,914         |  
|Consulting fees - Note 4                             |   | 22,625                    |   |   | 124,164    |   |   | 711,628       |  
|Depreciation                                         |   | 407                       |   |   | 1,287      |   |   | 9,299         |  
|Filing fees and transfer agent                       |   | 5,074                     |   |   | 2,027      |   |   | 41,620        |  
|Foreign exchange loss (gain)                         |   | 6,083                     |   |   | (6,197     | ) |   | (23,426       | )
|General and administrative - Note 4                  |   | 18,673                    |   |   | 19,440     |   |   | 117,215       |  
|Mineral property costs - Note 3                      |   | -                         |   |   | 52,724     |   |   | 1,264,394     |  
|Printing and mailing                                 |   | -                         |   |   | -          |   |   | 16,883        |  
|Shareholder information and investor
      relations |   | -                         |   |   | 1,530      |   |   | 61,230        |  
|Stock-based compensation - Note 5b                   |   | 91,704                    |   |   | 83,852     |   |   | 953,722       |  
|Travel and entertainment                             |   | 4,606                     |   |   | 1,034      |   |   | 127,038       |  
|Recovery of doubtful collection - Note 3b            |   | -                         |   |   | (84,823    | ) |   | (272,358      | )
|Allowance for doubtful collection                    |   | -                         |   |   | -          |   |   | 246,708       |  
|                                                     |   | (214,116                  | ) |   | (249,083   | ) |   | (3,690,891    | )
|                                                     |   |                           |   |   |            |   |   |               |  
|Other item                                           |   |                           |   |   |            |   |   |               |  
|Interest income                                      |   | 412                       |   |   | 3,678      |   |   | 32,134        |  
|                                                     |   |                           |   |   |            |   |   |               |  
|Net loss for the period                              | $ | (213,704                  | ) | $ | (245,405   | ) | $ | (3,658,757    | )
|                                                     |   |                           |   |   |            |   |   |               |  
|Basic and diluted loss per share                     | $ | (0.00                     | ) | $ | (0.01      | ) |   |               |  
|                                                     |   |                           |   |   |            |   |   |               |  
|Weighted average number of shares outstanding        |   | 43,826,175                |   |   | 43,826,175 |   |   |               |  

See accompanying notes to consolidated financial statements

19

---

STERLING GROUP VENTURES, INC.
  (An Exploration Stage
  Company)CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
    (CAPITAL DEFICIT)For the period from July 27, 1994 (date of inception) to May 31, 2010

|                                                                             |  |            |   |   |             |   |   |            |   |   |          |  |   |               |   |   | Deficit         |   |   |          |  
|---------------------------------------------------------------------------- |  | ---------- | - | - | ----------- | - | - | ---------- | - | - | -------- |  | - | ------------- | - | - | --------------- | - | - | -------- | -
|                                                                             |  |            |   |   | Stock       |   |   |            |   |   |          |  |   | Accumulated   |   |   | **Accumulated** |   |   |          |  
|                                                                             |  |            |   |   | **Amount**  |   |   | Additional |   |   |          |  |   | Other         |   |   | During The      |   |   |          |  
|                                                                             |  | Common     |   |   | **At**  Par |   |   | Paid In    |   |   |          |  |   | Comprehensive |   |   | **Exploration** |   |   |          |  
|Stated in U.S. dollars                                                       |  | Shares     |   |   | Value       |   |   | Capital    |   |   | Warrants |  |   | Loss          |   |   | Stage           |   |   | Total    |  
|Balance, July 27, 1994 (Date
      of inception)                             |  | -          |   | $ | -           |   | $ | -          |   | $ | -        |  | $ | -             |   | $ | -               |   | $ | -        |  
|Common stock                                                                 |  | 1          |   |   | 1           |   |   | -          |   |   | -        |  |   | -             |   |   | -               |   |   | 1        |  
|Amount contributed by
      director                                         |  | -          |   |   | -           |   |   | 1,881      |   |   | -        |  |   | -             |   |   | -               |   |   | 1,881    |  
|Net loss for the periods                                                     |  | -          |   |   | -           |   |   | -          |   |   | -        |  |   | -             |   |   | (7,902          | ) |   | (7,902   | )
|                                                                             |  |            |   |   |             |   |   |            |   |   |          |  |   |               |   |   |                 |   |   |          |  
|Balance, May 31, 2001                                                        |  | 1          |   | $ | 1           |   | $ | 1,881      |   | $ | -        |  | $ | -             |   | $ | (7,902          | ) | $ | (6,020   | )
|Net loss of the year                                                         |  | -          |   |   | -           |   |   | -          |   |   | -        |  |   | -             |   |   | (1,860          | ) |   | (1,860   | )
|Balance, May 31, 2002                                                        |  | 1          |   | $ | 1           |   | $ | 1,881      |   | $ | -        |  | $ | -             |   | $ | (9,762          | ) | $ | (7,880   | )
|Net loss of 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 reverse
      acquisition                      |  | 25,000,000 |   |   | 25,000      |   |   | (23,119    | ) |   | -        |  |   | -             |   |   | -               |   |   | 1,881    |  
|Outstanding common shares of
      Company prior to acquisition              |  | 11,360,000 |   |   | 11,360      |   |   | (10,883    | ) |   | -        |  |   | (583          | ) |   | -               |   |   | (106     | )
|Issuance of shares for cash pursuant to a
      private placement - at $0.50 |  | 1,766,000  |   |   | 1,766       |   |   | 881,234    |   |   | -        |  |   | -             |   |   | -               |   |   | 883,000  |  
|Stock-based compensation                                                     |  | -          |   |   | -           |   |   | 368,641    |   |   | -        |  |   | -             |   |   | -               |   |   | 368,641  |  
|Net loss of the year                                                         |  | -          |   |   | -           |   |   | -          |   |   | -        |  |   | -             |   |   | (527,446        | ) |   | (527,446 | )
|Balance, May 31, 2004                                                        |  | 38,126,000 |   | $ | 38,126      |   | $ | 1,215,873  |   | $ | -        |  | $ | (583          | ) | $ | (538,568        | ) | $ | 714,848  |  
|Issuance of shares for cash pursuant to a
      private placement - at $0.50 |  | 1,950,000  |   |   | 1,950       |   |   | 973,050    |   |   | -        |  |   | -             |   |   | -               |   |   | 975,000  |  
|Issuance of shares for
      finder's fee of private placement               |  | 101,500    |   |   | 102         |   |   | 50,648     |   |   | -        |  |   | -             |   |   | -               |   |   | 50,750   |  
|Finders' fees                                                                |  | -          |   |   | -           |   |   | (50,750    | ) |   | -        |  |   | -             |   |   | -               |   |   | (50,750  | )
|Fair value of share purchase
      warrants (finders' fees)                  |  | -          |   |   | -           |   |   | (40,110    | ) |   | 40,110   |  |   | -             |   |   | -               |   |   | -        |  
|Issuance of shares for services rendered                                     |  | 100,000    |   |   | 100         |   |   | 41,900     |   |   | -        |  |   | -             |   |   | -               |   |   | 42,000   |  
|Net loss of the year                                                         |  | -          |   |   | -           |   |   | -          |   |   | -        |  |   | -             |   |   | (818,954        | ) |   | (818,954 | )
|Balance, May 31, 2005                                                        |  | 40,277,500 |   | $ | 40,278      |   | $ | 2,190,611  |   | $ | 40,110   |  | $ | (583          | ) | $ | (1,357,522      | ) | $ | 912,894  |  
|Net loss for the year ended
      May 31, 2006                               |  | -          |   |   | -           |   |   | -          |   |   | -        |  |   | -             |   |   | (461,201        | ) |   | (461,201 | )
|Balance, May 31, 2006                                                        |  | 40,277,500 |   | $ | 40,278      |   | $ | 2,190,611  |   | $ | 40,110   |  | $ | (583          | ) | $ | (1,818,723      | ) | $ | 451,693  |  
|Issuance of shares for cash
      pursuant to a private                      |  |            |   |   |             |   |   |            |   |   |          |  |   |               |   |   |                 |   |   |          |  
|placement - at $0.15                                                         |  | 2,750,300  |   |   | 2,750       |   |   | 409,795    |   |   | -        |  |   | -             |   |   | -               |   |   | 412,545  |  
|Issuance of shares for
      finder's fee of                                 |  |            |   |   |             |   |   |            |   |   |          |  |   |               |   |   |                 |   |   |          |  
|private placement                                                            |  | 123,690    |   |   | 124         |   |   | 21,522     |   |   | -        |  |   | -             |   |   | -               |   |   | 21,646   |  
|Finders' 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                               |  | 350,000    |   |   | 350         |   |   | 48,650     |   |   | -        |  |   | -             |   |   | -               |   |   | 49,000   |  
|Net loss for the year ended May 31, 2007                                     |  | -          |   |   | -           |   |   | -          |   |   | -        |  |   | -             |   |   | (864,485        | ) |   | (864,485 | )
|Balance, May 31, 2007                                                        |  | 43,501,490 |   | $ | 43,502      |   | $ | 2,633,768  |   | $ | 51,587   |  | $ | (583          | ) | $ | (2,683,208      | ) | $ | 45,066   |  
|Issuance of shares for services rendered at
      $0.06                      |  | 324,685    |   |   | 324         |   |   | 19,156     |   |   | -        |  |   | -             |   |   | -               |   |   | 19,480   |  
|Revaluation of share purchase
      warrants                                 |  | -          |   |   | -           |   |   | -          |   |   | 409,525  |  |   | -             |   |   | -               |   |   | 409,525  |  
|Net loss for the year ended May 31, 2008                                     |  | -          |   |   | -           |   |   | -          |   |   | -        |  |   | -             |   |   | (516,440        | ) |   | (516,440 | )
|Balance, May 31, 2008                                                        |  | 43,826,175 |   | $ | 43,826      |   | $ | 2,652,924  |   | $ | 461,112  |  | $ | (583          | ) | $ | (3,199,648      | ) | $ | (42,369  | )
|Revaluation of share purchase warrants                                       |  | -          |   |   | -           |   |   | -          |   |   | 83,852   |  |   | -             |   |   | -               |   |   | 83,852   |  
|Net loss for the year ended
      May 31, 2009                               |  | -          |   |   | -           |   |   | -          |   |   | -        |  |   | -             |   |   | (245,405        | ) |   | (245,405 | )
|Balance, May 31, 2009                                                        |  | 43,826,175 |   | $ | 43,826      |   | $ | 2,652,924  |   | $ | 544,964  |  | $ | (583          | ) | $ | (3,445,053      | ) | $ | (203,922 | )
|Revaluation of share purchase
      warrants                                 |  | -          |   |   | -           |   |   | -          |   |   | 91,704   |  |   | -             |   |   | -               |   |   | 91,704   |  
|Net loss for the year ended May 31, 2010                                     |  | -          |   |   | -           |   |   | -          |   |   | -        |  |   | -             |   |   | (213,704        | ) |   | (213,704 | )
|Balance, May 31, 2010                                                        |  | 43,826,175 |   | $ | 43,826      |   | $ | 2,652,924  |   | $ | 636,668  |  | $ | (583          | ) | $ | (3,658,757      | ) | $ | (325,922 | )

See accompanying notes to consolidated financial statements

20

---

STERLING GROUP VENTURES, INC.
  (An Exploration Stage
  Company)CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years
    ended May 31, 2010 and 2009 andfor the period from July 27, 1994 (date of inception) to May 31, 2010

|                                                                                                                     |   |                           |   |   |            |   |   | July 27, 1994 |  
|-------------------------------------------------------------------------------------------------------------------- | - | ------------------------- | - | - | ---------- | - | - | ------------- | -
|                                                                                                                     |   |                           |   |   |            |   |   | (Date of      |  
|                                                                                                                     |   |                           |   |   |            |   |   | inception)    |  
|                                                                                                                     |   | Years
      ended May 31, |   |   | to May 31, |  
|Stated in U.S.
      dollars                                                                                         |   | 2010                      |   |   | 2009       |   |   | 2010          |  
|Cash flows from operating activities                                                                                 |   |                           |   |   |            |   |   |               |  
|Net loss for the period                                                                                              | $ | (213,704                  | ) | $ | (245,405   | ) | $ | (3,658,757    | )
|Adjustments to reconcile net loss to net cash 
           provided by (used in) operating activities                 |   |                           |   |   |            |   |   |               |  
|Stock compensation expenses                                                                                          |   | 91,704                    |   |   | 83,852     |   |   | 953,722       |  
|Depreciation                                                                                                         |   | 407                       |   |   | 1,287      |   |   | 9,299         |  
|Permit and engineering studies                                                                                       |   | -                         |   |   | -          |   |   | 150,000       |  
|Shareholder information and investor relations                                                                       |   | -                         |   |   | -          |   |   | 20,447        |  
|Accounting, audit and legal fees                                                                                     |   |                           |   |   | -          |   |   | 49,000        |  
|Translation adjustment                                                                                               |   | -                         |   |   | -          |   |   | (106          | )
|Changes in non-cash working capital items 
         related to operations                                            |   |                           |   |   |            |   |   |               |  
|GST refundable                                                                                                       |   | 5,577                     |   |   | (4,170     | ) |   | (4,000        | )
|Prepaid expenses and other receivable                                                                                |   | 258                       |   |   | (259       | ) |   | 21,541        |  
|Advance receivable                                                                                                   |   | -                         |   |   | 8,850      |   |   | -             |  
|Accounts payable and accrued liabilities                                                                             |   | 60,971                    |   |   | 29,040     |   |   | 541,996       |  
|Net cash provided by (used in) operating activities                                                                  |   | (54,787                   | ) |   | (126,805   | ) |   | (1,916,858    | )
|                                                                                                                     |   |                           |   |   |            |   |   |               |  
|Cash flows from investing activities                                                                                 |   |                           |   |   |            |   |   |               |  
|Advance on investment                                                                                                |   | -                         |   |   | -          |   |   | (150,000      | )
|Additions to equipment                                                                                               |   | -                         |   |   | -          |   |   | (9,346        | )
|Net change in cash held in trust                                                                                     |   | 55,287                    |   |   | 170,380    |   |   | (33           | )
|Net cash flows used in investing activities                                                                          |   | 55,287                    |   |   | 170,380    |   |   | (159,379      | )
|                                                                                                                     |   |                           |   |   |            |   |   |               |  
|Cash flows from financing activities                                                                                 |   |                           |   |   |            |   |   |               |  
|Net proceeds on issuance of common
      stock                                                                       |   | -                         |   |   | -          |   |   | 2,266,858     |  
|Amounts contributed by director                                                                                      |   | -                         |   |   | -          |   |   | 1,881         |  
|Net cash flows provided by financing activities                                                                      |   | -                         |   |   | -          |   |   | 2,268,739     |  
|                                                                                                                     |   |                           |   |   |            |   |   |               |  
|Net increase in cash                                                                                                 |   | 500                       |   |   | 43,575     |   |   | 192,502       |  
|Cash - beginning of period                                                                                           |   | 192,002                   |   |   | 148,427    |   |   | -             |  
|Cash - end of period                                                                                                 | $ | 192,502                   |   | $ | 192,002    |   | $ | 192,502       |  
|                                                                                                                     |   |                           |   |   |            |   |   |               |  
|Supplemental Information :                                                                                           |   |                           |   |   |            |   |   |               |  
|Cash paid for :                                                                                                      |   |                           |   |   |            |   |   |               |  
|Interest                                                                                                             | $ | -                         |   | $ | -          |   | $ | -             |  
|Income taxes                                                                                                         | $ | -                         |   | $ | -          |   | $ | -             |  
|Non-cash Transactions :                                                                                              |   |                           |   |   |            |   |   |               |  
|Issuance of shares for commission paid to broker
      for 
             private placement                           | $ | -                         |   | $ | -          |   | $ | 72,396        |  
|Issuance of shares for services
      rendered                                                                       | $ | -                         |   | $ | -          |   | $ | 91,000        |  
|Issuance of shares for settlement of accounts
      payable                                                          | $ | -                         |   | $ | -          |   | $ | 19,480        |  
|Issuance of share purchase warrants
      for finder's fee 
              paid to
      broker for private placement | $ | -                         |   | $ | -          |   | $ | 11,477        |  

See accompanying notes to consolidated financial statements

21

---

STERLING GROUP VENTURES, INC.(An Exploration
      Stage Company)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSMay 31, 2010 and 2009(Stated in US Dollars)

|Note 1 | Nature of Operations and
      Ability to Continue as a Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | Sterling Group Ventures Inc. was incorporated in the
      State of Nevada on September 13, 2001 and its fiscal year-end is May 31.
      On January 20, 2004, the Company acquired all of the issued and
      outstanding shares of Micro Express Ltd. (Micro), which was incorporated
      on July 27, 1994. The business combination was accounted for as a reverse
      acquisition whereby the purchase method of accounting was used with Micro
      being the accounting acquirer and the Company being the accounting
      subsidiary. The cumulative figures are shown on a reverse acquisition
      basis with respect to the accounting acquirers date of inception, July
      27, 1994.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | Sterling Group Ventures Inc. (the Company) is in the
      exploration stage. The Company has entered into joint venture agreements
      to explore and develop mineral properties located in China and has not yet
      determined whether these properties contain reserves that are economically
      recoverable. The recoverability of amounts from these properties will be
      dependent upon the discovery of economically recoverable reserves,
      confirmation of the Companys interest in the underlying properties, 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, 2010, the Company had not yet
      achieved profitable operations, has a working capital deficiency of
      $325,969, has accumulated losses of $3,658,757 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.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | The consolidated financial statements have, in
      managements opinion, been properly prepared within the framework of the
      significant accounting policies summarized below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

22

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 2 | Summary of Significant
      Accounting Policies  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Exploration Stage Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | The Company complies with Financial Accounting Standards
      Board (FASB) Accounting Standards Codification (ASC) Topic 915,
      Development Stage Entities (prior authoritative literature: FASB
      Statement of Financial Accounting Standards (SFAS) No. 7) 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 were 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. Exploration activities conducted jointly with others are
      reflected at the Companys proportionate interest in such activities. As
      at May 31, 2010 and 2009, the Company did not have proven or probable ore
      reserves.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Impairment of Long-lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | In accordance with Financial Accounting Standards Board
      (FASB) Accounting Standards Codification (ASC) Topic 360-10,
      Property, Plant and Equipment - Overall (prior authoritative literature:
      SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
        Assets), the carrying value of intangible assets and other long-lived
      assets is 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.                                                                                                                                                                                                                                                                                                            

23

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 2 | Summary of Significant Accounting Policies
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | 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. No asset retirement obligation was recognized at May 31, 2010 and
      2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | Equipment is carried at cost and consists of computer
      equipment. Depreciation is provided on a straight-line basis over the
      useful life of the equipment being 3 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | The Company accounts for income taxes under the
      provisions of ASC Topic 740, Income Taxes (prior authoritative
      literature: SFAS 109, Accounting for Income Taxes). Under ASC
      Topic 740, deferred tax assets and liabilities are recognized for the
      future tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases. Deferred income taxes are provided using the
      liability method. Under this method, deferred income taxes are recognized
      for the tax consequences of temporary differences by applying enacted
      statutory rates applicable to future years to differences between the
      financial statement carrying amounts and the tax bases of existing assets
      and liabilities. The tax base of an asset or liability is the amount
      attributed to that asset or liability for tax purposes. The effect on
      deferred taxes of a change in tax rates is recognized in income in the
      period of change. A valuation allowance is provided to reduce the amount
      of deferred tax assets if it is considered more likely than not that some
      portion of, or all of, the deferred tax assets will not be realized.               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | On June 1, 2007, the Company adopted Financial Accounting
      Standards Board (FASB) interpretation No. 48 (FIN 48), Accounting
        for Uncertainty in Income Taxes, (codified in FASB ASC Topic 740).
      FIN 48 contains a two-step approach to recognizing and measuring uncertain
      tax positions taken or expected to be taken in a tax return. The first
      step is to determine if the weight of available evidence indicates that it
      is more likely than not that the tax position will be sustained in an
      audit, including resolution of any related appeals or litigation
      processes. The second step is to measure the tax benefit as the largest
      amount that is more than 50% likely to be realized upon ultimate
      settlement. The Company recognizes interest and penalties accrued on
      unrecognized tax benefits within general and administrative expense. To
      the extent that accrued interest and penalties do not ultimately become
      payable, amounts accrued will be reduced and reflected as a reduction in
      general and administrative expenses in the period that such determination
      is made. The adoption of FIN 48 did not have a material impact on the
      Companys financial position, results of operations or cash flows.

24

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 2 | Summary of Significant Accounting Policies
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | The Company applies the provisions of ASC 820 (prior
      authoritative literature: SFAS No. 157, Fair Value
        Measurements). ASC 820 defines fair value, establishes a framework
      for measuring fair value under generally accepted accounting principles
      and enhances disclosures about fair value measurements. Fair value is
      defined under ASC 820 as the exchange price that would be received for an
      asset or paid to transfer a liability (an exit price) in the principal or
      most advantageous market for the asset or liability in an orderly
      transaction between market participants on the measurement date. Valuation
      techniques used to measure fair value under ASC 820 must maximize the use
      of observable inputs and minimize the use of unobservable inputs. The
      standard describes a fair value hierarchy based on three levels of inputs,
      of which the first two are considered observable and the last
      unobservable, that may be used to measure fair value which are the
      following:
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Level 1 - quoted prices (unadjusted) in active markets
      for identical assets or liabilities;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Level 2 - observable inputs other than Level I, quoted
      prices for similar assets or liabilities in active markets, quoted prices
      for identical or similar assets and liabilities in markets that are not
      active, and model-derived prices whose inputs are observable or whose
      significant value drivers are observable; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Level 3 - assets and liabilities whose significant value
      drivers are unobservable by little or no market activity and that are
      significant to the fair value of the assets or liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | The Companys financial instruments consist of cash, cash
      held in trust, accounts receivables and accounts payable and accrued
      liabilities. The carrying values of the Companys financial instruments
      approximate fair value due to 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | The Company did not have any Level 1, Level 2 or Level 3
      inputs as at May 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

Concentration of Credit Risk

The Company places its cash and cash
  equivalents with high credit quality financial institutions. As of May 31, 2010,
  the Company had no deposit in a bank beyond insured limits.

25

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 2 | Summary of Significant
      Accounting Policies (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | Basic Loss per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | The Company reports basic loss per share in accordance
      with the ASC Topic 260-10, Earnings Per Share - Overall (prior
      authoritative literature: SFAS No. 128, Earnings Per Share, and
      EITF No. 03-06, Participating Securities and the Two-Class Method
        under FASB Statement No. 128, respectively). Basic loss per share is
      computed using the weighted average number of shares outstanding during
      the period. Diluted loss per share is computed similar to basic loss per
      share except that the denominator is increased to include the number of
      additional common shares that would have been outstanding if the dilutive
      potential common shares had been issued. In addition, in computing the
      dilutive effect of convertible securities, the numerator is adjusted to
      add back any convertible preferred dividend and the after-tax amount of
      interest in the period associated with any convertible debt. The numerator
      is also adjusted for any other changes in income or loss that would result
      from the assumed conversion of these potential common shares. Common share
      equivalents represent the dilutive effect of the assumed exercise of the
      outstanding stock options and warrants, using the treasury stock method,
      at either the beginning of the respective period presented or the date of
      issuance, whichever is later, and only if the common stock equivalents are
      considered dilutive based upon the Companys net loss position at the
      calculation date. At May 31, 2010, the Company had 6,691,490 (2009 
      6,691,490) common share equivalents in respect to options and warrants.
      Because the Company incurred a loss, diluted loss per share is the same as
      basic loss per share.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | Comprehensive Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | The Company reports comprehensive income (loss) in
      accordance with ASC Topic 220-10, Comprehensive Income - Overall (prior
      authoritative literature: 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 ASC
      Topic 830- 20, Foreign Currency Matters - Foreign Currency Translation
      (prior authoritative literature: 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 which approximates the exchange rate in effect at the date of
      the transaction. Translation adjustments from the use of different
      exchange rates from period to period are included in the Comprehensive
      Income account in Stockholders 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

26

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 2 | Summary of Significant
      Accounting Policies  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | Stock-based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | The Company adopted ASC Topic 718-10, Compensation -
      Stock Compensation  Overall(prior authoritative literature: SFAS No.
      123R, Accounting for Stock-Based Compensation), using the
      modified prospective method on June 1, 2006 to account for its stock
      options and similar equity instruments issued. Under this application, the
      Company is required to record compensation expense, based on the fair
      value of the awards, for all awards granted after the date of adoption and
      for the unvested portion of previously granted awards that remain
      outstanding as at the date of adoption. In accordance with ASC 718-10, the
      compensation expense is amortized on a straight- line basis over the
      requisite service period which approximates the vesting period. ASC Topic
      718-10 requires excess tax benefits to be reported as a financing cash
      inflow rather than as a reduction of taxes paid.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | With the adoption of ASC 718-10, the Company has elected
      to use the Black-Scholes option pricing model to determine the fair value
      of the extension of the expiry dates of share purchase warrants previously
      granted. The Company has estimated the fair value of share purchase
      warrants for the years ended May 31, 2010 and May 31, 2009 using the
      assumptions more fully described in Note 5(b).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | Comparative Figures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | Certain comparative figures have been reclassified to
      conform to current years presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | FASB Accounting Standards Codification Effective
      for interim and annual periods ending after September 15, 2009, the FASB
      has defined a new hierarchy for U.S. GAAP and established the FASB
      Accounting Standards Codification (ASC) as the sole source for
      authoritative guidance to be applied by nongovernmental entities. On the
      effective date of this standard, FASB Accounting Standards
      Codification(ASC) will become the source of authoritative U.S.
      accounting and reporting standards for nongovernmental entities, in
      addition to guidance issued by the Securities and Exchange Commission
      (SEC). ASC significantly changes the way financial statement preparers,
      auditors, and academics perform accounting research but is not intended to
      change GAAP. The adoption of the ASC changes the manner in which U.S. GAAP
      guidance is referenced, but it does not have any impact on the Companys
      financial position or results of operations. In order to ease the
      transition to the Codification, the Company is providing the Codification
      cross- reference alongside the references to the standards issued and
      adopted prior to the adoption of the Codification.                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       | The Company adopted ASC 805 Business Combinationswhich was issued in December 2007. ASC 805 requires that upon
      initially obtaining control, an acquirer should recognize 100% of the fair
      values of acquired assets, including goodwill and assumed liabilities,
      with only limited exceptions, even if the acquirer has not acquired 100%
      of its target. Additionally, contingent consideration arrangements will be
      fair valued at the acquisition date and included on that basis in the
      purchase price consideration and transaction costs will be expensed as
      incurred. This statement also modifies the recognition for pre-
      acquisition contingencies, such as environmental or legal issues,
      restructuring plans and acquired research and development value in
      purchase accounting. This statement amends ASC 740-10, Income Taxes(ASC 740) to require the acquirer to recognize changes in
      the amount of its deferred tax benefits that are recognizable because of a
      business combination either in income from continuing operations in the
      period of the combination or directly in contributed capital, depending on
      the circumstances. ASC 805 is effective for fiscal years beginning after
      December 15, 2008. The adoption of this standard did not have any impact
      on the Companys financial position or results from operations.

27

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 2 | Summary of Significant
      Accounting Policies (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | New Accounting Pronouncements (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | In December 2007, the Company adopted ASC 810-10, Non-controlling Interests in Consolidated Financial Statements(prior authoritative literature: SFAS No. 160, Non-controlling
      Interests in Financial Statements  an amendment of ARB No.
        5).ASC 810-10 establishes accounting and reporting standards
      for non-controlling interest in a subsidiary and for deconsolidation of a
      subsidiary. ASC 810-10 requires retroactive adoption of the presentation
      and disclosure requirements for existing minority interests. The adoption
      of ASC 810-10 did not have a material impact on the Companys consolidated
      financial statements.                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | In March 2008, the Company adopted ASC 815-10 Disclosures about Derivative Instruments and Hedging
      Activities(prior authoritative literature: SFAS No. 161, Disclosures about Derivative Instruments and Hedging
        Activities, an amendment of FASB Statement No. 133). ASC 815-10amends
      and expands the disclosure requirements of ASC 815 (prior authoritative
      literature: SFAS 133, Accounting for Derivative Instruments and
        Hedging Activities) to include qualitative disclosures regarding the
      objectives and strategies for using derivatives, fair value amounts of
      gains and losses on derivative instruments and disclosures about
      credit-risk- related contingent features in derivative agreements. The
      pronouncement also requires the cross-referencing of derivative
      disclosures within the financial statements and notes thereto. The
      adoption of ASC 815-10 did not have a material impact on the Companys
      consolidated financial statements.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | The Company adopted ASC 470-20. In June 2008, the
      Emerging Issues Task Force (EITF) reached consensus on Issue No. 07-5, Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entitys Own Stock(EITF 07-5). EITF 07-5 was incorporated
      into ASC 470-20, Distinguishing Liabilities vs. Equity. ASC
      470-20 provides guidance for instruments (including options or warrants on
      a companys shares, forward contracts on a companys shares, and
      convertible debt instruments and convertible preferred stock) that may
      contain contract terms that call into question whether the instrument or
      embedded feature is indexed to the entitys own stock. ASC 470-20 is
      effective for financial statements issued for fiscal years and interim
      periods beginning after December 15, 2008. The adoption of this standard
      did not have any impact on the Companys financial position or results
      from operations.                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | In April 2009, the FASB issued additional disclosure
      requirements related to fair values, which are included in ASC 820,
      Interim Disclosures about Fair Value of Financial Instruments.The provisions require disclosures about fair value of financial
      instruments for interim reporting periods of publicly traded companies as
      well as in the annual financial statements. The required disclosures were
      effective for interim reporting periods ending after June 15, 2009. The
      adoption of the provision did not have a material impact on the Companys
      statements of financial position, results of operations and cash flows.                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | In May 2009, the FASB issued ASC 855 (prior authoritative
      literature: SFAS No. 165, Subsequent). The statement establishes
      general standards of accounting for and disclosure of events that occur
      after the balance sheet date but prior to the issuance of financial
      statements. This statement was effective for interim or annual reporting
      periods after June 15, 2009. ASC 855 sets forth the period after the
      balance sheet date during which management of a reporting entity should
      evaluate events or transactions that may occur for potential recognition
      or disclosure in the financial statements as well as the circumstances
      under which the entity would recognize them and the related disclosures an
      entity should make. The Company adopted ASC 855 during the first quarter
      of fiscal 2010. The adoption of this standard did not have a material
      impact on the Companys consolidated financial statements.                                        

28

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 2 | Summary of Significant
      Accounting Policies (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | New Accounting Pronouncements (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | In August 2009, the FASB issued ASU No. 2009-05,
      Measuring Liabilities at Fair Value, or ASU 2009-05, which amends
      ASC 820 to provide clarification of circumstances in which a quoted price
      in an active market for an identical liability is not available. A
      reporting entity is required to measure fair value using one or more of
      the following methods: 1) a valuation technique that uses a) the quoted
      price of the identical liability when traded as an asset or b) quoted
      prices for similar liabilities (or similar liabilities when traded as
      assets) and/or 2) a valuation technique that is consistent with the
      principles of ASC 820. ASU 2009-05 also clarifies that when estimating the
      fair value of a liability, a reporting entity is not required to adjust to
      include inputs relating to the existence of transfer restrictions on that
      liability. The adoption of this ASU did not have an impact on the
      Companys consolidated financial statements.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | In January 2010, the FASB issued Accounting Standards
      Update No. 2010-06, Improving Disclosures about Fair Value
        Measurements (Topic 820)Fair Value Measurements and Disclosures(ASU 2010- 06), to add additional disclosures about the different
      classes of assets and liabilities measured at fair value, the valuation
      techniques and inputs used, the activity in Level 3 fair value
      measurements, and the transfers between Levels 1, 2, and 3. The adoption
      of this standard did not have a material impact on the Companys
      consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | In February 2010, the FASB issued ASU 2010-09, Subsequent Events. ASU 2010-09 was issued to amend ASC 855 to
      remove the requirement for SEC filers to disclose the date through which
      an entity has evaluated subsequent events. This change is intended to
      alleviate potential conflicts with current SEC guidance. The provisions of
      ASU 2010-09 are effective upon issuance. The adoption of ASC 855 and ASU
      2010-09 did not have a material impact on the Company's financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Note 3 | Mineral Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | Summary of mineral properties expenses for the years
      ended May 31, 2010 and 2009 and for the cumulative period from date of
      inception (July 27, 1994) to May 31, 2010:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

| |                         |   | DXC       | 
| | ----------------------- | - | --------- | 
| |                         |   | Salt Lake | 
| |                         |   | Property  | 
| |                         |   |           | 
| | Year ended May 31, 2010 | $ | -         | 
| |                         |   |           | 
| | Year ended May 31, 2009 |   |           | 
| | Administrative          | $ | 867       | 
| | Consulting fees         |   | 27,890    | 
| | Travel                  |   | 16,959    | 
| | Legal fees              |   | 7,008     | 
| |                         | $ | 52,724    | 

29

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 3 | Mineral Properties (contd)
|------ | -----------------------------

| |                                                              |   | DXC       |  |   | Jiajika   |  
| | ------------------------------------------------------------ | - | --------- |  | - | --------- | -
| |                                                              |   | Salt Lake |  |   | Spodumene |  
| | Summary of
      mineral property expenditures               |   | Property  |  |   | Property  |  
| |                                                              |   |           |  |   |           |  
| | From Date of Inception (July 27, 1994) to May 31,
      2010 |   |           |  |   |           |  
| | Balance, May 31, 2003                                        | $ | -         |  | $ | -         |  
| | Administrative                                               |   | -         |  |   | 471       |  
| | Consulting fees                                              |   | -         |  |   | 9,263     |  
| | Travel                                                       |   | -         |  |   | 2,763     |  
| | Balance, May 31, 2004                                        |   | -         |  |   | 12,497    |  
| | Administrative                                               |   | -         |  |   | 6,598     |  
| | Consulting fees                                              |   | -         |  |   | 33,799    |  
| | Feasibility study                                            |   | -         |  |   | 157,769   |  
| | Permit costs                                                 |   | -         |  |   | 150,000   |  
| | Travel                                                       |   | -         |  |   | 15,085    |  
| | Balance, May 31, 2005                                        |   | -         |  |   | 375,748   |  
| | Administrative                                               |   | 5,560     |  |   | 2,100     |  
| | Consulting fees                                              |   | 46,629    |  |   | 12,062    |  
| | Engineering studies                                          |   | 26,933    |  |   | -         |  
| | Feasibility study                                            |   | 29,080    |  |   | -         |  
| | Geophysical study                                            |   | 31,114    |  |   | -         |  
| | Legal fees                                                   |   | 623       |  |   | -         |  
| | Topography measurement                                       |   | 32,266    |  |   | -         |  
| | Travel                                                       |   | 30,953    |  |   | 8,009     |  
| | Wages and benefits                                           |   | 33,601    |  |   | -         |  
| | Cost recovery                                                |   | -         |  |   | (309,058  | )
| | Balance, May 31, 2006                                        |   | 236,759   |  |   | 88,861    |  
| | Administrative                                               |   | 5,200     |  |   | -         |  
| | Consulting fees                                              |   | 134,580   |  |   | -         |  
| | Engineering studies                                          |   | 38,063    |  |   | -         |  
| | Mining permit                                                |   | 382,920   |  |   | -         |  
| | Topography measurement                                       |   | 15,001    |  |   | -         |  
| | Legal fees                                                   |   | 9,695     |  |   | -         |  
| | Travel                                                       |   | 53,262    |  |   | 488       |  
| | Wages and benefits                                           |   | 35,687    |  |   | -         |  
| | Balance, May 31, 2007                                        |   | 911,167   |  |   | 89,349    |  
| | Administrative                                               |   | 706       |  |   | -         |  
| | Consulting fees                                              |   | 60,548    |  |   | -         |  
| | Travel                                                       |   | 5,456     |  |   | -         |  
| | Legal fees                                                   |   | 11,566    |  |   | -         |  
| | Balance, May 31, 2008                                        |   | 989,443   |  |   | 89,349    |  
| | Administrative                                               |   | 867       |  |   | -         |  
| | Consulting fees                                              |   | 27,890    |  |   | -         |  
| | Travel                                                       |   | 16,959    |  |   | -         |  
| | Legal fees                                                   |   | 7,008     |  |   | -         |  
| | Balance, May 31, 2009 and 2010                               |   | 1,042,167 |  |   | 89,349    |  

Not included in the table above was a
  total of $132,878 of costs incurred on other properties which were abandoned
  during the years ended May 31, 2006 and 2007.

30

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 3 | Mineral Properties
      (contd)
|------ | ----------------------------------

| | 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 Mianping Agreement) for the development of Dangxiongcuo
      salt lake property (DXC Salt Lake) in Nima county of Naqu district in
      Tibet, China.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | Pursuant to the Mianping Agreement, the parties agreed to
      set up a Cooperative Company, (the Cooperative) to develop the DXC Salt
      Lake. The objective of the Cooperative was to use the funds provided by
      the Company and the skills and technology provided by the other party to
      produce lithium carbonate and borate from brine. The Company, through
      Micro, was to own 65% of the Cooperative. It was anticipated that the
      total investment in the Cooperative would be approximately 240 million RMB
      (or approximately US$35 million). The Cooperative Company was never set
      up. On July 3, 2007, Micro received a letter from the other party to the
      Mianping Agreement stating that the agreement between Micro and the other
      party should be deemed terminated as a result of lack of progress in the
      approval for the establishment of the joint venture company and is
      considering a lawsuit against the Company and Micro. Micro has responded
      that the other partys claim has no legal grounds as the lack of progress
      is not caused by Micro. There has been no legal action to date and none is
      expected. By letter dated August 25, 2008, Beijing Mianping Salt Lake
      Research Institute (Mianping) has confirmed that the agreement dated
      September 16, 2005 was terminated effective July 8, 2008. This agreement
      was replaced by the agreement with Zhong Chuan International Mining
      Holdings Co. Ltd. dated July 8, 2008.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | On July 8, 2008, the Company signed an agreement (the
      "Agreement") with the shareholders of Monte Sea Holdings Ltd. ("Monte Sea
      Shareholders") and a third party to restructure the transactions
      contemplated under the September 16, 2005 agreement. The parties wish to
      jointly develop the DXC Salt Lake property and lithium resources in Tibet
      including an exploration license, and elsewhere (the Property), by way
      of a cooperative joint venture. Monte Sea Shareholders and the third party
      are to provide RMB100,000,000 ($14,584,000) to finance the DXC property to
      production.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | Pursuant to the Agreement, the parties wish to establish
      a Sino-foreign cooperative joint venture company ("CJV") for the purpose
      of applying for and holding required approvals, permits and licenses with
      respect to the development of the Property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Parties agree that an operating company ("Opco") will
      be established in Tibet prior to the establishment of the CJV for the
      purpose of applying for and holding required approvals, permits and
      licenses with respect to the development of the Property. The Opco shall
      hold all such approvals, permits and licenses in trust for the
      CJV.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | Under the Agreement, the CJV will be established within
      90 days from date of this Agreement, subject to required regulatory
      approval and based on a joint venture agreement by way of acquisition of
      interest in the Opco by Monte Sea Holdings Ltd. (Monte Sea), or by way
      of incorporation under the Chinese laws. Monte Sea shall hold up to 65%
      but no less than 51% of shares in the CJV. CJV shall own and hold all the
      Property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | If for any Chinese regulatory or policy reasons, Monte
      Sea is not permitted to have more than fifty-one percent (51%) interest in
      the CJV, then the CJV agreement will be revised such
      that:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

31

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 3 | Mineral Properties
      (contd)
|------ | ----------------------------------

| | a) | Dangxiongcuo Salt Lake Project 
      (contd)
| | -- | -----------------------------------------------

| | (i)   | Monte Sea shall have a forty-nine percent (49%) interest
      in the CJV;                                                                                                                          
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                     
| | (ii)  | Monte Sea shall be entitled to receive returns on its
      investment in the CJV on a priority and accelerated basis until its
      investment in the CJV and the Property is fully recovered; and
| |       |                                                                                                                                                                                                     
| | (iii) | Monte Sea shall be permitted to manage the daily
      operation of the CJV pursuant to a management agreement to be entered into
      on terms and conditions satisfactory to the
      Company.  

Upon the Agreement being effective and
  termination of the agreement dated September 16, 2005, the Company will be
  repaid RMB6,000,000 (approximately $875,000). As of May 31, 2010, the Company
  has received $nil in regards to this agreement.

Upon signing of this Agreement and
  subject to applicable regulatory approval, Monte Sea Shareholders shall
  subscribe for 5,000,000 units (the "Units") to be issued by the Company at $0.15
  per Unit. Each Unit shall consist of one common share in the stock of the
  Company, and one warrant which shall entitle the Monte Sea shareholders to
  purchase one common share in the stock of the Company at $0.16 per share within
  two years from the date of the issuance of the Units.

Subject to applicable regulatory
  approval, the Company shall cause 200,000,000 shares to be issued to the Monte
  Sea Shareholders within ten working days from the date transfer of the
  exploration license to the CJV is approved by the Chinese regulators, in
  exchange for all the shares then issued and outstanding in the stock of Monte
  Sea and held by Monte Sea Shareholders (the "Share Exchange"). The Share
  Exchange may be conducted and completed at an earlier date as long as the
  Company and Monte Sea Shareholders may agree in writing. This transaction would
  be accounted for as a reverse acquisition.

Subject to applicable regulatory
  approval, the Company shall cause 87,910,000 shares in the capital of the
  Company to be issued to the Monte Sea Shareholders at no additional cost, upon
  receipt by the CJV of a mining license and such other permits or approvals for
  the Property, permitting the full exploitation and development of the
  Property.

The Company intends to, when and as
  required by the CJV, arrange and complete financing for the operation of the
  CJV.

Zhong Chuan shall, together with Monte
  Sea Shareholders, provide funds no less than RMB 100,000,000 (or US dollar
  equivalent thereof) for the purpose of meeting registered capital payment
  requirements in the registration and operation of the CJV. Zhong Chuan shall
  keep other Parties informed of any development in the registration of the CJV
  and transfer of the exploration license.

The application to establish a joint
  venture has not yet been approved by the regulators in Tibet, China.

As of May 31, 2010, the Company has
  incurred a total of $1,042,167 in mineral property costs on this property.

32

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 3 | Mineral Properties
      (contd)
|------ | ----------------------------------

| | a) | Dangxiongcuo Salt Lake Project 
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company received verbal termination of the Agreement
      with Zhong Chuan in July 2009, as advised by third party legal counsel, at
      a meeting in Beijing, China. The Agreement, in effect, allows Zhong Chuan
      to terminate the Agreement if it pays the Company double the amount of
      funds paid by the Company to date to secure and develop the DXC Project.
      Zhong Chuan has not paid the required amount anticipated by the Agreement
      to date. The delay in payment has delayed the termination process and the
      Company is pursuing Zhong Chuan to complete the termination, as the
      Company deems, is mandated by the Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | b) | Jiajika Spodumene Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | On September 16, 2003, the Company, through its wholly
      owned subsidiary, Micro Express Ltd. (Micro), entered into an agreement
      with Sichuan Province Mining Ltd. to acquire a 75% interest in a 30-year
      mining joint venture company. The joint venture company would hold the
      mining licenses to develop the Jiajika spodumene property located in
      Sichuan province, China for the extraction of lithium and lithium salts.
      Pursuant to the agreement, the total investment required was estimated at
      RMB88,500,000 (US$10,800,000) for the initial capacity of 240,000
      tonnes/annum. The initial registered capital was RMB56,000,000
      (US$6,800,000). Sichuan Province Mining Ltd. would contribute
      RMB14,000,000 (US$1,700,000) including the mining permits to hold 25% of
      the JV Company. Micro would contribute RMB42,000,000 (US$ 5,100,000) to
      hold 75% of the JV Company.                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | On April 5, 2005, the Company, through its wholly-owned
      subsidiary Micro Express Ltd. (MEL), signed a joint venture contract
      with a Chinese partner for the establishment of a joint venture company,
      Jihai Lithium Ltd. and the development of the Jiajika lithium deposit in
      Kangding District, Sichuan province, China. On March 3, 2006, both parties
      agreed to terminate the joint venture and the Chinese partner agreed to
      pay back RMB2,480,000 ($309,058) incurred by MEL on the project. The
      Chinese partner agreed to pay RMB1,200,000 ($149,520) and RMB1,280,000
      ($159,538) before April 15, 2006 and March 30, 2007, respectively. If the
      Chinese partner does not pay the RMB1,280,000, the amount will be
      converted into an interest in the Jiajika project based on the percentage
      of 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 of May 31, 2009, the Company had received the full amount
      of RMB2,480,000 ($334,707) from the Chinese partner.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | As the Chinese partner had not paid the remaining
      RMB700,000 ($87,170) and the recoverability of the RMB1,280,000 ($159,538)
      was uncertain, the Company recorded an allowance for doubtful collection
      totalling $246,708 for the year ended May 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | During the year ended May 31, 2007, the Company received
      RMB 300,000 ($40,381) from the Chinese partner and this was recorded as a
      recovery of doubtful collection on the statement of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | During the year ended May 31, 2008, the Company received
      RMB1,100,000 ($147,154) from the Chinese partner. This amount was reported
      as recovery of doubtful collection in the consolidated statements of
      operation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

33

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 3 | Mineral Properties
      (contd)
|------ | ----------------------------------

| | b) | Jiajika Spodumene Property Continued                                                                                                                                                                        
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                              
| |    | During the year ended May 31, 2009, the Company received
      RMB580,000 ($84,823) from the Chinese partner and this was recorded as a
      recovery of doubtful collection on the statement of operations.
| |    |                                                                                                                                                                                                              
| |    | As at May 31, 2010, the Company had incurred a total of
      $398,407 in the Jiajika Spodumene Property before the cumulative cost
      recovery of RMB2,480,000 ($309,058).                               

|Note 4 | Related Party Transactions                                                                                                                                                                                                                                             
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                        
|       | The Company was charged consulting fees for
      administrative, corporate, financial, engineering, and management services
      during the year ended May 31, 2010 totalling $22,625 (2009: $123,726) by
      companies controlled by two directors of the Company.
|       |                                                                                                                                                                                                                                                                        
|       | The Company was charged rental fees included in general
      and administrative expense during the year ended totalling $12,847 (2009:
      $17,072) by a company controlled by a director of the Company.                                                           
|       |                                                                                                                                                                                                                                                                        
|       | The Company was charged consulting fees included in
      mineral property costs during the year ended May 31, 2010 in the amount of
      $nil (2009: $4,094) by the Vice President of Micro.                                                                         
|       |                                                                                                                                                                                                                                                                        
|       | The Company was charged consulting fees included in
      mineral property costs during the year ended May 31, 2010 in the amount of
      $nil (2009: $22,042) by a company controlled by a director of the Company.                                                  
|       |                                                                                                                                                                                                                                                                        
|       | Cash and cash equivalents at May 31, 2010 include $33
      (2009: $55,320) held in trust by a director of the Company.                                                                                                                                                
|       |                                                                                                                                                                                                                                                                        
|       | Included in accounts payable and accrued liabilities is
      $509,990 (2009: $459,043) which was due to companies controlled by the
      directors of the Company for their services provided.                                                                       
|       |                                                                                                                                                                                                                                                                        
|       | These transactions were in the normal course of
      operations and were measured at the exchange amount which represented the
      amount of consideration established and agreed to by the related parties.                                                        
|       |                                                                                                                                                                                                                                                                        
|Note 5 | Capital Stock                                                                                                                                                                                                                                                          

| | a) | Stock Options                                                                                                                                                                                                                                      
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                    
| |    | On February 3, 2004, the Board of Directors of the
      Company approved the 2004 Stock Option Plan which allows the Company to
      grant up to 3,636,000 stock options as an incentive to directors,
      officers, employees and consultants.
| |    |                                                                                                                                                                                                                                                    
| |    | During the years ended May 31, 2010 and 2009, no stock
      options were granted or exercised. On February 3, 2009, 3,636,000 stock
      options with an exercise price of $0.50 per share expired
      unexercised.                            
| |    |                                                                                                                                                                                                                                                    
| |    | At May 31, 2010, there were no outstanding stock options
      (2009 - nil).                                                                                                                                                                       

34

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 5 | Capital Stock -(contd)
|------ | -----------------------

| | b) | Share Purchase Warrants                                                   
| | -- | --------------------------------------------------------------------------
| |    |                                                                           
| |    | Share purchase warrants outstanding at May 31, 2010 were
      as follows:

|Number    | Price  | Expiry           
|--------- | ------ | -----------------
|          |        |                  
|3,817,500 | $ 0.50 | February 16, 2011
|2,873,990 | $ 0.18 | February 16, 2011
|6,691,490 |        |                  

During the years ended May 31, 2010
  and 2009, no warrants were exercised, cancelled or expired.

Each Series A warrant entitles the
  holder thereof the right to purchase one common share at $0.50 per share
  expiring on the earlier of:

| | 1) | February 16, 2008; or                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                    
| | 2) | The 90th day after the day on which the weighted average
      trading price of the Company's shares exceeds $0.85 per share for 30
      consecutive trading days.

Upon exercise of the Series "A" Share
  Purchase Warrant at $0.50 each, the holder will receive one Common Share of the
  Company and a Series "B" Share Purchase Warrant exercisable at $1.00 expiring
  one year after the occurrence of either (1) or (2) as described above. The
  Series "A" Share Purchase Warrants were originally issued in 2004 pursuant to a
  private placement commenced in February 2004.

On February 7, 2008, the Company
  extended the expiry date of the 3,817,500 Series A Share Purchase Warrants
  from February 16, 2008 to February 16, 2009. The exercise price of the warrants
  remains unchanged at $0.50 per share. The additional fair value of the 3,817,500
  extended life Series A Share Purchase Warrants was estimated at $252,989, by
  using the Black-Scholes Option Pricing Model with the following weighted average
  assumptions: dividend yield of 0%, expected volatility of 218.52%, risk free
  interest rates of 2.08% and expected life of one year.

On February 6, 2009, the Company
  re-extended the expiry date of 3,817,500 Share Purchase Warrants (the Series "A"
  Share Purchase Warrants) from February 16, 2009 to February 16, 2010. The
  exercise price of the warrants remains unchanged at $0.50 per share. The
  additional fair value of the 3,817,500 extended life Series A Share Purchase
  Warrants was estimated at $35,593 using the Black-Scholes Option Pricing Model
  with the following weighted average assumptions: dividend yield of 0%, expected
  volatility of 223.36%, risk free interest rates of 0.82% and expected life of
  one year.

35

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 5 | Capital Stock -(contd)
|------ | -----------------------

| | b) | Share Purchase Warrants -(contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | On February 12, 2010, the Company re-extended the expiry
      date of 3,817,500 Share Purchase Warrants (the Series "A" Share Purchase
      Warrants) from February 16, 2010 to February 16, 2011. The exercise price
      of the warrants remains unchanged at $0.50 per share. The additional fair
      value of the 3,817,500 extended life Series A Share Purchase Warrants
      was estimated at $44,283 using the Black-Scholes Option Pricing Model with
      the following weighted average assumptions: dividend yield of 0%, expected
      volatility of 244%, risk free interest rates of 0.56% and expected life of
      one year.                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | On February 7, 2008, the Company extended the expiry date
      of the 2,873,990 Series C Share Purchase Warrants from February 29, 2008
      to February 27, 2009. The exercise price of the warrants remained
      unchanged at $0.18 per share. The additional fair value of the 2,873,990
      extended life Series C Share Purchase Warrants was estimated at
      $156,536, by using the Black- Scholes Option Pricing Model with the
      following weighted average assumptions: dividend yield of 0% expected
      volatility of 222.09%, risk-free interest rates of 2.08% and expected life
      of one year.                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The Company also re-extended the expiry date of 2,873,990
      Share Purchase Warrants (the Series "C" share purchase Warrants) from
      February 27, 2009 to February 26, 2010. The exercise price of the warrants
      remains unchanged at $0.18 per share. The Series "C" Share Purchase
      Warrants were originally issued in September 2006 pursuant to a private
      placement commenced in August 2006. The additional fair value of the
      2,873,990 extended life Series C Share Purchase Warrants was estimated
      at $48,259 using the Black-Scholes Option Pricing Model with the following
      weighted average assumptions: dividend yield of 0% expected volatility of
      244.01%, risk-free interest rates of 0.82% and expected life of one
      year.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The Company also re-extended the expiry date of 2,873,990
      Share Purchase Warrants (the Series "C" share purchase Warrants) from
      February 26, 2010 to February 16, 2011. The exercise price of the warrants
      remains unchanged at $0.18 per share. The additional fair value of the
      2,873,990 extended life Series C Share Purchase Warrants was estimated
      at $47,421 using the Black- Scholes Option Pricing Model with the
      following weighted average assumptions: dividend yield of 0% expected
      volatility of 244%, risk-free interest rates of 0.56% and expected life of
      one year.                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | As at May 31, 2010, the Company has a total of 3,817,500
      Series A and 2,873,990 Series C share purchase warrants outstanding,
      respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|Note 6 | Foreign Currency Risk                                                                                   
|------ | --------------------------------------------------------------------------------------------------------
|       |                                                                                                         
|       | The Company is exposed to
      fluctuations in foreign currencies through amounts held in China in RMB:
|       |                                                                                                         
|       | - Cash held in trust $33 (2009 -
      $55,320)                                                         

36

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 7 | Deferred Tax Assets                                                                                                              
|------ | ---------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                  
|       | The Company's income tax expense for the years ended May
      31, 2010 and 2009 differed from the United States statutory rates:

| |                                                             |   | 2010    |   |   | 2009    |  
| | ----------------------------------------------------------- | - | ------- | - | - | ------- | -
| |                                                             |   |         |   |   |         |  
| | Effective tax rate                                          |   | 35%     |   |   | 35%     |  
| |                                                             |   |         |   |   |         |  
| | Statutory rate applied to loss before
      income taxes    | $ | (74,800 | ) | $ | (85,800 | )
| | Increase in income taxes resulting from:                    |   |         |   |   |         |  
| | Foreign
      income taxed at other than US statutory rates |   | 1,600   |   |   | -       |  
| | Non-deductible expenses                                     |   | 32,100  |   |   | 29,400  |  
| | Change in valuation allowance                               |   | 41,100  |   |   | 56,400  |  
| | Income tax expense                                          | $ | -       |   | $ | -       |  

The significant components of the
  Companys deferred tax assets are as follows:

| |                                                          |   | 2010     |   |   | 2009     |  
| | -------------------------------------------------------- | - | -------- | - | - | -------- | -
| | Future income tax assets (liability)                     |   |          |   |   |          |  
| | Share issuance cost                                      | $ | -        |   | $ | 5,200    |  
| | Equipment                                                |   | 3,600    |   |   | 3,700    |  
| | Mineral property and
      related deferred explorations |   | 520,600  |   |   | 500,000  |  
| | Non-capital losses                                       |   | 400,700  |   |   | 374,900  |  
| |                                                          |   | 924,900  |   |   | 883,800  |  
| | Valuation allowance                                      |   | (924,900 | ) |   | (883,800 | )
| |                                                          | $ | -        |   | $ | -        |  

At May 31, 2010, the Company has
  incurred accumulated net operating losses totalling approximately $1,192,677
  (2009: $1,071,084) which are available to reduce taxable income in future
  taxation years.

37

---

Sterling Group Ventures, Inc. 
  (An Exploration Stage
  Company) 
  Notes to Consolidated Financial Statements 
  May 31, 2010 and
  2009 
  (Stated in US Dollars)

|Note 7 | Deferred Tax Assets (contd)  
|------ | -------------------------------
|       |                                
|       | These losses expire as follows:

|Year of Expiry |   | Amount    | 
|-------------- | - | --------- | 
|               |   |           | 
|2025           | $ | 359,680   | 
|2026           |   | 213,619   | 
|2027           |   | 256,068   | 
|2028           |   | 119,731   | 
|2029           |   | 121,986   | 
|2030           |   | 121,593   | 
|               | $ | 1,192,677 | 

The amount taken into income as
  deferred tax assets must reflect that portion of the income tax loss
  carryforwards that is more likely-than-not to be realized from future
  operations. The Company has chosen to provide an allowance of 100% against all
  available income tax loss carryforwards, regardless of their time of expiry.

As at May 31, 2010, the Company is in
  arrears on filing its statutory income tax returns and the amounts presented
  above are based on estimates. The actual losses available could differ from
  these estimates. In addition, the Company could be subject to penalties for
  these unfiled tax returns.

The Company operates in foreign
  jurisdictions and is subject to audit by taxing authorities. These audits may
  result in the assessment of amounts different than the amounts recorded in the
  consolidated financial statements. The Company liaises with the relevant
  authorities in these jurisdictions in regard to its income tax and other
  returns. Management believes the Company has adequately provided for any taxes,
  penalties and interest that may fall due.

38

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

a.        Evaluation of
Disclosure Controls and Procedures:

The management of the Company has evaluated the effectiveness
of the Company's disclosure controls and procedures as of the end of the period
of the report, May 31, 2010 and has concluded that the disclosure controls, and
procedures was effective based upon their evaluation as of the evaluation date.

b.        Management's
Report on Internal Control over Financial Reporting

The Companys management, including its chief executive officer
and chief financial officer, is responsible for establishing and maintaining
adequate internal control over our financial reporting. Internal control over
financial reporting is a process designed by, or under the supervision of, our
chief executive and chief financial officers and implemented by our board of
directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures that: (i)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements. Because of their inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

An evaluation was performed under the supervision and with the
participation of the Companys management, including the chief executive officer
and the chief financial officer, of the effectiveness of the design and
operation of the Company's internal controls over financial reporting as defined
in Rules 13a-15(e) or 240.15d -15(e) of the Securities Exchange Act of 1934, as
amended, as of May 31, 2010. Based on that evaluation, our management, including
the Chief Executive Officer and Chief Financial Officer, concluded that the
Company's internal controls over financial reporting are effective.

This annual report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit our company to provide only managements report
in this annual report.

c.        Changes in
Internal Control over Financial Reporting:

There were no significant changes in the Companys internal
control over financial reporting identified in connection with the Companys
evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the
Exchange act that during the Company's last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

39

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE

All directors of the 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 /
      Appointed
|---------------- | ------------------------------ | --- | ------------------------------------
|Richard Shao     | President, Director, CFO       | 47  | January 21, 2004                    
|Raoul Tsakok     | Chairman of the Board, CEO     | 60  | January 21, 2004                    
|Gerald Runolfson | Director                       | 68  | April 5, 2004                       
|Robert Smiley    | Director                       | 66  | June 6, 2007                        

Business Experience

The following sets forth the business experience of each of the
Company'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 and director of Richco Investors Inc. and
Constitution Insurance Company of Canada. He holds an MBA degree.

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 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, J. D, 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.

40

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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.                                           

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.

Audit Committee and Charter

We have an audit committee and audit committee charter. Our
audit committee is comprised of Mr. Raoul Tsakok, Mr. Richard Shao and Mr.
Robert Smiley. During the year ended May 31, 2010, the audit committee met six
times. A copy of our audit committee charter is filed as an exhibit to the Form
10-K on August 28, 2009.

The Audit Committee's responsibilities include:

- selecting and reviewing our independent registered public accounting firm
  and their services;
- reviewing and discussing the audited financial statements, related
  accounting and auditing principles, practices and disclosures with the
  appropriate members of management;
- reviewing and discussing our quarterly financial statements prior to the
  filing of those quarterly financial statements;
- establishing procedures for the receipt of, and response to, any complaints
  received regarding accounting, internal accounting controls, or auditing
  matters, including anonymous submissions by employees;
- reviewing the accounting principles and auditing practices and procedures
  to be used for the audit of our financial statements and reviewing the results
  of those audits; and
- monitoring the adequacy of our operating and internal controls as reported
  by management and the independent registered public accounting firm.

Code of Ethics

We have adopted a corporate code of ethics that applies to all
employees, including our directors and officers. A copy of the code of ethics is
filed as an exhibit to the Form 10-K on August 28, 2009. We believe our code of
ethics is reasonably designed to deter wrongdoing and promote honest and ethical
conduct; provide full, fair, accurate, timely and understandable disclosure in
public reports; comply with applicable laws; ensure prompt internal reporting of
code violations; and provide accountability for adherence to the code.

41

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ITEM 11. EXECUTIVE COMPENSATION

(a) Officers' Compensation.

Compensation paid by the Company for all services provided up
to the fiscal years ended May 31, 2010 and 2009 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
      Grants | TOTAL 
      ($)                             
|----------------------------------------- | --------------------------------------- | ----------------------------- | --------------------- | ---------------------------------------------
|Name and 
      Principal 
      Position | Year 
      ended 
      May 
      31, | Salary 
      ( $) 
      (1) | Bonus 
      ($)      | All Other 
      Compensation 
      ( $) (2)
|Richard Shao 
    President               | 2009                                    | 0                             | 0                     | 62,076                                       
|2010                                      | 0                                       | 0                             | 0                     | 0                                            
|Raoul Tsakok 
    Chairman                | 2009                                    | 0                             | 0                     | 63,000                                       
|2010                                      | 0                                       | 0                             | 0                     | 0                                            
|Kathy Wang 
    Secretary                 | 2009                                    | 0                             | 0                     | 20,692                                       
|2010                                      | 0                                       | 0                             | 22,625                | 0                                            
|Officers as a Group                       | 2009                                    | 0                             | 0                     | 145,768                                      
|2010                                      | 0                                       | 0                             | 22,625                | 0                                            

|(1) | Executive officers did not receive any salary during the
      fiscal years ended December 31, 2010 or 2009.                                                                       
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The amounts listed under the Column entitled All other
      Compensation in the Summary Compensation Table related to consulting
      fees earned during the period reported.

(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 granted options to directors under its 2004
Incentive Stock Option Plan subsequently adopted.

SUMMARY COMPENSATION TABLE OF DIRECTORS(For fiscal
years ended May 31, 2010 and 2009)

|                                     | Cash Compensation                    | Security Grants                            |                           | TOTAL 
        ($)                                         
|------------------------------------ | ------------------------------------ | ------------------------------------------ | ------------------------- | -----------------------------------------------------------
|Name and 
        Principal Position | Year 
        ended 
        May 31, | Annual 
        Retainer 
        Fees ($) | Meeting 
        Fees ($) | Consulting 
        Fees/ Other 
        Fees 
        ( $)
|Raoul Tsakok 
        Director       | 2009                                 | 0                                          | 0                         | 0                                                          
|2010                                 | 0                                    | 0                                          | 0                         | 0                                                          
|Richard Shao 
        Director       | 2009                                 | 0                                          | 0                         | 0                                                          
|2010                                 | 0                                    | 0                                          | 0                         | 0                                                          
|Gerald Runolfson 
        Director   | 2009                                 | 0                                          | 0                         | 0                                                          
|2010                                 | 0                                    | 0                                          | 0                         | 0                                                          
|Robert G. Smiley 
        Director   | 2009                                 | 0                                          | 0                         | 0                                                          
|2010                                 | 0                                    | 0                                          | 0                         | 0                                                          
|Directors as a 
        Group        | 2009                                 | 0                                          | 0                         | 0                                                          
|2010                                 | 0                                    | 0                                          | 0                         | 0                                                          

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 and expired on February 3, 2009. During the year ended
May 31, 2010, no stock options were granted to our directors or officers.

42

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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 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of August 26, 2010, 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 26, 2010, there were 43,826,175 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                                   | 15,000,000 (3)                                  | 34.23%                
|Common stock   | Richard Shao                                   | 4,000,000                                       | 9.13%                 
|Common stock   | Gerald Runolfson                               | 1,700,000 (4)                                   | 3.87%                 
|Common stock   | Robert Smiley                                  | 0                                               | 0                     
|               | TOTAL                                          | 20,700,000                                      | 47.23%                

| | (1) | The address of each beneficial owner is 4743  350 SE
      Marine Drive, Vancouver, BC V5X 2S5 Canada                                                                                                                                                                                                      
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Based on 43,826,175 shares outstanding as of August 26,
      2010 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) | Includes 800,000 common shares and 300,000 A warrants,
      300,000 B warrants and 300,000 C warrants held through Elkon Products
      Inc.                                                                                                                                                         

Changes in Control

Pursuant to the agreement signed on July 8, 2008 with Zhong
Chuan, the Company will cause 287,910,000 shares in the capital of the Company
to be issued to Monte Sea Shareholders for the DXC Salt Lake project. This share
issuance will result in a change of control of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE

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.

43

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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.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

BDO Canada LLP (BDO) provided audit services to the Company
in connection with its annual report for the fiscal years ended May 31, 2010 and
May 31, 2009. The aggregate fees billed by BDO for the May 31, 2010 year ended
audit and the fiscal year 2010 quarterly reviews of the Company was $40,852. The
aggregate fees billed by BDO for the May 31, 2009 year ended audit and the
fiscal year 2009 quarterly reviews of the Company was $42,284.

Audit Related Fees

No fees were billed by BDO 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 BDO to the Company in the years ended
May 31, 2010 and 2009 for professional tax services.

All Other Fees

No fees were billed by BDO to the Company for other
professional services rendered or any other services not disclosed above during
the years ended May 31, 2010 and 2009.

Audit Committee Pre-Approval

The Audit Committee has the sole authority to appoint,
terminate and replace our independent auditor and to approve the scope, fees and
terms of all audit engagements, as well as all permissible non-audit engagements
of our independent auditor.

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

44

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this
report:

1.      Financial Statements.

Our consolidated financial statements are included in Part
II, Item 8 of this report:

|                                                                                   | Page 
|---------------------------------------------------------------------------------- | -----
|Report
      of Independent Registered Public Accounting Firm                      | 17   
|Consolidated
      Balance Sheets                                                  | 18   
|Consolidated
      Statements of Operations                                        | 19   
|Consolidated
      Statements of Changes in Stockholders' Equity (Capital Deficit) | 20   
|Consolidated
      Statements of Cash Flows                                        | 21   
|Notes
      to the Consolidated Financial Statements                               | 22-38

2.      Financial statement schedules and
supplementary information required to be submitted.

Schedules other than that listed above are omitted because they
are not applicable.

3. Exhibits

A list of the exhibits filed or furnished with this report on
Form 10-K (or incorporated by reference to exhibits previously filed or
furnished by us) is provided in the Exhibit Index beginning on page 47 of this
report. Those exhibits incorporated by reference herein are indicated as such by
the information supplied in the parenthetical thereafter. Otherwise, the
exhibits are filed herewith.

45

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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:   /s/ Richard
Shao         Richard Shao, President
and Chief Financial
Officer          Date: August
26, 2010

By:   /s/ Raoul
Tsakok         Raoul Tsakok,
Chairman and Chief Executive
Officer         Date: August 26,
2010

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          Date: August
26, 2010

By:   /s/ Raoul
Tsakok         Raoul Tsakok,
Chairman and Chief Executive
Officer         Date: August 26,
2010

46

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Index of Exhibits

|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                     
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                     
|3.1     |  | Articles of
        Incorporation of the Company, (filed as Exhibit 3.1 to the Company's Registration
        Statement on Form SB-2 filed on July 26, 2002, and incorporated herein
        by reference).                                                                                                                                                                         
|3.2     |  | Bylaws of the Company (filed
        as Exhibit 3.2 to the Company's Registration Statement on Form SB-2 filed
        on July 26, 2002, and incorporated herein by reference).                                                                                                                                                                                                     
|4.1     |  | Specimen stock
        certificate (filed as Exhibit 4.1 to the Company's Registration Statement
        on Form SB-2 filed on July 26, 2002, and incorporated herein by reference).                                                                                                                                                                                                
|10.1    |  | Acquisition Agreement between
        the Company and Micro Express Ltd., dated January 20, 2004. (Filed as
        Exhibit 10.1 to the Company's current report on Form 8-K filed on January
        29, 2004, and incorporated herein by reference).                                                                                                                              
|10.2    |  | Joint Venture
        Contract between Micro Express Ltd. (the Companys wholly subsidiary)
        and Sichuan Province Mining Ltd., dated April 5, 2005 (Filed as Exhibit
        10.1 to the Company's current report on Form 8-K filed on April 11, 2005,
        and incorporated herein by reference).                                                                        
|10.3    |  | Agreement for Development of
        DXC Salt Lake Property between Micro Express Holdings Inc. (the Companys
        wholly subsidiary) and Beijing Mianping Salt Lake Research Institute,
        dated September 16, 2005 (Filed as Exhibit 10.1 to the Company's current
        report on Form 8-K filed on September 21, 2005, and incorporated herein
        by reference).
|10.4    |  | Agreement for
        Termination of Joint Venture between Micro Express Ltd. and Sichuan Province
        Mining Ltd., dated March 3, 2006 (Filed as Exhibit 10.1 to the Company's
        current report on Form 8- K filed on March 6, 2006, and incorporated herein
        by reference).                                                                                      
|10.5    |  | Agreement between the Company,
        Zhong Chuan International Mining Holding Co., Ltd., and shareholders of
        Monte Sea Holdings Ltd., dated July 8, 2008 (Filed as Exhibit 10.1 to
        the Company's current report on Form 8-K filed on July 15, 2008, and incorporated
        herein by reference).                                                                
|14.1    |  | Code of Ethics.
        (Filed as Exhibit 14.1 to the Company's annual report on Form 10-K filed
        on August 28, 2009, and incorporated herein by reference).                                                                                                                                                                                                                 
|31.1    |  | Certification
        of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act
        of 2002. Filed herewith.                                                                                                                                                                                                                                                       
|31.2    |  | Certification
        of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act
        of 2002. Filed herewith.                                                                                                                                                                                                                                                       
|32.1    |  | Certification
        of Chief Executive Officer Pursuant to 18 U.S.C. Sec. 1350 as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.                                                                                                                                                                                                      
|32.2    |  | Certification
        of Chief Financial Officer Pursuant to 18 U.S.C. Sec. 1350 as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.                                                                                                                                                                                                      
|99.1    |  | Audit Committee Charter. (Filed
        as Exhibit 99.1 to the Company's annual report on Form 10-K filed on August
        28, 2009, and incorporated herein by reference).                                                                                                                                                                                                        

47

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