UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.

Commission File Number: 333-183246

STERLING CONSOLIDATED CORP. 

(Exact name of registrant as specified in its charter)

Nevada	45-1840913
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1105 Green Grove Road 

Neptune, New Jersey 07753 

(Address of principal executive offices)

(732) 918-8004 

(Registrant’s telephone number, including area code)

N/A 

(Former name, former address and former fiscal year, 

if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer x	Smaller reporting company x
	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

As of September 27, 2021 there were 47,284,689 shares of common stock, $0.001 par value issued and outstanding.

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

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common	STCC	OTC

STERLING CONSOLIDATED CORP. 

TABLE OF CONTENTS 

FORM 10-Q REPORT 

March 31, 2021

		Page  Number
PART I - FINANCIAL INFORMATION		F-1
Item 1.	Financial Statements.	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	7
Item 4.	Controls and Procedures.	7
PART II - OTHER INFORMATION		9
Item 1.	Legal Proceedings.	9
Item 1A.	Risk Factors.	9
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	9
Item 3.	Defaults Upon Senior Securities.	9
Item 4.	Mine Safety Disclosures	9
Item 5.	Other Information.	9
Item 6.	Exhibits.	10
SIGNATURES		11

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

F-1 

STERLING CONSOLIDATED CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2021			2020
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	746,354		$	171,818
Account receivable, net		1,332,482			1,177,928
Inventory, net		2,710,886			3,045,718
Notes receivable and other current assets		11,918			20,847
Total current assets		4,801,640			4,416,311
Property and equipment, net		938,777			1,448,071
Intangible assets, net		87,784			91,284
Deferred tax asset		264,327			325,807
Total assets	$	6,092,528		$	6,281,473
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses	$	637,764		$	1,042,828
Asset-based line of credit		1,004,885			896,913
Other liabilities		4,325			5,330
Current portion of long-term notes payable, rel. party		52,702			52,702
Current portion of long-term notes payable		258,604			257,610
Total current liabilities		1,958,280			2,255,383
Other liabilities
Long-term notes payable, related party		710,189			749,074
Long-term notes payable		1,828,439			1,839,488
Total other liabilities		2,538,628			2,588,562
Total liabilities		4,496,908			4,843,945
Stockholders' equity
Preferred stock, $0.001 par value; 10,000,000 shares
authorized, no shares issued		-			-
Common stock, $0.001 par value; 200,000,000 shares authorized, 47,284,689 shares issued and outstanding as of March 31, 2021 and December 31, 2020.		47,285			47,285
Additional paid-in capital		2,569,249			2,569,249
Accumulated deficit		(1,020,914	)		(1,179,006	)
Total stockholders' equity		1,595,620			1,437,528
Total liabilities and stockholders' equity	$	6,092,528		$	6,281,473

See accompanying notes to condensed consolidated financial statements

F-2 

STERLING CONSOLIDATED CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended March 31,
		2021			2020
Revenues
O-rings and rubber product sales	$	2,210,565		$	2,364,473
Freight services		135,789			31,181
Total revenues		2,346,354			2,395,654
Cost of sales
Cost of goods		1,603,880			1,508,614
Cost of services		171,374			65,905
Total cost of sales		1,775,254			1,574,519
Gross profit		571,100			821,135
Operating expenses
Sales and marketing		77,132			75,357
General and administrative		465,703			368,003
Total operating expenses		542,835			443,360
Operating income		28,265			377,775
Other income (expense)
Other		2,982			2,982
Loss on theft		-			(10,000	)
Interest expense		(37,005	)		(52,004	)
Gain on sale of real estate		225,330			-
Total other expense		191,307			(459,022	)
Income (loss) before provision for income taxes		219,572			318,753
Provision (benefit) for income taxes		61,480			96,247
Net income	$	158,092		$	222,506
Net income (loss) per share of common stock:
Basic and diluted	$	0.00		$	0.00
Weighted average number of shares outstanding
Basic and diluted		47,284,689			47,284,689

See accompanying notes to condensed consolidated financial statements

F-3 

STERLING CONSOLIDATED CORP
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
	Common Stock				Additional Paid-
	Shares		Amount		in Capital		Accumulated Deficit			Total
Balance, December 31, 2019		47,284,689	$	47,285	$	2,569,249	$	(1,103,727	)	$	1,512,807
Net income for the three months ended March 31, 2020								222,506			222,506
Balance, March 31, 2020		47,284,689	$	47,285	$	2,569,249	$	(881,221	)	$	1,735,313
Balance, December 31, 2020		47,284,689	$	47,285	$	2,569,249	$	(1,179,006	)	$	1,437,528
Net income for the three months ended March 31, 2021								158,092			158,092
Balance, March 31, 2021		47,284,689	$	47,285	$	2,569,249	$	(1,020,914	)	$	1,595,620

See accompanying notes to condensed consolidated financial statements

F-4 

STERLING CONSOLIDATED CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
	For the Three Months Ended March 31,
	2021			2020
Cash flows from operating activities
Net income	$	158,092		$	222,506
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		25,624			32,123
Gain on sale of real estate		(225,330	)		-
Changes in operating assets and liabilities:
Accounts receivable		(154,554	)		(88,033	)
Inventory		334,832			176,175
Prepaids and other current assets		8,929			(145,880	)
Deferred tax asset		61,480			95,626
Accounts payable and accrued interest payable		(405,064	)		(259,587	)
Other liabilities		(1,005	)		-
Net cash provided by (used in) operating activities		(196,996	)		32,930
Cash flows from investing activities
Proceeds from sale of real estate		712,500			-
Net cash used in investing activities		712,500			-
Cash flows from financing activities
Net borrowings on asset-based line of credit		107,972			78,796
Net paydown on notes payable		(10,055	)		(147,119	)
Net paydown on related party note		(38,885	)		(68,248	)
Net cash provided by financing activities		59,032			(136,571	)
Net change in cash and cash equivalents		574,536			(103,641	)
Cash and cash equivalents at the beginning of period		171,818			106,348
Cash and cash equivalents at the end of period	$	746,354		$	2,707
Supplemental disclosures of cash flow information:
Cash paid for interest	$	37,005		$	52,004
Cash paid for taxes	$	-		$	1,338

See accompanying notes to condensed consolidated financial statements

F-5 

STERLING CONSOLIDATED CORP AND AFFILIATES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31, 2021

NOTE 1 – BASIS OF PRESENTATION

The accompanying interim financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows as of and for the period ended, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2020 audited financial statements.  The results of operations for the periods ended March 31, 2021 and March 31, 2020 are not necessarily indicative of the operating results for the full years.

COVID-19

In the first quarter of 2020 the Company was affected by COVID-19. The COVID-19 pandemic has caused us to modify our business practices (including employee travel, employee work locations, and reduction of physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. We reiterate that COVID 19 has affected our results of operations and the first quarter 2020 financial results are not necessarily indicative of the annual 2021 results.

COVID-19 continues to affect the world economy in 2021. The extent to which COVID-19 impacts our business, results of operations and financial condition will depend on future developments, which are uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the coronavirus outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied by the Company in these condensed interim financial statements are the same as those applied by the Company in its audited consolidated financial statements as at and for the year ended December 31, 2020.

ASU 2016-13, “Financial Instruments - Credit Losses” (Topic 326)

This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected The standard was effective for fiscal years beginning after December 15, 2019. Management has evaluated the impact in 2021 and has concluded the effect is not material to the Consolidated Financial Statements as a whole.

F-6 

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to the accounts receivable and sales allowances, fair values of financial instruments, useful lives of intangible assets and property and equipment, inventory valuations, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and
liabilities.

Inventories

Inventories, which are comprised of finished goods, are stated at the lower of cost (based on weighted average method) Cost does not include shipping and handling fees, which are charged directly to income. The Company provides for estimated losses from obsolete or slow-moving inventories, which is approximately 20% of the total inventory, and writes down the cost of inventory at the time such determinations are made. Reserves are estimated based upon inventory on hand, historical sales activity, industry trends, the business environment, and the expected net realizable value. The net realizable value is determined based upon current awareness of market prices.

Inventory Type	March 31, 2021			December 31, 2020
Finished goods	$	3,442,078		$	3,776,910
Raw materials		-			-
Work-in-progress					-
Inventory Reserve		(731,192	)		(731,192	)
Net Inventory	$	2,710,886		$	3,045,718

Revenue Recognition

The Company recognizes revenue based on Account Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, and all of the related amendments (“new revenue standard”). In the case of Sterling, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, shipment of the product has occurred, price is fixed or determinable and collectability of the resulting receivable is reasonably assured.  For provision of third-party freight services provided by Integrity, revenue is recognized on a gross basis in accordance with ASC 606. Revenue is generally recognized when the contracted goods arrive at their destination point. When revenues and expenses straddle a period end due to the time between shipment and delivery, Integrity allocates revenue between reporting periods based on relative transit time in each period with expenses recognized as incurred. Cost of goods is comprised of sale of o-rings and related rubber products. Freight services is comprised of freight forwarding and related services earned by Integrity and rental services is comprised of revenue from rental of commercial space to third parties.

Basic and Diluted Earnings per Share

The computation of basic earnings (loss) per share of common stock is based on the weighted average number of shares outstanding during the periods presented. The computation of fully diluted earnings (loss) per share includes common stock equivalents outstanding at the balance sheet date. The Company had 10,800,000 and zero stock options and warrants that would have been included in the fully diluted earnings per share for the three- and 3-month periods ended March 31, 2021 and 2020, respectively.

NOTE 3 – CLOSURE OF FLORIDA OFFICE AND SALE OF REAL ESTATE

In the first quarter of 2020, the Company closed down its Florida operations and consolidated the sales accounts with its New Jersey based sales force based out of the Company’s headquarters in Neptune, New Jersey. The Company owns the Florida property unencumbered and intends to sell it in 2020. The closure was an effort to reduce costs and consolidate operations and was not related to COVID-19.

On March 30, 2021 the Company sold its building and land in Apopka, Florida. The proceeds on the sale were $712,500 and the company recorded a gain on the sale of $225,330.

F-7 

NOTE 4 – LOSS ON THEFT

In the first quarter of 2020, the Company was subjected to a fraudulent request for refund from an individual posing as a customer. The Company honored the refund request, but soon discovered the request was fraudulent. The Company had an initial loss of $92,435 and received $82,435 in the second quarter of 2020 from a claim with its insurance company. The net loss of $10,000 was recorded in other expense in the consolidated statement of operations for the 3 months ended March 31, 2020.

NOTE 5 – SUBSEQUENT EVENTS

PPP Forgiveness

In May of 2021, the Company’s PPP draw 1 loan of $326,100 was forgiven in full and was recorded as other income.

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Notice Regarding Forward Looking Statements

The information contained in Item 2 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Overview

We were incorporated in the State of Nevada as Oceanview Acquisition Corp. on January 31, 2011. On May 18, 2012, we amended our Articles of Incorporation to change our name to Sterling Consolidated Corp.

Our largest subsidiary is Sterling Seal & Supply, Inc. (“Sterling Seal”), a New Jersey corporation which was incorporated in 1997. Its predecessor was Sterling Plastic & Rubber Products, Inc., incorporated in New Jersey and was founded in 1970. Sterling Seal engages primarily in the distribution and sale of O-rings, rubber seals, oil seals, custom molded rubber parts, custom Teflon parts, Teflon rods, O-ring cord, bonded seals, O-ring kits, and stuffing box sealant.

3 

We also own real property through our subsidiaries ADDR Properties, LLC (“ADDR”) and Q5 Ventures, LLC (“Q5”). ADDR owns a 28,000 square foot facility in Neptune, New Jersey, that is primarily used by Sterling Seal for its operations.

In addition, our subsidiary Integrity Cargo Freight Corporation (“Integrity”) is a freight forwarding business. Integrity shares a facility with Sterling Seal and manages the importation of Sterling Seal’s products and exports products on behalf of Sterling Seal to various countries. Currently eighty percent (80%) of Sterling Seal’s imports come from Asia, and ten percent (10%) of the Company’s sales are exported to various countries. However, all payables are billed and collected in USD, so Sterling does not bear any foreign exchange risk on open payables.

Results of Operations

Comparison for the three months ended March 31, 2021 and 2020

Net Revenue

Net revenue decreased by $49,300, or 2.1%, from $2,395,654 for the three months ended March 31, 2020 to $2,395,654 for the three months ended March 31, 2021. This decrease was due primarily to inventory shortages created by the COVID-19 pandemic. We expect this worldwide inventory shortage to continue through 2021.

Total Cost of Sales

Cost of sales increased by $200,735 or 12.7%, from $1,574,519 for the three months ended March 31, 2020 to $1,775,254 for the three months ended March 31, 2021. This increase was due primarily to price increases attributed to the worldwide o-ring inventory shortage.

Gross profit

Gross profit decreased by $250,035 or 30.4 %, from $ 821,135 for the three months ended March 31, 2020 to $571,100 for the three months ended March 31, 2021. This decrease was due primarily to the above mentioned decrease in sales and increase in cost of sales.

Operating income

Operating income decreased by $349,510, from $ 377,775 for the three months ended March 31, 2020 to $28,625 for the three months ended March 31, 2021. This decrease can be explained by the above explained decreases in net revenue and gross profit, coupled with an increase of $99,75 in operating expenses. The increase in operating expenses is explained by a $43,984 increase in general and administrative costs related to the closing of the Florida real estate sale coupled with increased payroll and related costs due to increased administrative headcount.

Other income (expense)

Other expense increased from a loss of $59,022 for the three months ended March 31, 2020 to income of $191,307 for the three months ended March 31, 2021. This increase was primarily due to a gain on sale of real estate of $225,330 offset by a reduction in interest expense related to reduced debt.

Net Income

As a result of the above factors, the Company showed a net income of $158,092 for the three months ended March 31, 2021, as compared to a net income of $222,504 for the three months ended March 31, 2020.

4 

Liquidity and Capital Resources

Cash requirements for, but not limited to, working capital, capital expenditures, and debt repayments have been funded from cash balances on hand, revolver borrowings, loans from officers, notes payable, CARES ACT loans and cash generated from operations.

On March 31, 2021, we had cash and cash equivalents of $746,354 as compared to approximately $171,818 as of December 31, 2020, representing an increase of $574,536. This increase can be explained by net cash used in operating activities of $196,996 primarily attributed to net income of $158,092, a decrease in inventory of $334,832 offset by a decrease in accounts payable and accrued interest payable of $405,064. This was offset by net cash used in financing activities of $136,571 attributed to the Company’s business acquisition and net cash provided by financing activities which was primarily due to a paydown on notes payable of $147,119, a paydown of $68,248 on related party notes payable, offset by increased borrowing on the asset-based line of credit of $78,796. On March 31, 2021, our working capital was approximately $2,843,360.

The cash flow from operating activities increased from net cash used of $32,930 for the quarter ended March 31, 2020 to net cash used of $196,996 for the quarter ended March 31, 2021. This increase of $229,926 is primarily attributed to reduced net income coupled with an increase in paydown of accounts payable.

The cash flow from investing activities decreased from cash provided of $0 for the quarter ended March 31, 2020 to $712,500 for the quarter ended March 31, 2021. This increase is attributed to the sale of the Florida property on March 30, 2021.

The cash flow from financing activities increased from net cash used of $136,571 for the quarter ended March 31, 2020 to net cash provided of $59,032 for the quarter ended March 31, 2021. This increase is primarily attributed to a increased borrowing on the asset-based line of credit coupled with decreased paydowns on notes payable and related party notes payable.

Bank Loans

In the 4^th quarter 2019, the Company obtained a mortgage with a New Jersey commercial bank. The mortgage was for $1,650,000 and carries a fixed interest rate of 5.00% amortized over 25 years with a re-financing required after 5 years. As of March 31, 2021 the Company had a balance of $1,604,532 outstanding on the note.

The Company currently also utilizes an asset-based line of credit from a New York-based asset-based lender. The Company was authorized for a line of $2,500,000 and currently pays 7% per annum in interest. As of March 31, 2021 the Company had a balance of $1,004,885 outstanding on the asset-based line.

The Company being in arrears on its public company reporting requirements may be considered a covenant breach by the lender.

Critical Accounting Policies and Estimates

The preparation of our Consolidated Financial Statements, in accordance with accounting principles generally accepted in the United States, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures pertaining to contingent assets and liabilities. Note 2, “Significant Accounting Policies,” to the Consolidated Financial Statements describes the significant accounting policies used to prepare the Consolidated Financial Statements. On an ongoing basis we evaluate our estimates, including, but not limited to, those related to bad debts, inventories, income taxes, and contingencies. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Actual results may differ from our estimates.

We believe the following accounting policies and estimates are the most critical. Some of them involve significant judgments and uncertainties and could potentially result in materially different results under different assumptions and conditions.

5 

Revenue recognition

The Company recognizes revenue based on Account Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, and all of the related amendments (“new revenue standard”). In the case of Sterling, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, shipment of the product has occurred, price is fixed or determinable and collectability of the resulting receivable is reasonably assured. The new revenue standard does not materially change this calculation method.  For provision of third-party freight services provided by Integrity, revenue is recognized on a gross basis in accordance with ASC 606. Revenue is generally recognized when the contracted goods arrive at their destination point. When revenues and expenses straddle a period end due to the time between shipment and delivery, Integrity allocates revenue between reporting periods based on relative transit time in each period with expenses recognized as incurred. Cost of goods is comprised of sale of o-rings and related rubber products. Freight services is comprised of freight forwarding and related services earned by Integrity and rental services is comprised of revenue from rental of commercial space to third parties.

Income taxes

Under the asset and liability method prescribed under ASC 740, Income Taxes, the Company uses the liability method of accounting for income taxes.  The liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements.  The resulting deferred tax assets or liabilities have been adjusted to reflect changes in tax laws as they occur.  A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized.

The Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a "more-likely-than-not" threshold, the amount to be recognized in the financial statements will be the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. As of December 31, 2020, the Company had no uncertain tax positions.

Fair values of financial instruments

In January 2010, the FASB ASC Topic 825, Financial Instruments, requires disclosures about fair value of financial instruments in quarterly reports as well as in annual reports.  For the Company, this statement applies to certain investments and long-term debt.  Also, the FASB ASC Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements.

Various inputs are considered when determining the value of the Company’s investments and long-term debt.  The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities.  These inputs are summarized in the three broad levels listed below.

· Level 1 – observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets.

· Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.…).

· Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments).

6 

The Company’s adoption of FASB ASC Topic 825, effectively at the beginning of the second quarter in FY 2010, did not have a material impact on the company’s financial statements.

The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared.

Stock-based compensation

The Company records stock-based compensation at fair value of the stock provided for services. The 10,300,000 of the stock options outstanding as of March 31, 2021 were fully vested and therefore, no compensation expense was recorded in the quarters ended March 31, 2021 or 2020.

Recent Accounting Pronouncements

ASU 2016-13, “Financial Instruments - Credit Losses” (Topic 326)

This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected The standard was effective for fiscal years beginning after December 15, 2019. Management has evaluated the impact in 2021 and has concluded the effect is not material to the Consolidated Financial Statements as a whole.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a Smaller Reporting Company and are not required to provide the information under this item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that due to material weaknesses the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, as appropriate, to allow timely decisions regarding required disclosure.

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As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements and Related Independence Rule and Conforming Amendments,” established by the Public Company Accounting Oversight Board ("PCAOB"), a material weakness is a deficiency or combination of deficiencies that result in a more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of March 31, 2021:

(1) Lack of an independent audit committee or audit committee financial expert. Although our board of directors serves as the audit committee it has no independent directors These factors are counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management.

(2) We do not have sufficient experience from our accounting personnel with the requisite U.S. GAAP public company reporting experience that is necessary for adequate controls and procedures.

(3) Need for greater integration, oversight, communication and financial reporting of the books and records of our satellite offices.

Our management determined that these deficiencies constituted material weaknesses.

Due to our small size, we were not able to immediately take any action to remediate these material weaknesses. Notwithstanding the assessment that our Internal Controls over Financial Reporting was not effective and that there were material weaknesses identified herein, we believe that our consolidated financial statements contained in this Annual Report fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.

Changes in Internal Control

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors.

We are a Smaller Reporting Company and are not required to provide the information under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit Number	Exhibit Title
31.1*	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *	XBRL Instance Document
101.SCH *	XBRL Taxonomy Schema
101.CAL *	XBRL Taxonomy Calculation Linkbase
101.DEF *	XBRL Taxonomy Definition Linkbase
101.LAB *	XBRL Taxonomy Label Linkbase
101.PRE *	XBRL Taxonomy Presentation Linkbase

* Filed herewith.

** In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.

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SIGNATURES

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

STERLING CONSOLIDATED CORP.
By:	/s/ Darren DeRosa
	Darren DeRosa,
	Chief Executive Officer
	(Principal Executive Officer)
	Dated: September 27, 2021
By:	/s/ Scott Chichester
	Scott Chichester,
	Chief Financial Officer
	(Principal Financial and Accounting Officer)
	Dated: September 27, 2021

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