STERLING CONSOLIDATED CORP. 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
Our largest subsidiary is
We also own real property through our subsidiaries
In addition, our subsidiary
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Results of Operations
Comparison for the three months ended
Net Revenue
Net revenue increased by
Total Cost of Sales
Cost of sales increased by
Gross profit
Gross profit increased by
Operating income
Operating income decreased by
Other income (expense)
Other expense increased from a loss of
Net Income
As a result of the above factors, the Company showed a net income of
Comparison for the nine months ended
Net Revenue
Net revenue increased by
Total Cost of Sales
Cost of sales increased by
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Gross profit
Gross profit increased by
Operating income
Operating income increased by
Other income (expense)
Other income (expense) increased from a loss of
Net Income
As a result of the above factors, the Company showed a net income of
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
The cash flow from operating activities increased from net cash used of
The cash flow from investing activities increased from cash provided of
The cash flow from financing activities decreased from net cash provided of
Bank Loans
In the 4th quarter 2019, the Company obtained a mortgage with a
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The Company currently also utilizes an asset-based line of credit from a
Critical Accounting Policies and Estimates
The preparation of our Consolidated Financial Statements, in accordance with
accounting principles generally accepted in
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.
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
Fair values of financial instruments
In
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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).
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
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
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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