Sterling Consolidated (STCC) 10-Q 8 Jan 20 2019 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jan. 06, 2020
Document and Entity Information
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Entity Registrant Name	STERLING CONSOLIDATED Corp
Entity Current Reporting Status	No
Entity Interactive Data Current	No
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		47,284,689
Entity Central Index Key	0001555972
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Trading Symbol	STCC

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 4,083	$ 32,034
Account receivable, net	1,573,824	942,683
Inventory, net	3,158,726	2,560,136
Notes receivable and other current assets	58,389	42,483
Total current assets	4,795,022	3,577,336
Property and equipment, net	1,568,370	1,631,614
Intangible assets, net	114,591	68,905
Deferred tax asset	333,850	309,520
Total assets	6,811,833	5,587,375
Current liabilities
Accounts payable and accrued expenses	1,699,228	1,278,479
Asset-based line of credit	2,108,278	1,775,452
Other liabilities	1,338	339
Current portion of long-term notes payable, rel. party	52,702	52,702
Current portion of long-term notes payable	53,516	3,929
Total current liabilities	3,915,062	3,110,901
Other liabilities
Long-term notes payable, related parties	1,594,805	1,664,199
Long-term notes payable	62,061	11,648
Total other liabilities	1,656,866	1,675,847
Total liabilities	5,571,928	4,786,748
Stockholders' equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued	0	0
Common stock, $0.001 par value; 200,000,000 shares authorized, 47,284,689 and 41,965,540 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	47,285	41,966
Additional paid-in capital	2,569,249	2,074,568
Accumulated deficit	(1,376,629)	(1,315,907)
Total stockholders' equity	1,239,905	800,627
Total liabilities and stockholders' equity	$ 6,811,833	$ 5,587,375

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
CONSOLIDATED BALANCE SHEETS
Preferred Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	0	0
Common Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Common Stock, Shares Authorized	200,000,000	200,000,000
Common Stock, Shares, Issued	47,284,689	41,965,540
Common Stock, Shares, Outstanding	47,284,689	41,965,540

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues
Total revenues	$ 2,063,463	$ 1,521,363	$ 4,313,901	$ 3,318,819
Cost of sales
Total cost of sales	1,753,640	1,155,900	3,364,927	2,486,155
Gross profit	309,823	365,463	948,974	832,664
Operating expenses
Sales and marketing	(144)	60,460	84,750	150,637
General and administrative	384,548	305,834	838,787	663,862
Research and development			30,000	112,500
Total operating expenses	384,404	366,294	953,537	926,999
Operating income	(74,581)	(831)	(4,563)	(94,335)
Other income (expense)
Other	(4,794)	1,404	1,206	4,516
Gain/(loss) on interest rate swap		436		2,809
Loss on disposal of software				(20,498)
Interest expense	(32,968)	(32,921)	(80,539)	(65,138)
Total other expense	(37,762)	(31,081)	(79,333)	(78,311)
Income (loss) before provision for income taxes	(112,343)	(31,912)	(83,896)	(172,646)
Provision (benefit) for income taxes	(31,945)	(10,762)	(23,174)	(51,794)
Net income (loss)	$ (80,398)	$ (21,150)	$ (60,722)	$ (120,852)
Net income (loss) per share of common stock:
Basic and diluted	$ 0	$ 0	$ 0	$ 0
Weighted average number of shares outstanding
Basic and diluted	47,284,689	41,465,540	45,760,356	41,465,540
O-rings and rubber product sales [Member]
Revenues
Total revenues	$ 2,022,107	$ 1,480,441	$ 4,239,815	$ 3,234,797
Cost of sales
Total cost of sales	1,689,017	1,115,133	3,220,119	2,375,164
Freight services [Member]
Revenues
Total revenues	41,356	40,922	74,086	84,022
Cost of sales
Total cost of sales	$ 64,623	$ 40,767	$ 144,808	$ 110,991

CONSOLIDATED STATEMENT OF STOCK

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2017	$ 40,716	$ 1,963,318	$ (1,249,181)	$ 754,853
Balance (in shares) at Dec. 31, 2017	40,715,540
Net loss	$ 0	0	(120,852)	(120,852)
Balance at Jun. 30, 2018	$ 41,466	2,060,068	(1,370,033)	731,501
Balance (in shares) at Jun. 30, 2018	40,715,540
Balance at Dec. 31, 2018	$ 41,966	2,074,568	(1,315,907)	800,627
Balance (in shares) at Dec. 31, 2018	41,965,540
Shares issued to acquire F&S Distributors, Inc.	$ 5,319	494,681		500,000
Shares issued to acquire F&S Distributors, Inc. (in shares)	5,319,149
Net loss	$ 0	0	(60,722)	(60,722)
Balance at Jun. 30, 2019	$ 5,319	$ 2,569,249	$ (1,376,629)	$ 1,239,905
Balance (in shares) at Jun. 30, 2019	47,284,689

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities
Net income (loss)	$ (60,722)	$ (120,852)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	69,558	71,133
Loss on disposal of software		20,498
Gain on swap		(2,808)
Stock for services		97,500
Changes in operating assets and liabilities:
Accounts receivable	(318,723)	(96,385)
Inventory	19,804	301,351
Prepaids and other current assets	(5,945)	17,481
Deferred tax asset	(24,330)	(51,794)
Accounts payable and accrued interest payable	307,976	(93,359)
Other liabilities	999	(41,732)
Net cash provided by (used in) operating activities	(11,383)	101,033
Cash flows from investing activities
Net cash paid for acquisition of business	(280,000)
Net cash used in investing activities	(280,000)
Cash flows from financing activities
Borrowing on asset-based line of credit	332,826
Payments on notes payable		(15,573)
Net loan (paydown) on related party note	(69,394)	(92,266)
Net cash provided by (used in) financing activities	263,432	(107,839)
Net change in cash and cash equivalents	(27,951)	(6,806)
Cash and cash equivalents at the beginning of period	32,034	36,888
Cash and cash equivalents at the end of period	4,083	30,082
Supplemental disclosures of cash flow information:
Cash paid for interest	80,539	65,138
Cash paid for taxes	2,191	$ 750
Supplemental non-cash investing and financing activities:
Common stock issued for business acquisition	500,000
Note payable issued for business acquisition	$ 100,000

BASIS OF PRESENTATION

BASIS OF PRESENTATION	6 Months Ended
	Jun. 30, 2019
BASIS OF PRESENTATION
BASIS OF PRESENTATION	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, 2018 audited financial statements. The results of operations for the periods ended June 30, 2019 and June 30, 2018 are not necessarily indicative of the operating results for the full years.

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
	Jun. 30, 2019
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES	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, 2018. On January 1, 2018, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers , and all of the related amendments (“new revenue standard”). Under this method, we are required to recognize the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The adjustment was not material, and therefore was not made. This results in no restatement of prior periods, which continue to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new revenue standard to continue to be immaterial on an ongoing basis. The impact of recording this change as of January 1, 2018 resulted in no change to deferred revenue at that date and no corresponding change in retained earnings. The impact of adopting the new revenue standard in 2019 did not create a material impact on our financial statements. 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 primarily comprised of finished goods, are stated at the lower of cost (based on the first in, first out method) or market. 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 June 30, 2019 December 31, 2018 Finished goods $ 3,888,105 $ 3,145,900 Raw materials — — Work-in-progress 1,813 — Inventory Reserve (731,192) (585,764) Net Inventory $ 3,158,726 $ 2,560,136 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 6 month periods ended June 30, 2019 and 2018, respectively.

STOCK TRANSACTIONS

STOCK TRANSACTIONS	6 Months Ended
	Jun. 30, 2019
STOCK TRANSACTIONS
STOCK TRANSACTIONS	NOTE 3 – STOCK TRANSACTIONS In the first quarter of 2019, the Company issued 5,319,149 shares of common stock as part of the acquisition of F&S Distributors, Inc. that were valued at $500,000. In the first quarter of 2018, the Company signed a stock for services agreement authorizing the issuance of 750,000 shares of stock to a consultant at a valuation of $.10/share related to its development of DiMO, the Company’s proprietary cryptocurrency. $0 and $75,000 was expensed to research and development related to this transaction for the 3 months ended March 31, 2019 and March 31, 2018, respectively.

BUSINESS ACQUISITION

BUSINESS ACQUISITION	6 Months Ended
	Jun. 30, 2019
BUSINESS ACQUISITION
BUSINESS ACQUISITION	NOTE 4 – BUSINESS ACQUISITION On February 12, 2019 the Company acquired F & S Distributors, Inc., a New Jersey, distributor of o-rings and rubber products. The consideration paid consisted of $300,000 cash and 5,319,149 shares of common stock that were valued at $500,000 on the date of acquisition and a note payable carried by the seller, for $100,000 payable in two equal installments of $50,000 paid 12 months after closing and another $50,000 paid 18 months after closing. The acquisition was accounted for under the purchase method of accounting. The following assets and liabilities were acquired as part of the transaction: Assets Acquired Cash $ 20,000 Accounts receivable 312,418 Inventory 763,822 Inventory reserve (145,428) Security deposit 9,961 Client list 50,000 Equipment 2,000 Total assets acquired 1,012,773 Liabilities Acquired Accounts payable 112,773 Net Assets Acquired $ 900,000

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	6 Months Ended
	Jun. 30, 2019
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS	NOTE 5 – SUBSEQUENT EVENTS The Company's record date for its DIMO cryptocurrency dividend was met on November 22, 2019. It has not been distributed yet, though its stated distribution date was December 13, 2019. It is expected the Company will begin distributing the DIMO tokens by January 31, 2019. As the Company has not yet built out the DIMO platform, the dividend is being valued at $0.

SIGNIFICANT ACCOUNTING POLICI_2

SIGNIFICANT ACCOUNTING POLICIES (Policies)	6 Months Ended
	Jun. 30, 2019
SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates	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 Inventories, which are primarily comprised of finished goods, are stated at the lower of cost (based on the first in, first out method) or market. 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 June 30, 2019 December 31, 2018 Finished goods $ 3,888,105 $ 3,145,900 Raw materials — — Work-in-progress 1,813 — Inventory Reserve (731,192) (585,764) Net Inventory $ 3,158,726 $ 2,560,136
Revenue Recognition	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	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 6 month periods ended June 30, 2019 and 2018, respectively.

SIGNIFICANT ACCOUNTING POLICI_3

SIGNIFICANT ACCOUNTING POLICIES (Tables)	6 Months Ended
	Jun. 30, 2019
SIGNIFICANT ACCOUNTING POLICIES
Schedule of Inventory	Inventory Type June 30, 2019 December 31, 2018 Finished goods $ 3,888,105 $ 3,145,900 Raw materials — — Work-in-progress 1,813 — Inventory Reserve (731,192) (585,764) Net Inventory $ 3,158,726 $ 2,560,136

BUSINESS ACQUISITION (Tables)

BUSINESS ACQUISITION (Tables)	6 Months Ended
	Jun. 30, 2018
BUSINESS ACQUISITION
Schedule of assets and liabilities were acquired as part of the transaction	The following assets and liabilities were acquired as part of the transaction: Assets Acquired Cash $ 20,000 Accounts receivable 312,418 Inventory 763,822 Inventory reserve (145,428) Security deposit 9,961 Client list 50,000 Equipment 2,000 Total assets acquired 1,012,773 Liabilities Acquired Accounts payable 112,773 Net Assets Acquired $ 900,000

SIGNIFICANT ACCOUNTING POLICI_4

SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
SIGNIFICANT ACCOUNTING POLICIES
Finished goods	$ 3,888,105	$ 3,145,900
Work-in-progress	1,813
Inventory Reserve	(731,192)	(585,764)
Net Inventory	$ 3,158,726	$ 2,560,136

SIGNIFICANT ACCOUNTING POLICI_5

SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
SIGNIFICANT ACCOUNTING POLICIES
Estimated Losses of Obsolete or Slow Moving Inventory Percent			20.00%
Incremental Common Shares Attributable to Dilutive Effect of Call Options and Warrants	10,800,000	0	10,800,000	0

STOCK TRANSACTIONS - Additional

STOCK TRANSACTIONS - Additional Information (Details) - USD ($)	Feb. 12, 2019	Mar. 31, 2019	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Stockholders Equity Note [Line Items]
Common Stock, Par or Stated Value Per Share				$ 0.001		$ 0.001
Research and Development Expense				$ 30,000	$ 112,500
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable				$ 500,000
F S Distributors Inc [Member]
Stockholders Equity Note [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	5,319,149	5,319,149
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	$ 500,000	$ 500,000
Consultant [Member]
Stockholders Equity Note [Line Items]
Stock Issued During Period, Shares, Issued for Services			750,000
proprietary cryptocurrency [Member]
Stockholders Equity Note [Line Items]
Common Stock, Par or Stated Value Per Share			$ 0.10
Research and Development Expense		$ 0	$ 75,000

BUSINESS ACQUISITION (Details)

BUSINESS ACQUISITION (Details)	Feb. 12, 2019USD ($)
Assets Acquired
Cash	$ 20,000
Accounts receivable	312,418
Inventory	763,822
Inventory reserve	(145,428)
Security deposit	9,961
Client list	50,000
Equipment	2,000
Total assets acquired	1,012,773
Liabilities Acquired
Accounts payable	112,773
Net Assets Acquired	$ 900,000

BUSINESS ACQUISITION - Addition

BUSINESS ACQUISITION - Additional Information (Details) - USD ($)	Feb. 12, 2019	Mar. 31, 2019	Jun. 30, 2019
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable			$ 500,000
Business Combination, Consideration Transferred, Liabilities Incurred			$ 100,000
F S Distributors Inc [Member]
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross	$ 300,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	5,319,149	5,319,149
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	$ 500,000	$ 500,000
Business Combination, Consideration Transferred, Liabilities Incurred	100,000
F S Distributors Inc [Member] | Twelve Months After Closing [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Liabilities Incurred	50,000
F S Distributors Inc [Member] | Eighteen Months After Closing [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Liabilities Incurred	$ 50,000

SUBSEQUENT EVENTS (Details)

SUBSEQUENT EVENTS (Details)	Jan. 31, 2019USD ($)
DIMO Cryptocurrency [Member]
Subsequent Event
Dividends	$ 0