**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
        Quarter Ended September 30, 2007
 
 or
 
 o  TRANSITION
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
 
 COMMISSION
        FILE NUMBER 000-52852
 
 STIRLING
        ACQUISITION CORPORATION
 (Exact
        name of registrant as specified in its charter)
 
 **DELAWARE**
                20-8121663(State
                    or other jurisdiction of
                (I.R.S.
                    Employerincorporation
                    or organization)
                Identification
                    No.)
  **914
        Curlew Road, Suite 403**
 **Dunedin,
        Florida 34698**
 (Address
        of principal executive offices)
 
 **(727)
        683-9573**
 (Registrant’s
        telephone number,
 including
        area code)
 
 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  o  No  x
 
 Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Exchange Act).
 Yes  o  **No  x**
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 **Yes  x**  No  o
 
 Indicate
        the number of shares outstanding of each of the issuer's classes of common
        stock, as of the latest practicable date.
 
 Title
                    of Each Class
                Outstanding
                    at November 13, 2007Common
                    Stock, $0.001 Par Value
                2,000,000
                    Shares




1




**TABLE
      OF CONTENTS**


**PAGE****PART
                  I**
              **FINANCIAL
                  INFORMATION****ITEM
                  1**
              **Financial
                  Statements**Balance
                  Sheets as of September 30, 2007 and December 31, 2006
              3Statements
                  of Operations for the three- and nine-month periods ended September
                  30,
                  2007
              4Statements
                  of Cash Flow for the nine-month period ended
                  September 30, 2007
              5Notes
                  to Financial Statements
              6**ITEM
                  2**
              **Managements’
                  Discussion and Analysis of Financial Condition and Plan of
                  Operation**
              11**ITEM
                  3**
              **Quantitative
                  and Qualitative Disclosures About Market Risk**
              11**ITEM
                  4**
              **Controls
                  and Procedures**
              12**PART
                  II**
              **OTHER
                  INFORMATION****ITEM
                  1**
              **Legal
                  Proceedings**
              13**ITEM
                  2**
              **Unregistered
                  Sales of Equity Securities and Use of Proceeds**
              13**ITEM
                  3**
              **Defaults
                  Upon Senion Securities**
              13**ITEM
                  4**
              **Submission
                  of Matters to a Vote of Security Holders**
              13**ITEM
                  5**
              **Other
                  Information**
              13**ITEM
                  6**
              **Exhibits**
              14**SIGNATURES**
              13




2




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**BALANCE
      SHEETS**





**December
                31, 2006**
              **(Audited)**
            
            **September 30,
                2007**
              **(Unaudited)****ASSETS**Current
                Assets:Cash
            
            $
            20,000
            
            $
            2,908Other
                current assetsTotal
                current assets
            
            
            20,000
            
            
            2,908Deferred
                offering costs
            
            
            
            
            
            44,527Total
                assets
            
            $
            20,000
            
            $
            47,434**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities
            
            $
            —
            
            $
            17,038Long-term
                debt
            
            
            —
            
            
            —Total
                liabilities
            
            $
            —
            
            $
            17,038Stockholders’
                equityCommon
                stock, $0.001 par value:50,000,000
                shares authorized, 2,000,000 shares outstanding at
                December 31, 2006 and September 30, 2007
            
            $
            2,000
            
            $
            2,000Preferred
                stock, $0.001 par value:10,000,000
                  shares authorized, no shares outstanding at December 31, 2006 and
                  September 30, 2007
            
            
            —
            
            
            —Additional
                paid in capital
            
            
            19,000
            
            
            33,140Deficit
                accumulated during development stage
            
            
            (1,000
            )
            
            (4,744
            )Total
                stockholder’s equity
            
            $
            20,000
            
            $
            30.396Total
                liabilities and equity
            
            $
            20,000
            
            $
            47,434





**The
      accompanying notes are an integral part of this Balance
      Sheet.**





3




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**STATEMENT
      OF OPERATIONS**





**December
                28,2006****Three Months Ended**
            
            **Nine Months Ended**
            
            **(inception) through****September
                30, 2007**
            
            **September
                30, 2007**
            
            **September
                30, 2007****(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)**Revenue
            
            $
            —
            
            $
            —
            
            $
            —Organization
                costs
            
            
            
            
            
            
            
            
            1,000General
                and administrative expenses
            
            
            149
            
            
            3,744
            
            
            3,744Total
                expenses
            
            
            149
            
            
            3,744
            
            
            4,744Deficit
                accumulated during development stage
            
            $
            (149
            )
            $
            (3,744
            )
            $
            (4,744
            )Net
                loss per common share
            
            $
            (0.00
            )
            $
            (0.00
            )
            $
            (0.00
            )Weighted
                number of common sharesissued
                and outstanding during period
            
            
            2,000,000
            
            
            2,000,000
            
            
            2,000,000





**The
      accompanying notes are an integral part of this Statement of
      Operations.**




4




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**STATEMENT
      OF CASH FLOW**


**December
                  28,2006****Nine Months Ended**
              
              **(inception) through****September
                  30, 2007**
              
              **September
                  30, 2007****(Unaudited)**
              
              **(Unaudited)****Cash
                  flows from operating activities**Deficit
                  accumulated during development stage
              
              $
              (
                  3,744
              )
              $
              (4,744
              )Changes
                  in operating assets and liabilities:Other
                  current assetsExpenses
                  paid by affiliates
              
              
              
              
              
              1,000Increase
                  in accounts payable
              
              
              17,038
              
              
              17,038Net
                  cash used in operating activities
              
              
              13,294
              
              
              13,294**Cash
                  flows from investing activities**Deferred
                  offering costs paid by the company
              
              
              (30,526
              )
              
              (30,526
              )Net
                  cash used in investing activities
              
              
              (17,232
              )
              
              (17,232
              )**Cash
                  flows from financing activities**Proceeds
                  from sale of common stock to founders
              
              
              
              
              
              20,000Additional
                  capital contributions from founders
              
              
              140
              
              
              140Net
                  cash provided by financing activities
              
              
              140
              
              
              20,140Net
                  increase (decrease) in cash
              
              
              (17,092
              )
              
              2,908Cash
                  balance, beginning of period
              
              
              20,000
              
              
              —Cash
                  balance, end of period
              
              $
              2,908
              
              $
              2,908




**Supplemental
      disclosure of non-cash transactions involving direct payment of certain costs
      by
      affiliates**


Proceeds
                  from direct payment of organization costs by affiliates
              
              
              —
              
              $
              1,000Proceeds
                  from direct payment of deferred offering costs by
                  affiliates`
              
              $
              14,000
              
              $
              14,000Total
                  non-cash transactions involving direct payments by
                  affiliates
              
              $
              14,000
              
              $
              15,000





**The
      accompanying notes are an integral part of this Statement of Cash
      Flow**





5




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO FINANCIAL STATEMENTS**


**(Information
      with respect to events occurring after December 31, 2006 is
      unaudited)**





**1.**  **Organization
      and Operations**





Stirling
      Acquisition Corporation (the “Company”) was incorporated under the laws of the
      State of Delaware on December 28, 2006. In connection with the organization
      of
      the Company four executive officers purchased 2,000,000 shares of common stock
      for $20,000 in cash, or $.01 per share. Additionally, the officers paid
      approximately $1,000 in organization costs, consisting principally of filing
      fees and registered agent fees. In total, the Company’s initial capital was
      $21,000.





The
      Company was organized for the primary purpose of conducting a public
      distribution of securities and then effecting a merger, acquisition or other
      acquisition transaction (an “Acquisition”) with an unidentified privately held
      company (a “Target”). The Company’s principal business goal is to engage in an
      acquisition on terms that will give its stockholders a reasonable share of
      the
      increased market value that ordinarily arises when a private company makes
      the
      transition to public ownership.





Since
      the
      Company has not yet identified a Target, persons who acquire securities in
      connection with the distribution will have virtually no substantive information
      available for advance consideration of any specific Target. The Company’s
      business strategy is also referred to as a “blind pool” because neither the
      management of the Company nor the persons who acquire securities in the
      distribution know what the business of the Company will be.





The
      Company is currently in the development stage. All activity of the Company
      to
      date relates to its organization and financing activities.





The
      Company has not engaged in any substantive business activities to date and
      has
      no specific plans to engage in any particular business in the future. The
      Company’s ability to commence operations is contingent upon completion of the
      distribution described in Note 2.





**2.**  **Public
      Distribution of Securities**





On
      May
      14, 2007, the Company filed a Form S-1 registration statement under the
      Securities Act of 1933 for the purpose of registering a public distribution
      of
      securities that includes





·
            250,000
                presently issued and outstanding shares that the Company’s existing
                stockholders (“founders”) will transfer to a total of 500 donees selected
                by them (“gift shares”);





·
            1,250,000
                presently issued and outstanding shares that the Company’s founders may
                offer to sell to the owners of a target and other participants in
                an
                acquisition; and





·
            13,000,000
                shares that the Company may issue in connection with an
                acquisition.





The
      registration statement was declared effective on October 5, 2007.





The
      distribution of gift shares is subject to and will be conducted in compliance
      with Securities and Exchange Commission Rule 419, which was adopted to
      strengthen the regulation of securities offered by “blank check” companies.
      Rule 419 defines a blank check company as a development stage company (a)
      that has no specific business plan or has indicated that its business plan
      is to
      engage in a merger or acquisition with an unidentified company and (b) is
      proposing to issue a “penny stock.” For purposes of Rule 419, penny stocks
      include all shares that have a price of less than $5 per share and are not
      listed on a stock exchange.




6




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO FINANCIAL STATEMENTS**


**(Information
      with respect to events occurring after December 31, 2006 is
      unaudited)**





**2.**  **Public
      Distribution of Securities—continued**





The
      Company’s founders will distribute 250,000 shares of common stock to individuals
      selected by them (“Donees”). Each Donee will receive 500 gift shares and will be
      subject to the resale restrictions described in the prospectus. The founders
      will promptly deposit all gift shares in the Rule 419 escrow upon issuance.
      The stock on deposit in the Rule 419 escrow will be held in trust for the
      sole benefit of the Donees until the shares are either released from escrow
      or
      returned to the founders in compliance with Rule 419.





In
      connection with the Company’s reconfirmation offering, each Donee must approve
      the proposed transaction in writing and elect to accept delivery of his gift
      shares. In the absence of an affirmative election by a Donee, the escrow agent
      will surrender the Donee’s stock certificates to the officer who made the
      original gift.





During
        the nine months ended September 30, 2007,  the Company incurred
        approximately $44,500 in costs associated with registering its common stock
        under the Securities Act and preparing for the gift share distribution. Since
        the Company’s pre-distribution capital needs are highly uncertain, its officers
        have agreed to contribute sufficient additional capital to pay all registration
        and pre-offering costs and ensure that the Company has a cash and working
        capital balance of $40,000 when they complete the gift share distribution.
        The
        founders presently anticipate a total investment of approximately $100,000
        in
        the Company





As
      a
      result of its limited resources, the Company will, in all likelihood, have
      the
      ability to affect only a single acquisition. Accordingly, the prospects for
      the
      Company’s success will be entirely dependent upon the future performance of a
      single business.





The
      Company is unlikely to enter into an agreement with a Target that does not
      have
      sufficient net tangible assets or operating income to satisfy the minimum
      listing standards of the American Stock Exchange or the Nasdaq Stock Market.
      Therefore management expects an acquisition to result in a change in control.
      After a change in control, the owners of the Target will have the right to
      appoint their own officers and directors, and the Company’s current officers
      will have no ability to influence future business decisions.





The
      Company may not qualify for an exchange listing upon completion of an
      acquisition. In such an event, the Company’s common stock will be traded on the
      over-the-counter market. It is anticipated that the common stock will qualify
      for quotation on the OTC Bulletin Board; a NASD sponsored and operated
      inter-dealer automated quotation system for equity securities that are not
      included in Nasdaq. It is also anticipated that the company’s common stock will
      qualify for inclusion in the National Quotation Bureau “OTC Pink Sheets.” There
      can be no assurance that the liquidity and prices of the Company’s common stock
      in the secondary market will not be adversely affected.





There
      is
      no assurance that the Company will be able to affect an acquisition. If the
      Company is unable to close a transaction before April 4, 2009, Rule 419
      will require that all gift share transactions be unwound and all certificates
      for gift shares be returned to the founders. In that event, the Donees will
      receive nothing.




**3.**  **Summary
      of Significant Accounting Policies**





***Use
      of Estimates*** **** The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.




7




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO FINANCIAL STATEMENTS**


**(Information
      with respect to events occurring after December 31, 2006 is
      unaudited)**





**3.**  **Summary
      of Significant Accounting Policies—continued**





***Fiscal
      Year*** **** The
      Company’s fiscal year begins on January 1 and ends on December 31 of each year.
      For the period ended December 31, 2006, the Company’s Statements of Operations
      and Cash Flow reflect all transactions that arose between December 28, 2006,
      the
      inception date of the Company, and September 30, 2007.





***Basis
      of Presentation of Interim Financial Statements*** ** The
      financial statements as of September 30, 2007 and for the three- and nine-month
      periods ended September 30, 2007 are unaudited, but in the opinion of management
      include all adjustments necessary for a fair presentation of the Company’s
      financial position, results of operations and cash flows. All such adjustments
      are of a normal recurring nature.





***Cash
      and Cash Equivalents*** **** For
      financial statement presentation purposes, the Company considers those
      short-term, highly liquid investments with original maturities of three months
      or less to be cash or cash equivalents.





***Organization
      and Start-up Costs*** During
      the period ended December 31, 2006, the Company’s founders incurred $1,000 in
      organization costs, which were paid by them from their personal funds and
      accounted for as start-up costs. In accordance with FASB Statement of Position
      98-5, all organization and start-up costs were charged to expense on a current
      basis during the period ended December 31, 2006.





***Deferred
      Offering Costs*** Deferred
      offering costs will be carried as an asset until the Company completes a
      business combination or abandons its business and liquidates. Upon the
      occurrence of either event, deferred offering costs will be offset against
      additional paid-in capital.





During
      the nine-months ended September 30, 2007, the Company’s founders paid $14,000 in
      legal fees associated with the preparation of the Company’s registration
      statement from their personal funds. Those the legal fees have been accounted
      for as deferred offering costs, and are included in the $44,527 in offering
      costs the company incurred prior to September 30, 2007. The Company expects
      to
      incur approximately $55,000 in total offering costs prior to the completion
      of
      the gift share distribution.





***Target
      Investigation Costs*** ** Target
      investigation costs will be carried as an asset until the Company negotiates
      an
      acquisition or abandons its efforts to acquire the target.





***Net
      Income (Loss) Per Common Share*** **** The
      Company computes net income (loss) per common share in accordance with Statement
      of Financial Accounting Standards (“SFAS”) No. 128, *Earnings
      Per Share* and SEC
      Staff Accounting Bulletin No. 98 (“SAB No. 98”). Under the provisions of
      SFAS No. 128 and SAB No. 98, basic net income (loss) per common share (“Basic
      EPS”) is computed by dividing net income (loss) by the weighted average number
      of common shares outstanding.





The
      Company’s net income (loss) per common share has been calculated on the basis of
      2,000,000 shares issued and outstanding at December 31, 2006 and September
      30,
      2007. There were no warrants or other stock purchase rights outstanding on
      either date.





***Income
      Taxes*** **** Income
      taxes are accounted for in accordance with SFAS No. 109, *Accounting
      for Income Taxes* .
      Under
      this method, deferred income taxes are determined based on differences between
      the tax bases of assets and liabilities and their financial reporting amounts
      at
      each year-end, and are measured based on enacted tax rates and laws that will
      be
      in effect when the differences are expected to reverse. Valuation allowances
      are
      established, when necessary, to reduce deferred tax assets to the amount
      expected to be realized. We have determined it more likely than not that these
      timing differences will not materialize and have provided a valuation allowance
      against substantially all of our net deferred tax asset. Management will
      continue to evaluate the realizability of the deferred tax asset and its related
      valuation allowance.





8




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO FINANCIAL STATEMENTS**


**(Information
      with respect to events occurring after December 31, 2006 is
      unaudited)**





**3.**  **Summary
      of Significant Accounting Policies—continued**





***Stock
      Based Compensation*** Stock-based
      awards to non-employees are accounted for using the fair value method in
      accordance with SFAS No. 123(R), *Accounting
      for Stock-Based Compensation* ,
      and
      EITF Issue No. 96-18, *Accounting
      for Equity Instruments that are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling Goods or Services* .





On
      December 28, 2006, the company adopted the provisions of Statement of Financial
      Accounting Standards (“SFAS”) 123R, *Share-Based
      Payment* (“SFAS
      123(R)”), which requires that companies measure and recognize compensation
      expense at an amount equal to the fair value of share-based payments granted
      under compensation arrangements.





We
      adopted SFAS 123(R) using the “modified prospective” method, which results in no
      restatement of prior period amounts. Under this method, the provisions of SFAS
      123(R) apply to all awards granted or modified after the date of adoption.
      In
      addition, compensation expense must be recognized for any unvested stock option
      awards outstanding as of the date of adoption on a straight-line basis over
      the
      remaining vesting period. We calculate the fair value of options using a
      Black-Scholes option pricing model. We do not currently have any outstanding
      options subject to future vesting. SFAS 123(R) also requires the benefits of
      tax
      deductions in excess of recognized compensation expense to be reported in the
      Statement of Cash Flows as a financing cash inflow rather than an operating
      cash
      inflow. In addition, SFAS 123(R) required a modification to the Company’s
      calculation of the dilutive effect of stock option awards on earnings per share.
      For companies that adopt SFAS 123(R) using the “modified prospective” method,
      disclosure of pro forma information for periods prior to adoption must continue
      to be made.





A ***ccounting
      For Obligations And Instruments Potentially To Be Settled In The Company’s Own
      Stock*** We
      account for obligations and instruments potentially to be settled in the
      Company’s stock in accordance with EITF Issue No. 00-19, *Accounting
      for Derivative Financial Instruments Indexed To, and Potentially Settled In
      a
      Company’s Own Stoc* k.
      This
      issue addresses the initial balance sheet classification and measurement of
      contracts that are indexed to, and potentially settled in, the Company’s own
      stock.





Under
      EITF Issue No. 00-19 contracts are initially classified as equity or as either
      assets or liabilities, in the following situations:





Equity





·
            Contracts
                that require physical settlement or net-share settlement;
                and


·
            Contracts
                that give the company a choice of net-cash settlement or settlement
                in its
                own shares (physical settlement or net-share settlement), assuming
                that
                all the criteria for equity classification have been
                met.





Assets
      or
      Liabilities





·
            Contracts
                that require net-cash settlement (including a requirement to net-cash
                settle the contract if an event occurs and if that event is outside
                the
                control of the company); and


·
            Contracts
                that give the counterparty a choice of net-cash settlement or settlement
                in shares (physical settlement or net-share
                settlement).





All
      contracts are initially measured at fair value and subsequently accounted for
      based on the current classification. Contracts initially classified as equity
      do
      not recognize subsequent changes in fair value as long as the contracts continue
      to be classified as equity. For contracts classified as assets or liabilities,
      the Company reports changes in fair value in earnings and discloses these
      changes in the financial statements as long as the contracts remain classified
      as assets or liabilities. If contracts classified as assets or liabilities
      are
      ultimately settled in shares, any previously reported gains or losses on those
      contracts continue to be included in earnings. The classification of a contract
      is reassessed at each balance sheet date.





9




In
      accordance with EITF Issue No. 00-19, a transaction which includes a potential
      for net-cash settlement, including liquidated damages, requires that derivative
      financial instruments, including warrants and additional investment rights,
      initially be recorded at fair value as an asset or liability and subsequent
      changes in fair value be reflected in the statement of operations. The recorded
      value of the liability for such derivatives can fluctuate significantly based
      on
      fluctuations in the market value of the underlying common stock of the issuer
      of
      the derivative instruments, as well as in the volatility of the stock price
      during the term used for observation and the remaining term.





***Warrant
      Derivative Liabilities*** We
      account for warrants issued in connection with financing arrangements in
      accordance with EITF Issue No. 00-19, *Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock* .
      Pursuant to EITF Issue No. 00-19, an evaluation of specifically identified
      conditions is made to determine whether the fair value of warrants issued is
      required be classified as a derivative liability. The fair value of warrants
      classified as derivative liabilities is adjusted for changes in fair value
      at
      each reporting period, and the corresponding non-cash gain or loss is recorded
      in current period earnings.





***Recent
      Accounting Pronouncements*** In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (SFAS
      157). SFAS 157 provides guidance for using fair value to measure assets and
      liabilities. It also responds to investors’ requests for expanded information
      about the extent to which companies measure assets and liabilities at fair
      value, the information used to measure fair value, and the effect of fair value
      measurements on earnings. SFAS 157 applies whenever other standards required
      (or
      permit) assets or liabilities to be measured at fair value, and does not expand
      the use of fair value in any new circumstances. SFAS 157 is effective for
      financial statements issued for fiscal years beginning after November 15,
      2007. We are currently evaluating the effect that the adoption of SFAS 157
      will
      have on our results of operations and financial condition and are not yet in
      a
      position to determine such effects.





In
      September 2006, the SEC staff issued Staff Accounting
      Bulletin No. 108, *Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements* (“SAB 108”).
      SAB 108 establishes an approach that requires quantification of financial
      statement misstatements based on the effects of the misstatements on each of
      the
      Company’s consolidated financial statements and the related financial statement
      disclosures. SAB 108 is effective for the year ending December 31,
      2006. We
      do not
      expect SAB 108 to have a material impact on our financial
      statements.





In
      June 2006, the FASB issued FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes—an Interpretation of FASB Statement
      109* ("FIN
      48"), which clarifies the accounting for uncertain tax positions. This
      Interpretation allows the tax effects from an uncertain tax position to be
      recognized in the Company's financial statements if the position is more likely
      than not to be sustained upon audit, based on the technical merits of the
      position. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure and
      transition. FIN 48 is effective for fiscal years beginning after
      December 15, 2006. We do not expect FIN 48 to have a material impact on our
      financial statements.





In
      May
      2006, the FASB issued “SFAS No. 154”, *Accounting
      Changes and Error Corrections* ,
      which
      replaces APB Opinion No. 20 *Accounting
      Changes* and FASB
      Statement No. 3 *Reporting
      Accounting Changes in Interim Financial Statements* .
      SFAS
      No. 154 changes the requirements for the accounting and reporting of a
      change in an accounting principle. SFAS No. 154 requires retrospective
      application for voluntary changes in an accounting principle unless it is
      impracticable to do so. SFAS No. 154 is effective for accounting changes
      made in fiscal years beginning after December 15, 2006. We adopted SFAS
      No. 154 on January 1, 2007 with no expected material effect on our
      financial statements.





10




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO FINANCIAL STATEMENTS**


**(Information
      with respect to events occurring after December 31, 2006 is
      unaudited)**





**4.**  **Capital
      Stock**





The
      Company’s Certificate of Incorporation authorizes the issuance of 50,000,000
      shares of common. The Company’s board of directors has the power to issue any or
      all of the authorized but unissued common stock without stockholder approval.
      The Company currently has no commitments to issue any shares of common stock;
      however, the Company will, in all likelihood, issue a substantial number of
      additional shares in connection with an acquisition. Since the company expects
      to issue shares of common stock in connection with an acquisition, the ultimate
      ownership of the gift share donees is likely to be less than 5% of the issued
      and outstanding common stock of the Company. It is impossible to predict whether
      an acquisition will ultimately result in dilution to gift share donees, however
      management believes the possibility of significant dilution is very
      remote.




The
      Company’s Board of Directors is empowered, without stockholder approval, to
      issue up to 10,000,000 shares of “blank check” preferred stock with dividend,
      liquidation, conversion, voting or other rights that could adversely affect
      the
      voting power or other rights of the holders of the Company’s common stock. There
      are no shares of preferred stock issued or outstanding and the Company has
      no
      current plans to issue shares of preferred stock for any purpose.





**5.**  **Stockholders’
      Equity**





In
      connection with the incorporation of the Company, its founders paid $20,000
      to
      purchase 2,000,000 shares of common stock at a price of $0.01 per share.
      Pursuant to an agreement among themselves, the Company’s founders are
      contractually obligated to contribute sufficient capital to pay the Company’s
      cumulative registration and operating costs and ensure that the Company has
      cash
      and working capital balances of at least $40,000 when the founders complete
      the
      planned gift share distribution. The Company believes it will incur
      approximately $60,000 in registration, offering and operating costs prior to
      the
      completion of the gift share distribution, which will require the founders
      to
      contribute an additional $80,000 to the Company’s capital.





The
      Company has no obligation to reimburse organization, operating and offering
      costs paid by its founders. In accordance with the requirements of SEC Staff
      Accounting Bulletin Topic 1B, all costs that are paid directly by the Company’s
      founders will be treated as additional capital contributions from the founders
      and the associated costs will be accounted for in accordance with the Company’s
      established accounting policies





**6.**  **Incentive
      Stock Plan**





The
      Company’s 2006 Incentive Stock Plan was adopted and approved in connection with
      the organization of the Company. The common stock reserved for issuance under
      the plan will be the lesser of 750,000 shares, or 10% of the total number of
      shares outstanding after the closing of an acquisition.





The
      class
      of persons eligible to participate in the plan includes all full-time and
      part-time employees of the Company, provided that the eligible participants
      do
      not include employees who are eligible to receive awards under the terms of
      any
      employment contract or specialty plan adopted by us in the future. The plan
      permits the grant of a variety of incentive awards including (i) non-qualified
      stock options, (ii) incentive stock options, (iii) shares of restricted stock,
      (iv) shares of phantom stock, and (v) stock bonuses. In addition, the plan
      allows us to grant cash bonuses that will be payable when an employee is
      required to recognize income for federal income tax purposes because of the
      vesting of shares of restricted stock or the grant of a stock
      bonus.





There
      were no stock options or other incentive awards outstanding at December 31,
      2006
      and no options or other awards may be granted until the Company closes an
      acquisition transaction.




11




**ITEM
              2.**
            **MANAGEMENTS’
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
                OPERATIONS**





**Financial
      Condition**





We
      were
      incorporated in Delaware on December 28, 2006. Our founders purchased 2 million
      shares of our common stock for $20,000, or $0.01 per share. Concurrently,
      founders agreed in writing to contribute sufficient capital to pay our
      cumulative registration and operating costs and ensure that we have cash and
      working capital balances of at least $40,000 after completion of the gift share
      distribution. We believe $40,000 in working capital will be sufficient for
      our
      planned activities.





During
      the year ended December 31, 2006, we incurred $1,000 in organization costs,
      which were paid by one of our founders and accounted for as an additional
      capital contribution. During the nine months ended September 30, 2007 our
      efforts were focused on drafting our registration statement and planning our
      future activities. We incurred $3,595 in audit fees and bank charges during
      the
      first six months of 2007, and additional general and administrative expenses
      of
      $149 during the three months ended September 30, 2007.





Our
      registration statement was declared effective on October 5, 2007. We incurred
      approximately $44,500 in registration and offering costs prior to September
      30,
      2007 and expect to incur approximately $60,000 in total registration, offering
      and operating costs prior to the completion of the gift share distribution
      The
      only line item that represented more than 10% of our cumulative offering costs
      at September 30, 2007 was $40,639 in legal fees. Our founders paid $14,000
      of
      these legal fees from their personal financial resources and we paid $15,745
      from our resources. At September 30, 2007 our accounts payable for offering
      and
      operating costs were $17,038, including $10,894 of legal fees.





We
      have
      no obligation to reimburse organization, operating and registration costs paid
      by our founders. In accordance with the requirements of SEC Staff Accounting
      Bulletin Topic 1B, all costs that are paid directly by our founders will be
      treated as additional capital contributions from the founders and the associated
      costs will be accounted for in accordance with our established accounting
      policies.





**Plan
      of Operations**





After
      the
      capital contributions that our founders are required to make upon completion
      of
      the gift share distribution, we will have $40,000 in cash and working capital.
      We will use our available cash resources to pay the costs of operating our
      company, investigating business opportunities, negotiating an acquisition and
      preparing a post-effective amendment to our registration statement. We will
      not
      pay any cash compensation to our officers, but we will reimburse any
      out-of-pocket costs they incur on our behalf.





We
      intend
      to request a reasonable due diligence fee before we begin a detailed
      investigation into the affairs of a potential target. We will also request
      that
      the target pay the legal and accounting fees and other costs associated with
      the
      preparation of a post-effective amendment to our registration statement. There
      can be no assurance that a potential target will be willing to pay the
      out-of-pocket costs we expect to incur in connection with our due diligence
      investigations and future SEC filings.





Rule 419
      will require us to unwind gift share distribution if we fail to negotiate an
      acquisition, complete our reconfirmation offering and close the transaction
      within 18 months from the effective date of our registration statement. We
      believe our available cash resources will be adequate for our expected needs.
      Nevertheless, we may run out of money if our investigation of a potential target
      requires significant technical expertise, or we spend substantial funds
      investigating a potential target and then determine that the potential target
      is
      not suitable.





The
      SEC’s
      integration and general solicitation doctrines will preclude future private
      placement transactions until we complete our reconfirmation offering and close
      an acquisition. Therefore, we will be unable to obtain funds by selling
      additional securities. We have the corporate power to borrow money, but under
      our circumstances credit is not likely to be available. Our founders may, but
      have no duty or obligation to loan our company money. If we spend our available
      cash and cannot obtain additional financing, we will be forced to abandon our
      business plan. In that event, donees will have no interest in our company and
      our founders will incur substantial losses.





12




**Off-balance
      sheet arrangements**





We
      have
      no off-balance sheet arrangements that have or are reasonably likely to have
      a
      current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources.





**Contractual
      obligations**





We
      have
      no contractual obligations that have or are reasonably likely to have a current
      or future effect on our financial condition, changes in financial condition,
      revenues or expenses, results of operations, liquidity, capital expenditures
      or
      capital resources.




**ITEM
      3**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





Substantially
      all of our financial assets consist of bank deposits and we own no portfolio
      investments that would expose our Company to the type of risks described in
      Item
      304 of Regulation S-K.




**ITEM
      4.**  **CONTROLS
      AND PROCEDURES**




As
      of the
      end of the fiscal quarter ended September 30, 2007, we carried out an evaluation
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures. This evaluation was accomplished under the supervision and with
      the
      participation of our chief executive officer and our chief financial officer
      who
      concluded that our disclosure controls and procedures are effective. There
      have
      been no significant changes in our internal controls or in other factors that
      could significantly affect internal controls subsequent to the date we completed
      our evaluation and the date of filing of this Report on Form 10-Q.





Disclosure
      controls and procedures are designed to ensure that the information we are
      required to disclose in our reports filed or submitted under the Securities
      Exchange Act is recorded, processed, summarized and reported, within the time
      periods specified in the Securities and Exchange Commission's rules and forms.
      Disclosure controls and procedures include, without limitation, controls and
      procedures designed to ensure that information required to be disclosed in
      our
      reports filed under the Exchange Act is accumulated and communicated to
      management, including our principal executive officer, to allow timely decisions
      regarding required disclosure.





**PART
      II - OTHER INFORMATION**





**ITEM
      1.**  **LEGAL
      PROCEEDINGS**





**NONE**





**ITEM
      2.**  **UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





**NONE**


**ITEM
      3.**  **DEFAULTS
      ON SENIOR SECURITIES**





**NONE**





**ITEM
      4.**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**





**NONE**





**ITEM
      5.**  **OTHER
      INFORMATION**





13




Our
      registration statement was declared effective on October 5, 2007 and our
      founders promptly commenced the gift share distribution described in our
      prospectus. Concurrently our officers commenced their search for acquisition
      targets. The following table identifies each founder who intends to distribute
      gift shares to Donees in compliance with our prospectus and summarizes the
      progress of the gift share distribution as of November 13, 2007.





**Gift
                Shares to**
            
            **Gift
                Shares Accepted**
            
            **Number
                of****Name**
            
            **be
                distributed**
            
            **at
                November 13, 2007**
            
            **Donees**John
                L. Petersen
            
            
            62,500
            
            
            61,000
            
            
            122Rachel
                A. Fefer
            
            
            62,500
            
            
            61,500
            
            
            123Sally
                Fonner
            
            
            62,500
            
            
            23,500
            
            
            47Mark
                Dolan
            
            
            62,500
            
            
            20,500
            
            
            41Total
            
            
            250,000
            
            
            166,500
            
            
            333





Between
      the effective date of our registration statement and the date of this report,
      our officers have engaged in preliminary discussions with representatives of
      several potential targets and commenced the process of exchanging information.
      None of these discussions have progressed to a point where an acquisition is
      probable.





**ITEM
      6.**  **EXHIBITS**





**(a)**
            **EXHIBITS**31.1
            Certification
                of Chief Executive Officer Pursuant to Rule 13a-14(a)31.2
            Certification
                of Chief Financial Officer Pursuant to Rule 13a-14(a)32.1
            Statement
                of Chief Executive Officer Pursuant to Section1350
                of Title 18 of the United States Code32.2
            Statement
                of Chief Financial Officer Pursuant to Section1350 of Title 18 of
                the
                United States Code





**(b)**  **REPORTS
      ON FORM 8-K**  **NONE**




**SIGNATURES**





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


**STIRLING
                  ACQUISITION CORPORATION**/s/
                  Sally A. FonnerSally
                  A. Fonner, Chief Executive OfficerDated:
                  November 13, 2007/s/
                  John L. PetersenJohn
                  L. Petersen, Chief Accounting OfficerDated:
                  November 13, 2007




14