**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 June 30, 2008**





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  x  No  o





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





Large
                accelerated filer
            o
            
            Accelerated
                filer
            oNon-accelerated
                filer
            o
            
            Smaller
                reporting company
            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 August 12,
                2008Common
                Stock, $0.001 Par Value
            2,000,000
                Shares










**TABLE
      OF CONTENTS**   **PART
                  I**
              **FINANCIAL
                  INFORMATION**
              **PAGE****ITEM
                  1**
              **Financial
                  Statements**Balance
                  Sheets as of June 30, 2008 and December 31, 2007
              3Statements
                  of Operations for the three- and six-month periods ended
                  June 30, 2008 and 2007
              4Statements
                  of Cash Flow for the three- and six-month periods ended
                  June 30, 2008 and 2007
              5Notes
                  to Financial Statements
              6**ITEM
                  2**
              **Managements’
                  Discussion and Analysis of Financial Condition and Plan of
                  Operation**
              12**ITEM
                  4**
              **Controls
                  and Procedures**
              13**PART
                  II**
              **OTHER
                  INFORMATION****ITEM
                  1**
              **Legal
                  Proceedings**
              13**ITEM
                  1A**
              **Risk
                  Factors**
              13**ITEM
                  2**
              **Unregistered
                  Sales of Equity Securities and Use of Proceeds**
              19**ITEM
                  3**
              **Defaults
                  Upon Senion Securities**
              19**ITEM
                  4**
              **Submission
                  of Matters to a Vote of Security Holders**
              19**ITEM
                  5**
              **Other
                  Information**
              19**ITEM
                  6**
              **Exhibits**
              19**SIGNATURES**
              20
  2




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**BALANCE
      SHEETS**





**June
                30,**
              **2008**
            
            **December
                31,**
              **2007****(Unaudited)****ASSETS**Current
                Assets:Cash
            
            $
            911
            
            $
            3,236Marketable
                securities at fair value
            
            
            85,000
            
            
            —Other
                current assets
            
            
            —
            
            
            —Total
                current assets
            
            
            85,911
            
            
            3,236Deferred
                offering costs
            
            
            89,111
            
            
            62,615Total
                assets
            
            $
            175,022
            
            $
            65,851**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Accounts
                payable
            
            $
            48,470
            
            $
            31,487Total
                liabilities
            
            $
            48,470
            
            $
            31,487Stockholders’
                equityCommon
                stock, $0.001 par value:50,000,000
                shares authorized, 2,000,000 shares outstandingat
                June 30, 2008 and December 31, 2007
            
            $
            2,000
            
            $
            2,000Preferred
                stock, $0.001 par value:10,000,000
                shares authorized, no shares outstandingat
                June 30, 2008 and December 31, 2007
            
            
            —
            
            
            —Additional
                paid in capital
            
            
            143,860
            
            
            37,140Other
                comprehensive income (loss)
            
            
            (5,000
            )Deficit
                accumulated during development stage
            
            
            (14,308
            )
            
            (4,777
            )Total
                stockholder’s equity
            
            $
            126,552
            
            $
            34,363Total
                liabilities and equity
            
            $
            175,022
            
            $
            65,851




**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**
            
            **Six
                Months Ended**
            
            **(inception) through****June
                30, 2008**
            
            **June
                30, 2007**
            
            **June
                30, 2008**
            
            **June
                30, 2007**
            
            **June
                30, 2008****(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)**Revenue
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Organization
                costs
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,000General
                and administrative expenses
            
            
            2,086
            
            
            3,595
            
            
            9,531
            
            
            3,595
            
            
            13,308Total
                expenses
            
            
            2,086
            
            
            3,595
            
            
            9,531
            
            
            3,595
            
            
            14,308Deficit
                accumulated during development stage
            
            
            ($2,086
            )
            
            ($3,595
            )
            
            ($9,531
            )
            
            ($3,595
            )
            
            ($14,308
            )Net
                loss per common share
            
            
            (nil
            )
            
            (nil
            )
            
            (nil
            )
            
            (nil
            )
            
            ($0.01
            )Weighted
              number of
              common sharesissued
                and outstanding during period
            
            
            2,000,000
            
            
            2,000,000
            
            
            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****Six
              Months Ended**
            
            **(inception) through****June
                30, 2008**
            
            **June
                30, 2007**
            
            **June
                30, 2008****(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)****Cash
                flows from operating activities**Deficit
                accumulated during development stage
            
            
            ($9,531
            )
            
            ($3,595
            )
            
            ($13,113
            )Changes
                in operating assets and liabilities:Other
                current assets
            
            
            —
            
            
            —
            
            
            —Increase
                in accounts payable for operating activities
            
            
            3,500
            
            
            3,500
            
            
            7,000Net
                cash provided by (used in) operating activities
            
            
            ($6,031
            )
            
            ($95
            )
            
            ($7,308
            )**Cash
                flows from financing activities**Proceeds
                from sale of common stock to founders
            
            
            —
            
            
            —
            
            $
            20,000Additional
                capital contributions from founders
            
            
            —
            
            
            140
            
            
            4,140Costs
                paid by founders treated as capital contributions
            
            $
            16,720
            
            
            —
            
            
            31,720Increase
                in accounts payable for deferred offering costs
            
            
            13,482
            
            
            18,339
            
            
            41,470Increase
                in deferred offering costs
            
            
            (26,496
            )
            
            (18,439
            )
            
            (89,111
            )Net
                cash provided by financing activities
            
            $
            3,706
            
            $
            40
            
            $
            8,219Net
                increase (decrease) in cash
            
            
            ($2,325
            )
            
            ($55
            )
            $
            911Cash
                balance, beginning of period
            
            $
            3,236
            
            $
            20,000
            
            
            —Cash
                balance, end of period
            
            $
            911
            
            $
            19,945
            
            $
            911**Supplemental
                disclosure of non-cash transactions with
                affiliates**Proceeds
                from payment of organization costs by affiliates
            
            
            —
            
            
            —
            
            $
            1,000Proceeds
                from payment of deferred offering costs by affiliates
            
            $
            16,720
            
            $
            14,000
            
            $
            30,720Contributions
                of marketable securities by affiliates
            
            
            90,000
            
            
            —
            
            
            90,000Unrealized
                gain (loss) on marketable securities
            
            
            (5,000
            )
            
            —
            
            
            (5,000
            )Total
                non-cash transactions with affiliates
            
            $
            101,719
            
            $
            14,000
            
            $
            120,860





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





5





**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO UNAUDITED INTERIM FINANCIAL STATEMENTS**


**(Information
      included in notes with respect to events occurring after December 31, 2007
      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, capital stock exchange
      or similar 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**





The
      Company has received an order of effectiveness for a Form S-1 registration
      statement under the Securities Act of 1933, as amended, (the “Securities Act”)
      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;





·
            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
      distribution described in the registration statement 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.





The
      Company’s founders will distribute a combined total of 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
      company’s 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.




6





**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO UNAUDITED INTERIM FINANCIAL STATEMENTS**


**(Information
      included in notes with respect to events occurring after December 31, 2007
      is
      unaudited)**





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





In
      connection with the Company’s reconfirmation offering, each Donee must approve
      the proposed Acquisition 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 year ended December 31, 2007, the Company incurred $62,615 in costs
      associated with registering its common stock under the Securities Act and
      conducting the distribution. During the six months ended June 30, 2008, the
      company incurred $26,496 in additional costs associated with the distribution
      and commenced their search for a suitable Target. Since the Company’s capital
      needs are highly uncertain, its officers agreed to contribute sufficient
      additional capital to insure that the Company had cash and working capital
      balances of $40,000 upon completion of the distribution. During the second
      quarter ended June 30, 2008, the founders paid $16,720 of offering costs on
      the
      Company’s behalf and contributed $85,000 in marketable securities to augment the
      Company’s working capital. The founders believe the orderly liquidation of those
      securities will provide sufficient resources for the Company’s anticipated
      needs. To date, the founders have made a total investment of approximately
      $146,000 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 listing on a national securities exchange after
      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, an 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 effect an Acquisition. If the
      Company is unable to close a transaction before April 4, 2009 (18 months from
      the effective date of its original registration statement), 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**





***Basis
      of Presentation*** **:** The
      financial statements have been presented in a “development stage” format. Since
      inception, our primary activities have been raising of capital and obtaining
      financing. We have not commenced our principal revenue producing
      activities.





***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 UNAUDITED INTERIM FINANCIAL STATEMENTS**


**(Information
      included in notes with respect to events occurring after December 31, 2007
      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.
      The Company’s Statements of Operations and Cash Flow reflect all transactions
      that arose during the three- and six-month periods ended June 30, 2008 and
      2007,
      the fiscal year ended December 31, 2007, and development period between
      inception (December 28, 2006) and June 30, 2008.





***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, including general promotion and marketing 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 year ended December 31, 2007, the Company’s founders paid $14,000 in legal
      fees associated with the preparation of the Company’s registration statement.
      During the second quarter of 2008, they paid $16,720 costs associated amending
      the Company’s registration statement and commencing the search for a suitable
      Target. All cash outlays by the founders for the benefit of the Company have
      been accounted for as deferred offering costs.





***Target
      Investigation Costs:*** ** Target
      investigation costs will be carried as an asset until the Company negotiates
      an
      Acquisition or abandons its efforts to acquire a particular 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 June 30, 2008 and December 31, 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.





***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* .




8




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO UNAUDITED INTERIM FINANCIAL STATEMENTS**


**(Information
      included in notes with respect to events occurring after December 31, 2007
      is
      unaudited)**





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





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.





The
      Company 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. The Company calculates
      the fair value of options using a Black-Scholes option pricing model. The
      Company does 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:*** The
      Company accounts 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 Stock* .”
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




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO UNAUDITED INTERIM FINANCIAL STATEMENTS**


**(Information
      included in notes with respect to events occurring after December 31, 2007
      is
      unaudited)**





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





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:*** The
      Company accounts 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 to 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. The Company has no outstanding
      warrants.





***Recent
      Accounting Pronouncements***





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. The Company adopted
      SFAS
      No. 154 on January 1, 2007 with no expected material effect on its
      financial statements.





In
      February 2007, FASB issued SFAS No. 159, *“The
      Fair Value Option for Financial Assets and Financial
      Liabilities.”* SFAS 159
      is effective for fiscal years beginning after November 15, 2007. Early adoption
      is permitted subject to specific requirements outlined in the new Statement.
      The
      new Statement allows entities to choose, at specified election dates, to measure
      eligible financial assets and liabilities at fair value that are not otherwise
      required to be measured at fair value. If a company elects the fair value option
      for an eligible item, changes in that item's fair value in subsequent reporting
      periods must be recognized in current earnings. SFAS 159 also establishes
      presentation and disclosure requirements designed to draw comparison
      between entities that elect different measurement attributes for similar assets
      and liabilities.





In
      December 2007, the FASB issued SFAS No. 141(R), “ *Business
      Combinations* .”
This
      Statement replaces SFAS No. 141. SFAS 141(R) retains the fundamental
      requirements in SFAS 141 that the acquisition method of accounting (which SFAS
      141 called the purchase method) be used for all business combinations and for
      an
      acquirer to be identified for each business combination. This Statement also
      establishes principles and requirements for how the acquirer: a) recognizes
      and
      measures in its financial statements the identifiable assets acquired, the
      liabilities assumed, and any noncontrolling interest in the acquiree; b)
      recognizes and measures the goodwill acquired in the business combination or
      a
      gain from a bargain purchase and c) determines what information to disclose
      to
      enable users of the financial statements to evaluate the nature and financial
      effects of the business combination. SFAS No. 141(R) will apply prospectively
      to
      business combinations for which the acquisition date is on or after Company’s
      fiscal year beginning October 1, 2009. While the Company has not yet evaluated
      SFAS 141(R) for the impact, if any, that it will have on its future consolidated
      financial statements, the Company will be required to expense costs related
      to
      any acquisitions after September 30, 2009.





10




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO UNAUDITED INTERIM FINANCIAL STATEMENTS**


**(Information
      included in notes with respect to events occurring after December 31, 2007
      is
      unaudited)**





**4.**  **Marketable
      Securities**





During
      the second quarter of 2008, two of our founders, Sally Fonner and Mark Dolan,
      each contributed 25,000 shares of the common stock of Axion Power International,
      Inc. (OTCBB: AXPW) to the Company for purposes of augmenting its working
      capital. The orderly liquidation of these securities is expected to provide
      sufficient cash to pay the current balance of the Company’s accounts payable and
      provide its anticipated cash requirements. If necessary, the founders may make
      additional capital contributions in the future.





In
      accordance with the requirements of SFAS 159, marketable securities are reported
      on the balance sheet at market value determined as of the reporting date and
      any
      unrealized gains or losses on the marketable securities are reflected in other
      comprehensive income. During the second quarter of 2008, the Company had $5,000
      in unrealized losses on marketable securities contributed by its
      founders.





**5.**  **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 the 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.





**6.**  **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’s officers contributed $21,000 in
      capital during 2006 and $90,000 in additional capital during 2007. The Company
      believes its capital resources will be sufficient for its anticipated needs,
      however the founders may make additional capital contributions in the
      future.





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.





11




**STIRLING
      ACQUISITION CORPORATION**


**(A
      DEVELOPMENT STAGE ENTITY)**


**NOTES
      TO UNAUDITED INTERIM FINANCIAL STATEMENTS**


**(Information
      included in notes with respect to events occurring after December 31, 2007
      is
      unaudited)**





**6.**  **Incentive
      Stock Plan - continued**





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 June 30, 2008
      and
      no options or other awards may be granted until the Company closes an
      Acquisition transaction.





12




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





***Financial
      Condition:*** **** Stirling
      Acquisition Corporation, which is referred to as “we,” “our,” “us” and the
“Company,” was incorporated in Delaware on December 28, 2006. Our founders
      purchased 2 million shares of our common stock for an aggregate of $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.





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 year ended December 31, 2007 our efforts were
      focused on drafting our registration statement and planning our future
      activities. We incurred $3,777 in operating expenses during the year ended
      December 31, 2007. We incurred $2,086 in operating expenses during the three
      months ended June 30, 2008 and $9,531 in operating expenses during the six
      months ended June 30, 2008. Our operating expenses consist principally of costs
      associated with our ongoing reporting obligations under the Securities Exchange
      Act of 1934, as amended (the “Exchange Act”).





From
      inception to date, we have incurred approximately $89,100 in costs to register
      our securities, conduct the gift share distribution and begin our search for
      a
      suitable Target. The only line items that represented more than 10% of our
      cumulative offering costs are $67,578 in legal fees and $11,350 in travel,
      promotion and general marketing costs associated with attendance at reverse
      merger industry events. During the year ended December 31, 2007, our founders
      contributed $39,140 in capital, including $15,000 in costs they paid on our
      behalf. During the second quarter ended June 30, 2008, our founders contributed
      $106,720 in additional capital, including $16,720 of costs they paid on our
      behalf. To date, the founders have made a total investment of approximately
      $146,000 in us.





We
      have
      no obligation to reimburse any capital contributed by our founders, whether
      in
      the form of direct payments to us or payments to others on our behalf. 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:*** **** At
      the
      date of this report, we have $37,441 in working capital and our founders believe
      the orderly liquidation of our marketable securities will provide sufficient
      cash resources to pay our current liabilities and provided for our anticipated
      cash requirements until we either identify a Target and begin preparations
      for
      our reconfirmation offering, or decide that we will be unable to conclude an
      acquisition within the 18-month period specified in Rule 419. We will use our
      available resources to pay the costs of operating our company, investigating
      potential Targets, negotiating an Acquisition and preparing a post-effective
      amendment to our registration statement. We will not compensate our officers
      in
      cash, but we may reimburse 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 required filings under the Securities Act and Exchange
      Act.





Rule 419
      will require us to unwind gift share distribution if we fail to identify a
      Target, negotiate an Acquisition, complete our reconfirmation offering and
      close
      the Acquisition transaction before April 4, 2009. 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.




13




***Contractual
      Obligations:*** **** We
      have
      no long-term debt, capital lease obligations, operating lease obligations,
      purchase obligations or other long term liabilities.





***Off-balance
      Sheet Arrangements:*** **** We
      have
      no off-balance sheet arrangements.





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





*Evaluation
      of Disclosure Controls and Procedures*





As
      of the
      end of the period covered by our Quarterly Report for the period ended June
      30,
      2008, management performed, with the participation of our Chief Executive
      Officer and Chief Financial Officer, an evaluation of the effectiveness of
      our
      disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e)
      of the Exchange Act. Our disclosure controls and procedures are designed to
      ensure that information required to be disclosed in the report we file or submit
      under the Exchange Act is recorded, processed, summarized, and reported within
      the time periods specified in the SEC’s forms, and that such information is
      accumulated and communicated to our management including our Chief Executive
      Officer and our Chief Financial Officer, to allow timely decisions regarding
      required disclosures. Based on the evaluation our Chief Executive Officer and
      our Chief Financial Officer concluded that, as of June 30, 2008, our disclosure
      controls and procedures were effective. There were no changes to our internal
      controls during the three- or six-month periods ended June 30,
      2008.





**PART
      II - OTHER INFORMATION**





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





**NONE**





**ITEM
      1A — RISK FACTORS**





Readers
      of this report on Form 10-Q should consider carefully the following risk factors
      in evaluating our company and its prospects. Any of the following risks, as
      well
      as other risks and uncertainties that are not yet identified or that we
      currently believe are immaterial, could harm our business, financial condition
      and operating results, and could result in the liquidation of our
      company.





**We
      have less than seven months to identify a target, comply with Rule 419 and
      complete an acquisition.**





Rule
      419
      requires that we complete an acquisition within eighteen months from the
      effective date of our original registration statement, which means that we
      must
      identify a Target, complete our investigation of the Target’s business,
      negotiate transaction terms, file one or more amendments to our registration
      statement, conduct our Rule 419 reconfirmation offering and close the
      Acquisition by April 4, 2009. If we do not complete our Target evaluation and
      selection activities within the next 60 to 90 days, we are likely to unwind
      the
      gift share distribution and withdraw the acquisition and founders’ shares from
      registration.





**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**




14


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





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 August 12, 2008.





**Name**
            
            **Gift
                Shares to**
            
            **Gift
                Shares Accepted**
            
            **Number
                of****be
                distributed**
            
            **at
                August 12, 2008**
            
            **Donees**John
                L. Petersen
            
            
            62,500
            
            
            62,500
            
            
            125Rachel
                A. Fefer
            
            
            62,500
            
            
            62,500
            
            
            125Sally
                Fonner
            
            
            62,500
            
            
            62,500
            
            
            125Mark
                Dolan
            
            
            62,500
            
            
            59,500
            
            
            119Total
            
            
            250,000
            
            
            247,000
            
            
            494





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**





**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





**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/ Mark
                R.
                DolanMark
              R. Dolan, Chief Executive OfficerDated:
              August 14, 2008


/s/ John
              L.
              PetersenJohn
              L. Petersen, Chief Accounting OfficerDated:
              August 14, 2008




15