RSCF Reflect Scientific Inc (QB)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10−Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2023

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to _____________

 

Commission File Number: 000-31377

 

REFLECT SCIENTIFIC, INC.

(Exact name of registrant as specified in its charter)

 

Utah		87-0642556
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

1266 South 1380 West, Orem, UT		84058
(Address of principal executive offices)		(Zip Code)

 

(801) 226-4100

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and formal fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

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

 

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

 

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

 

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

 

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

 

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

 

As of November 8, 2023, there were 85,214,086 common shares of the registrant issued and outstanding. 

 

 

 

 

 

 

REFLECT SCIENTIFIC, INC.

 

Quarterly Report on Form 10-Q

 Period Ended September 30, 2023

 

 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

Item 1:	Financial Statements	2
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3:	Quantitative and Qualitative Disclosure about Market Risk	16
Item 4:	Controls and Procedures	16

 

PART II

OTHER INFORMATION

 

Item 1:	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3:	Defaults Upon Senior Securities	17
Item 4:	Mine Safety Disclosure	17
Item 5:	Other Information	17
Item 6:	Exhibits	18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART I

FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

 

REFLECT SCIENTIFIC, INC.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

		Page
Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022		3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)		4
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)		5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (Unaudited)		6
Notes to Condensed Consolidated Financial Statements (Unaudited)		7

 

 

 

REFLECT SCIENTIFIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		September 30, 2023				December 31, 2022
ASSETS		(Unaudited)
Current Assets
Cash and cash equivalents		$	1,339,446			$	1,381,927
Accounts receivable, net			120,182				129,329
Inventories, net			920,954				797,352
Prepaid expenses and other current assets			9,693				20,221
Total Current Assets			2,390,275				2,328,829
Operating lease right-of-use assets			252,955				54,265
Goodwill			60,000				60,000
Other long-term assets			3,100				3,100
TOTAL ASSETS		$	2,706,330			$	2,446,194
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses		$	104,276			$	78,969
Customer deposits			273,834				13,230
Current portion of operating lease liabilities			56,298				57,393
Total Current Liabilities			434,408				149,592
Operating lease liabilities, net of current portion			197,358				-
TOTAL LIABILITIES			631,766				149,592
Stockholders' Equity
Preferred Stock, $0.01 par value, 5,000,000 shares authorized; none issued and outstanding as of September 30, 2023 and December 31, 2022			-				-
Common stock, $0.01 par value, 100,000,000 shares authorized; 85,214,086 shares issued and outstanding as of September 30, 2023 and December 31, 2022			852,140				852,140
Additional paid-in capital			20,272,806				20,252,181
Accumulated deficit			(19,050,382	)			(18,807,719	)
TOTAL STOCKHOLDERS’ EQUITY			2,074,564				2,296,602
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	2,706,330			$	2,446,194

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

REFLECT SCIENTIFIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Revenues		$	525,874			$	253,233			$	891,385			$	1,562,424
Cost of goods sold			195,888				122,204				373,371				552,314
Gross profit			329,986				131,029				518,014				1,010,110
Operating Expenses
Salaries and wages			155,677				154,648				472,521				484,492
General and administrative			84,331				94,781				272,684				315,734
Research and development			9,082				14,820				20,528				58,474
Total Operating Expenses			249,090				264,249				765,733				858,700
INCOME (LOSS) FROM OPERATIONS			80,896				(133,220	)			(247,719	)			151,410
Other income			5,368				-				5,368				-
NET INCOME (LOSS) BEFORE INCOME TAXES			86,264				(133,220	)			(242,351	)			151,410
INCOME TAX EXPENSE			-				(702	)			(312	)			(702	)
NET INCOME (LOSS)		$	86,264			$	(133,922	)		$	(242,663	)		$	150,708
Earnings (loss) per common share
Basic		$	0.00			$	(0.00	)		$	(0.00	)		$	0.00
Diluted		$	0.00			$	(0.00	)		$	(0.00	)		$	0.00
Weighted average shares outstanding
Basic			85,214,086				84,989,086				85,214,086				84,989,086
Diluted			85,664,086				84,989,086				85,214,086				85,739,086

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

REFLECT SCIENTIFIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

 

 

Three and Nine Months Ended September 30, 2023

 

 

		Common Stock						Additional Paid-In				Accumulated				Total Stockholders'
		Shares			Amount			Capital				Deficit				Equity
Balance at December 31, 2022			85,214,086		$	852,140		$	20,252,181			$	(18,807,719	)		$	2,296,602
Stock-based compensation			-			-			6,875				-				6,875
Net loss			-			-			-				(147,839	)			(147,839	)
Balance at March 31, 2023			85,214,086		$	852,140		$	20,259,056			$	(18,955,558	)		$	2,155,638
Stock-based compensation			-			-			6,875				-				6,875
Net loss			-			-			-				(181,088	)			(181,088	)
Balance at June 30, 2023			85,214,086		$	852,140		$	20,265,931			$	(19,136,646	)		$	1,981,425
Stock-based compensation			-			-			6,875				-				6,875
Net income			-			-			-				86,264				86,264
Balance at September 30, 2023			85,214,086		$	852,140		$	20,272,806			$	(19,050,382	)		$	2,074,564

 

 

 

 Three and Nine Months Ended September 30, 2022

 

 

		Common Stock						Additional Paid-In				Accumulated				Total Stockholders'
		Shares			Amount			Capital				Deficit				Equity
Balance at December 31, 2021			84,989,086		$	849,890		$	20,226,931			$	(18,897,115	)		$	2,179,706
Stock-based compensation			-			-			12,844				-				12,844
Net income			-			-			-				206,505				206,505
Balance at March 31, 2022			84,989,086		$	849,890		$	20,239,775			$	(18,690,610	)		$	2,399,055
Stock-based compensation			-			-			906				-				906
Net income			-			-			-				78,125				78,125
Balance at June 30, 2022			84,989,086		$	849,890		$	20,240,681			$	(18,612,485	)		$	2,478,086
Stock-based compensation			-			-			6,875				-				6,875
Net loss			-			-			-				(133,922	)			(133,922	)
Balance at September 30, 2022			84,989,086		$	849,890		$	20,247,556			$	(18,746,407	)		$	2,351,039

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

 

REFLECT SCIENTIFIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

		Nine Months Ended September 30,
		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	(242,663	)		$	150,708
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation			20,625				20,625
Amortization of right-of-use assets			44,192				41,885
Changes in operating assets and liabilities:
Accounts receivable			9,147				60,088
Inventories			(123,602	)			(279,590	)
Prepaid expenses and other current assets			10,528				15,876
Accounts payable and accrued expenses			25,307				(7,479	)
Customer deposits			260,604				(109,552	)
Operating lease liabilities			(46,619	)			(41,779	)
Net cash used in operating activities			(42,481	)			(149,218	)
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash provided by investing activities			-				-
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities			-				-
NET CHANGE IN CASH AND CASH EQUIVALENTS			(42,481	)			(149,218	)
CASH AND CASH EQUIVALENTS
Beginning of the period			1,381,927				1,473,924
End of the period		$	1,339,446			$	1,324,706
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest		$	-			$	-
Cash paid for income taxes			-				-
NON-CASH INVESTING AND FINANCING ACTIVITIES
Operating lease right-of-use asset and liability remeasurement		$	242,882			$	-

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

REFLECT SCIENTIFIC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

 NOTE 1—BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements of Reflect Scientific, Inc. (the “Company,” “we,” “us,” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all the information and footnotes required by GAAP for complete financial statements. The December 31, 2022, consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2023. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three and nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

 

NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS

 

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). The Company has evaluated all recent accounting pronouncements and determined that the adoption of pronouncements applicable to the Company has not had or is not expected to have a material impact on the Company's condensed consolidated financial statements.

 

NOTE 3—DISAGGREGATION OF REVENUES

 

Our revenue is disaggregated based on product category and geographical region. We recognize revenue from the sale of scientific equipment for the life sciences and manufacturing industries. Our products range from non-mechanical Cyrometrix freezers, chillers, and original equipment manufacturer (“OEM”) value-added products and components for the life sciences industry.

 

The Company’s revenues for the three months ended September 30, 2023 and 2022 are disaggregated as follows:

 

		Three Months Ended September 30, 2023
		United States				International				Total
Revenues
Freezers and chillers		$	355,561			$	-			$	355,561
OEM and other			122,980				47,333				170,313
Total Revenues		$	478,541			$	47,333			$	525,874

 

		Three Months Ended September 30, 2022
		United States				International				Total
Revenues
Freezers and chillers		$	54,768			$	-			$	54,768
OEM and other			129,695				68,770				198,465
Total Revenues		$	184,463			$	68,770			$	253,233

 

The Company’s revenues for the nine months ended September 30, 2023 and 2022 are disaggregated as follows:

 

		Nine Months Ended September 30, 2023
		United States				International				Total
Revenues
Freezers and chillers		$	411,319			$	-			$	411,319
OEM and other			332,015				148,051				480,066
Total Revenues		$	743,334			$	148,051			$	891,385

 

		Nine Months Ended September 30, 2022
		United States				International				Total
Revenues
Freezers and chillers		$	712,930			$	153,236			$	866,166
OEM and other			497,742				198,516				696,258
Total Revenues		$	1,210,672			$	351,752			$	1,562,424

 

NOTE 4—INVENTORIES

 

Inventories at September 30, 2023 and December 31, 2022 consisted of the following:

 

		September 30,				December 31,
		2023				2022
Finished goods		$	297,768			$	376,334
Raw materials			729,230				527,062
Total inventories			1,026,998				903,396
Less reserve for obsolescence			(106,044	)			(106,044	)
Total inventories, net		$	920,954			$	797,352

 

Inventory balances are composed of finished goods and raw materials. Work in process inventory is immaterial to the condensed consolidated financial statements.

 

NOTE 5—LEASES

 

The following was included in our condensed consolidated balance sheets at September 30, 2023 and December 31, 2022:

 

		September 30,			December 31,
		2023			2022
Operating lease right-of-use assets		$	252,955		$	54,265
Lease liabilities, current portion			56,298			57,393
Lease liabilities, long-term			197,358			-
Total operating lease liabilities		$	253,656		$	57,393
Weighted-average remaining lease term (months)			38			11
Weighted average discount rate			10.50	%		5.25	%

 

Total lease expense for the three and nine months ended September 30, 2023 and 2022 is as follows:

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Operating lease expense		$	15,216			$	15,216			$	$45,648			$	45,648
Variable lease expense			5,300				1,334				16,939				5,122
Total lease expense		$	20,516			$	16,550			$	62,587			$	50,770

 

As of September 30, 2023, maturities of operating lease liabilities were as follows:

 

Year Ending December 31,		Amount
2023 – remaining		$	17,587
2024			85,309
2025			98,532
2026			101,708
Total			303,136
Less: imputed interest			(49,480	)
Total operating lease liabilities		$	253,656

NOTE 6—STOCKHOLDERS’ EQUITY

 

Common Stock

 

As of September 30, 2023, the Company was authorized to issue 100,000,000 common shares. As of September 30, 2023 and December 31, 2022, the Company had 85,214,086 common shares issued and outstanding.

 

Restricted Stock Awards

 

Below is a table summarizing the changes in restricted stock awards outstanding during the nine months ended September 30, 2023:

 

 

 

 

 

 

 

		Restricted Stock Awards				Weighted-Average Exercise Price
Outstanding at December 31, 2022			450,000			$	0.11
Granted			-				-
Vested			-				-
Forfeited			-				-
Outstanding at September 30, 2023			450,000			$	0.11

 

Stock-based compensation expense of $6,875 was recorded during the three months ended September 30, 2023 and 2022, respectively. Stock-based compensation expense of $20,625 was recorded during the nine months ended September 30, 2023 and 2022, respectively.

 

As of September 30, 2023, the remaining unrecognized stock-based compensation expense related to non-vested restricted stock awards is $34,375 and is expected to be recognized over 1.25 years.

 

NOTE 7—EARNINGS (LOSS) PER SHARE

 

The computation of the basic and diluted weighted average shares outstanding and the basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2023 and 2022 consisted of the following:

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Net income (loss)		$	86,264			$	(133,922	)		$	(242,663	)		$	150,708
Basic weighted average shares outstanding			85,214,086				84,989,086				85,214,086				84,989,086
Basic earnings (loss) per share		$	0.00			$	(0.00	)		$	(0.00	)		$	0.00
Weighted average shares outstanding			85,214,086				84,989,086				85,214,086				84,989,086
Effect on dilutive stock awards			450,000				-				-				750,000
Diluted weighted average shares outstanding			85,664,086				84,989,086				85,214,086				85,739,086
Diluted earnings (loss) per share		$	0.00			$	(0.00	)		$	(0.00	)		$	0.00

 

For the nine months ended September 30, 2023, there were 450,000 common share equivalents excluded from the diluted earnings per share calculation as their effect is anti-dilutive.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following management’s discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following financial information is derived from our financial statements and should be read in conjunction with such financial statements and notes thereto set forth elsewhere herein.

 

Use of Terms

 

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our” and the “Company” refer to Reflect Scientific, Inc., and its consolidated subsidiaries.

 

Special Note Regarding Forward Looking Statements

 

This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

 

●

Changes in Company-wide strategies, which may result in changes in the types or mix of businesses in which our Company is involved or chooses to invest;

 

●

Changes in U.S., global or regional economic conditions;

 

●

Changes in U.S. and global financial and equity markets, including significant interest rate fluctuations, which may impede our Company’s access to, or increase the cost of, external financing for our operations and investments;

 

●

Increased competitive pressures, both domestically and internationally;

 

●

Legal and regulatory developments, such as regulatory actions affecting environmental activities;

 

●

The imposition by foreign countries of trade restrictions and changes in international tax laws or currency controls;

 

●

Adverse weather conditions or natural disasters, such as hurricanes and earthquakes, labor disputes, which may lead to increased costs or disruption of operations.

 

In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

 

The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

 

Overview

 

Reflect Scientific is engaged in the manufacture and distribution of innovative products targeted at the life science market. Our customers include hospitals, diagnostic laboratories, pharmaceutical and biotech companies, cold chain management, universities, government and private sector research facilities, chemical and industrial companies.

 

Our goal is to provide our customers with the best solution for their needs. This philosophy extends into our business strategies and acquisition plans. Through a series of strategic acquisitions, we acquired technology that has enabled us to expand our line of products to align with, and capitalize on, market needs. Our growing product portfolio includes ultra-low temperature freezers, blast freezers, solvent chillers and refrigerated transportation in addition to supplying OEM products to the life sciences industry.

 

Our Cryometrix brand ultra-low temperature and blast freezers innovative design enables our customers to save substantially on energy costs related to cryogenic storage. Ultra-low temperature freezers are used worldwide for the storage of vaccines, DNA, RNA, proteins and many other biological and chemical substances. There is a growing need for energy efficient, reliable ultra-low temperature storage units. Our Cryometrix freezers are targeted to this growing market and we have had tremendous success in blood storage and pharmaceutical manufacturing applications. The application of this technology for use in refrigerated trailers (commonly called “reefers”) used to transport goods which need to be maintained in a cold environment significantly broadens the market for this technology. The utilization of this technology in reefers eliminates the current method of cooling, which uses engines run on hydrocarbon fuels. The Cryometrix technology is pollutant free and is more efficient and cost effective than the technologies currently used. Reflect Scientific has added a new product line of solvent chillers. Solvent chillers are used in natural products extraction for optimizing product yield and purity.

 

 

Recent Developments

 

None.

 

Impact of Coronavirus Pandemic

 

Starting in late 2019, a novel strain of the coronavirus, or COVID-19, began to rapidly spread around the world and every state in the United States. Most states and cities have at various times instituted quarantines, restrictions on travel, “stay at home” rules, social distancing measures and restrictions on the types of businesses that could continue to operate, as well as guidance in response to the pandemic and the need to contain it. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations and financial results.

 

The pandemic has impacted and may continue to impact some suppliers and manufacturers on some of our products. As a result, we have faced and may continue to face longer supply chain lead-times and higher logistics costs. Additionally, costs for raw materials have also started to increase due to availability, which could negatively affect its business and financial results.

 

The extent to which the pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.

 

Critical Accounting Policies and Estimates

 

The preparation of the unaudited condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

 

For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 31, 2022.

During the nine months ended September 30, 2023, there were no significant changes in our accounting policies and estimates.

 

Results of Operations

 

Comparison of the Three Months Ended September 30, 2023 and 2022

 

The following table sets forth key components of our results of operations during the three months ended September 30, 2023 and 2022, both in dollars and as a percentage of our revenues.

 

 

 

		Three Months Ended September 30,
		2023								2022
		Amount				% of Revenues				Amount				% of Revenues
Revenues		$	525,874				100.0	%		$	253,233				100.0	%
Cost of goods sold			195,888				37.2	%			122,204				48.3	%
Gross profit			329,986				62.8	%			131,029				51.7	%
Operating Expenses
Salaries and wages			155,677				29.6	%			154,648				61.1	%
General and administrative			84,331				16.0	%			94,781				37.4	%
Research and development			9,082				1.7	%			14,820				5.9	%
Total Operating Expenses			249,090				47.4	%			264,249				104.4	%
Income (loss) from operations			80,896				15.4	%			(133,220	)			(52.6)	%
Other income			5,368				1.0	%			-				-	%
Net income (loss) before income taxes			86,264				16.4	%			(133,220	)			(52.6)	%
Income tax expense			-				-	%			(702	)			(0.3)	%
Net income (loss)		$	86,264				16.4	%		$	(133,922	)			(52.9)	%

 

Revenues. Revenues increased by $272,641, or 107.7%, to $525,874 for the three months ended September 30, 2023, from $253,233 for the three months ended September 30, 2022. Such increase was primarily due to heightened demand for freezer and chiller sales, driven by an up tick in customer capital expenditure during the period.

 

Cost of goods sold. Cost of goods sold increased by $73,684, or 60.3%, to $195,888 for the three months ended September 30, 2023,from $122,204 for the three months ended September 30, 2022. Such increase was primarily due to increased freezer and chillers sales.

 

Gross profit. Our gross profit as a percentage of sales increased to 62.8% for the three months ended September 30, 2023, compared to 51.7% for the three months ended September 30, 2022. The increase in gross profit percentage was primarily due to the increase in freezer and chiller sales, which have better margins than other products.

 

Salaries and wages. Salaries and wages increased by $1,029, or 0.7%, to $155,677 for the three months ended September 30, 2023,from $154,648 for the three months ended September 30, 2022. Such increase was primarily due to increased employee benefit costs.

 

General and administrative. General and administrative expenses decreased by $10,450, or 11.0%, to $84,331 for the three months ended September 30, 2023,from $94,781 for the three months ended September 30, 2022. Such decrease was primarily due to decreased advertising and marketing spend, offset by increased rent expense.

 

Research and development. Research and development expenses decreased by $5,738, or 38.7%, to $9,082 for the three months ended September 30, 2023,from $14,820 for the three months ended September 30, 2022. Such decrease was primarily a result of decreased enhancements to the ultra-cold CBD oil chiller.

 

Net income (loss). As a result of the cumulative effect of the factors described above, our net income was $86,264 for the three months ended September 30, 2023, as compared to a net loss of $133,922 for the three months ended September 30, 2022. Management continues to look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.

 

 

 

Comparison of the Nine Months Ended September 30, 2023 and 2022

 

The following table sets forth key components of our results of operations during the nine months ended September 30, 2023 and 2022, both in dollars and as a percentage of our revenues.

 

		Nine Months Ended September 30,
		2023								2022
		Amount				% of Revenues				Amount				% of Revenues
Revenues		$	891,385				100.0	%		$	1,562,424				100.0	%
Cost of goods sold			373,371				41.9	%			552,314				35.3	%
Gross profit			518,014				58.1	%			1,010,110				64.7	%
Operating Expenses
Salaries and wages			472,521				53.0	%			484,492				31.0	%
General and administrative			272,684				30.6	%			315,734				20.2	%
Research and development			20,528				2.3	%			58,474				3.7	%
Total Operating Expenses			765,733				85.9	%			858,700				55.0	%
Income (loss) from operations			(247,719	)			(27.8)	%			151,410				9.7	%
Other income			5,368				0.6	%			-				-	%
Net income (loss) before income taxes			(242,351	)			(27.2)	%			151,410				9.7	%
Income tax expense			(312	)			(0.0)	%			(702	)			(0.0)	%
Net income (loss)		$	(242,663	)			(27.2)	%		$	150,708				9.6	%

 

Revenues. Revenues decreased by $671,039, or 42.9%, to $891,385 for the nine months ended September 30, 2023, from $1,562,424 for the nine months ended September 30, 2022. Such decrease was primarily due to a reduced demand for freezer and chiller sales, influenced by a decline in customer capital expenditures amid the prevailing economic conditions.

 

Cost of goods sold. Cost of goods sold decreased by $178,943, or 32.4%, to $373,371 for the nine months ended September 30, 2023, from $552,314 for the nine months ended September 30, 2022. Such decrease was primarily due to decreased freezer and chillers sales.

 

Gross profit. Our gross profit as a percentage of sales decreased to 58.1% for the nine months ended September 30, 2023, compared to 64.7% for the nine months ended September 30, 2022. The decrease in gross profit percentage was primarily due to the decrease in freezer and chiller sales, which have better margins than other products, offset by increased product costs.

 

Salaries and wages. Salaries and wages decreased by $11,971, or 2.5%, to $472,521 for the nine months ended September 30, 2023, from $484,492 for the nine months ended September 30, 2022. Such decrease was primarily due to decreased headcount.

 

General and administrative. General and administrative expenses decreased by $43,050, or 13.6%, to $272,684 for the nine months ended September 30, 2023, from $315,734 for the nine months ended September 30, 2022. Such decrease was primarily due to decreased advertising, marketing, and travel expenditures, partially offset by increased public filing costs and rent expense.

 

Research and development. Research and development expenses decreased by $37,946, or 64.9%, to $20,528 for the nine months ended September 30, 2023, from $58,474 for the nine months ended September 30, 2022. Such decrease was primarily a result of decreased enhancements to the ultra-cold CBD oil chiller as a result of the decline in operations.

 

 

 

Net income (loss). As a result of the cumulative effect of the factors described above, our net loss was $242,663 for the nine months ended September 30, 2023, as compared to net income of $150,708 for the nine months ended September 30, 2022. Management continues to look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.

 

Liquidity and Capital Resources

 

As of September 30, 2023 and December 31, 2022, our current assets exceeded current liabilities by $1,955,867 and $2,179,237, respectively, and we had cash and cash equivalents of $1,339,446 and $1,381,927, respectively. To date, we have financed our operations primarily through revenue generated from operations, cash proceeds from financing activities, borrowings, and equity contributions by our shareholders.

 

Summary of Cash Flow

 

The following table provides detailed information about our net cash flow for the period indicated:

 

		Nine Months Ended      September 30,
		2023				2022
Net cash used in operating activities		$	(42,481	)			(149,218	)
Net cash provided by investing activities			-				-
Net cash provided by financing activities			-				-
Net change in cash and cash equivalents			(42,481	)			(149,218	)
Cash and cash equivalents at beginning of period			1,381,927				1,473,924
Cash and cash equivalents at end of period		$	1,339,446			$	1,324,706

 

Net cash used by operating activities was $42,481 and $149,218 for the nine months ended September 30, 2023 and 2022, respectively. Significant factors affecting operating cash flows were primarily a result of increased customer deposits, decreased accounts payable payments, and decreased inventory purchases, offset by decreased accounts receivable and net income during the nine months ended September 30, 2023.

 

We continue working to enhance our on-line ordering system to increase sales, develop the market for our ultra-low temperature freezers, work with current vendors to obtain more favorable pricing, and locate new vendors to provide opportunities to further reduce our cost of goods.

 

We will continue to focus our efforts on our core business activities while pursuing capital resources and evaluating potential future acquisitions which fit within and enhance our core business.

 

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.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our chief executive officer and chief principal officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30, 2023. Based upon, and as of the date of this evaluation, our chief executive officer and principal financial officer determined that there have been no changes in our internal controls over financial reporting as of September 30, 2023 to the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, our disclosure controls and procedures were not effective.

 

PART II

OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

 

ITEM 1A. RISK FACTORS.

 

Not applicable.

 

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

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. Exhibits

 

(a)     Exhibits.

 

 

Exhibit No.	Title of Document	Location if other than attached hereto
3.1	Articles of Incorporation	10-SB Registration Statement*
3.2	Articles of Amendment to Articles of Incorporation	10-SB Registration Statement*
3.3	By-Laws	10-SB Registration Statement*
3.4	Articles of Amendment to Articles of Incorporation	8-K Current Report dated December 31, 2003*
3.5	Articles of Amendment to Articles of Incorporation	8-K Current Report dated December 31, 2003*
3.6	Articles of Amendment	September 30, 2004 10-QSB Quarterly Report*
3.7	By-Laws Amendment	September 30, 2004 10-QSB Quarterly Report*
4.1	Debenture	8-K Current Report dated June 29, 2007*
4.2	Form of Purchasers Warrant	8-K Current Report dated June 29, 2007*
4.3	Registration Rights Agreement	8-K Current Report dated June 29, 2007*
4.4	Form of Placement Agreement	8-K Current Report dated June 29, 2007*
10.1	Securities Purchase Agreement	8-K Current Report dated June 29, 2007*
10.2	Placement Agent Agreement	8-K Current Report dated June 29, 2007*
14	Code of Ethics	December 31, 2003 10-KSB Annual Report*
21	Subsidiaries of the Company	December 31, 2004 10-KSB Annual Report*

 

Exhibit No.	Title of Document	Location if other than attached hereto
31.1	302 Certification of Kim Boyce
31.2	302 Certification of Kim Boyce
32	906 Certification

 

Exhibits

 

Additional Exhibits Incorporated by Reference

*	Reflect California Reorganization	8-K Current Report dated December 31, 2003
*	JMST Acquisition	8-K Current Report dated April 4, 2006
*	Cryomastor Reorganization	8-K Current Report dated September 27, 2006
*	Image Labs Merger Agreement Signing	8-K Current Report dated November 15, 2006
*	All Temp Merger Agreement Signing	8-K Current Report dated November 17, 2006
*	All Temp Merger Agreement Closing	8-KA Current Report dated November 17, 2006
*	Image Labs Merger Agreement Closing	8-KA Current Report dated November 15, 2006

 

* Previously filed and incorporated by reference.

SIGNATURES

 

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

 

Reflect Scientific, Inc.

(Registrant)

 

 

Date: November 9, 2023                                                             By: /s/ Kim Boyce

Kim Boyce, CEO, President and Director

 

Date: November 9, 2023                                                              By: /s/ Tom Tait

Tom Tait, Vice President and Director

 

Date: November 9, 2023                                                              By: /s/ Kim Boyce

Kim Boyce, CFO, Principal Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Kim Boyce certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Reflect Scientific, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Dated: November 9, 2023	Signature: /s/ Kim Boyce
	Kim Boyce
	Chief Executive Officer and Director

 

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Kim Boyce, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Reflect Scientific, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Dated: November 9, 2023	Signature: /s/ Kim Boyce
	Kim Boyce
	Principal Financial Officer and CFO

 

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Quarterly Report of Reflect Scientific, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), We, Kim Boyce, our Chief Executive Officer and director and Kim Boyce, our Chief/Principal Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Dated: November 9, 2023	Signature: /s/ Kim Boyce
	Kim Boyce
	Chief Executive Officer and Director

 

Dated: November 9, 2023	Signature: /s/ Kim Boyce
	Kim Boyce
	Principal Financial Officer and CFO

 

 

 

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