UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
10‑Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 2019
2021
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE 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
(IRS Employer Identification No.)
incorporation or organization)
1266 South 1380 West Orem, Utah 84058
(Address of principal executive offices) (Zip Code)
(801) 226-4100
(Registrant’s telephone number, including area code)
Utah | 87-0642556 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
1266 South 1380 West Orem, Utah 84058 | ||
(Address of principal executive offices) (Zip Code) | ||
(801) 226-4100 | ||
(Registrant’s telephone number, including area code) | ||
Securities registered pursuant to Section 12(b) of the Act:
Title of class registered | Trading symbol(s) | Name of exchange on which registered |
Title of class
Ticker symbol
Name of exchange on which registered
None
None; not applicable.
Indicate by check mark whether the Registrant: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 [X]*
* Registrant has not been subject to the Section 13 filing requirements for the past 90 days.
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 [X] No [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition 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 [X]
Smaller reporting company [X]
Emerging growth company [ ]
Large Accelerated filer | [ ] | Accelerated filer | [ ] | ||
Non-accelerated filer | [X] | Smaller reporting company | [X] | ||
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 complying 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 [X]
1
Indicate by check mark whether the Registrant has submitted electronically on its corporate Web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes [X] No [ ]
Applicable Only to Issuers Involved in Bankruptcy Proceedings During the Preceding Five Years:
Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Not applicable.
Applicable Only to Corporate Issuers:
Indicate the number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date.
Class
Outstanding as of November 18, 2019
79,108,08684,739,086 shares of $0.01 par value common stock on November 18, 2019August 16, 2021
2
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
PART I – FINANCIAL INFORMATION | |||
| 4 | ||
Condensed Consolidated Balance Sheets as of | 5 | ||
Condensed Consolidated Statements of Operations for the three and six months ended | 7 | ||
Condensed Consolidated Statement of Stockholders’ Equity for the three | |||
and | 8 | ||
Condensed Consolidated Statements of Cash Flows for the |
| ||
Notes to Condensed Consolidated Financial Statements |
| ||
Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3: | Quantitative and Qualitative Disclosure about Market Risk |
|
Item 4: | Controls and Procedures |
|
PART II – OTHER INFORMATION
| 19 | ||
|
|
|
| Item 1:Legal Proceedings | 19 | |
Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds |
|
Item 3: | Defaults Upon Senior Securities |
|
Item 4: | Mine Safety Disclosure |
|
| Item 5:Other Information | 20 | |
Item |
|
|
| Signatures | ||
|
| 22 |
|
| |
3
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Reflect Scientific, Inc.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SeptemberJune 30, 2019
2021
The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made. These financial statements should be read in conjunction with the 10-K for the period ended December 31, 2018,2020, accompanying notes, and with the historical financial information of the Company.
4
REFLECT SCIENTIFIC, INC.
Condensed Consolidated Balance Sheets
ASSETS
ASSETS
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
(Unaudited) | ||||||||
CURRENT ASSETS | ||||||||
| ||||||||
Cash | $ | 1,057,707 | $ | 642,542 | ||||
Accounts receivable, net | 206,999 | 340,427 | ||||||
Inventory, net | 524,081 | 438,606 | ||||||
Prepaid assets | 48,979 | 24,134 | ||||||
| ||||||||
Total Current Assets | 1,837,766 | 1,445,709 | ||||||
| ||||||||
OTHER ASSETS | ||||||||
| ||||||||
Operating lease right-of-use assets | 137,526 | 167,641 | ||||||
Goodwill | 60,000 | 60,000 | ||||||
Deposits | 3,100 | 3,100 | ||||||
| ||||||||
Total Other Assets | 200,626 | 230,741 | ||||||
| ||||||||
TOTAL ASSETS | $ | 2,038,392 | $ | 1,676,450 | ||||
|
| September 30, 2019 (Unaudited) |
| December 31, 2018 |
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
Cash | $ | 457,094 | $ | 220,427 |
Accounts receivable, net |
| 40,689 |
| 155,543 |
Inventory, net |
| 182,724 |
| 142,325 |
Prepaid assets |
| 3,510 |
| 3,510 |
|
|
|
|
|
Total Current Assets |
| 684,017 |
| 521,805 |
|
|
|
|
|
FIXED ASSETS, NET |
| 4,781 |
| 7,766 |
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
|
|
|
|
|
Operating lease right-of-use assets |
| 61,137 |
| - |
Goodwill |
| 60,000 |
| 60,000 |
Deposits |
| 3,100 |
| 3,100 |
|
|
|
|
|
TOTAL ASSETS | $ | 813,035 | $ | 592,671 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
REFLECT SCIENTIFIC, INC.
Condensed Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS’ EQUITY
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
(Unaudited) | ||||||||
CURRENT LIABILITIES | ||||||||
| ||||||||
Accounts payable and accrued expense | $ | 59,939 | $ | 70,204 | ||||
Contract liabilities | 206,980 | 113,643 | ||||||
Operating lease liabilities – short term | 58,144 | 58,682 | ||||||
Income taxes payable | 0- | 100 | ||||||
| ||||||||
Total Current Liabilities | 325,063 | 242,629 | ||||||
| ||||||||
| ||||||||
LONG-TERM LIABILITIES | ||||||||
| ||||||||
Operating lease liability – long-term | 81,639 | 109,338 | ||||||
Loan – long-term | 0- | 111,342 | ||||||
| ||||||||
Total Liabilities | 406,702 | 463,309 | ||||||
| ||||||||
STOCKHOLDERS’ EQUITY | ||||||||
| ||||||||
Preferred stock, $0.01 par value, authorized 5,000,000 shares; NaN shares issued and outstanding | 0- | 0- | ||||||
Common stock, $0.01 par value, authorized 100,000,000 shares; 84,739,086 and 84,739,086 issued and outstanding, respectively | 847,390 | 847,390 | ||||||
Additional paid in capital | 20,201,931 | 20,201,931 | ||||||
Accumulated deficit | (19,417,631 | ) | (19,836,180 | ) | ||||
Total Stockholders’ Equity | 1,631,690 | 1,213,141 | ||||||
| ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,038,392 | $ | 1,676,450 | ||||
|
| September 30, 2019 (Unaudited) |
| December 31, 2018 |
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expense | $ | 61,053 | $ | 52,450 |
Short-term line of credit |
| 9,010 |
| 9,878 |
Customer deposits |
| 185,731 |
| 12,500 |
Operating lease liabilities – current portion |
| 48,765 |
| - |
Income taxes payable |
| 100 |
| 100 |
|
|
|
|
|
Total Current Liabilities |
| 304,659 |
| 74,928 |
|
|
|
|
|
LONG-TERM LIABILITIES |
|
|
|
|
|
|
|
|
|
Operating lease liabilities |
| 12,877 |
| - |
|
|
|
|
|
Total Liabilities |
| 317,536 |
| 74,928 |
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, authorized 5,000,000 shares; No shares issued and outstanding |
| - |
| - |
Common stock, $0.01 par value, authorized 100,000,000 shares; 79,108,086 and 79,108,086 issued and outstanding, respectively |
| 791,081 |
| 791,081 |
Additional paid in capital |
| 20,027,369 |
| 20,027,369 |
Accumulated deficit |
| (20,322,951) |
| (20,300,707) |
|
|
|
|
|
Total Stockholders’ Equity |
| 495,499 |
| 517,743 |
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 813,035 | $ | 592,671 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
REFLECT SCIENTIFIC, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
REVENUES | $ | 366,431 | $ | 359,151 | $ | 977,312 | $ | 1,119,491 |
| |||
|
|
|
|
|
|
|
|
|
| |||
COST OF GOODS SOLD |
| 101,366 |
| 151,178 |
| 300,901 |
| 381,015 |
| |||
|
|
|
|
|
|
|
|
|
| |||
GROSS PROFIT |
| 265,065 |
| 207,973 |
| 676,411 |
| 738,476 |
| |||
|
|
|
|
|
|
|
|
|
| |||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
| |||
Salaries and wages |
| 113,611 |
| 128,339 |
| 343,924 |
| 400,873 |
| |||
Rent expense |
| 8,977 |
| 6,379 |
| 28,173 |
| 27,830 |
| |||
Research and development expense |
| 75,417 |
| 34,542 |
| 105,040 |
| 49,447 |
| |||
General and administrative expense |
| 63,823 |
| 80,832 |
| 220,935 |
| 421,469 |
| |||
Total Operating Expenses |
| 261,828 |
| 250,090 |
| 698,072 |
| 899,619 |
| |||
|
|
|
|
|
|
|
|
|
| |||
OPERATING INCOME (LOSS) |
| 3,237 |
| (42,117) |
| (21,661) |
| (161,143) |
| |||
|
|
|
|
|
|
|
|
|
| |||
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
| |||
Total Other Income (Expenses) |
| (1,716) |
| (456) |
| (583)
|
| (456)
|
| |||
|
|
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) BEFORE TAXES |
| 1,521 |
| (42,573) |
| (22,244) |
| (161,599) |
| |||
|
|
|
|
|
|
|
|
|
| |||
Income tax benefit (expense) |
| - |
| - |
| -
|
| -
|
| |||
|
|
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) | $ | 1,521 | $ | (42,573) | $ | (22,244) | $ | (161,599) |
| |||
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) PER SHARE – BASIC AND DILUTED | $ | 0.00 | $ | (0.00) | $ | (0.00) | $ | (0.00) |
| |||
|
|
|
|
|
|
|
|
|
| |||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED |
| 79,108,086 |
| 76,512,086 |
| 79,108,086 |
| 73,959,705 |
| |||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 | ||||||
REVENUES | $ | 707,133 | $ | 502,906 | $ | 1,269,495 | $ | 1,486,714 | ||||||||
| ||||||||||||||||
COST OF GOODS SOLD | 235,179 | 122,538 | 378,974 | 593,169 | ||||||||||||
| ||||||||||||||||
GROSS PROFIT | 471,954 | 380,368 | 890,521 | 893,545 | ||||||||||||
| ||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Salaries and wages | 146,116 | 212,119 | 282,720 | 328,910 | ||||||||||||
Research and development expense | 19,456 | 76,772 | 28,153 | 189,856 | ||||||||||||
General and administrative expense | 135,601 | 116,920 | 272,364 | 234,506 | ||||||||||||
Total Operating Expenses | 301,173 | 405,811 | 583,237 | 753,272 | ||||||||||||
| ||||||||||||||||
OPERATING INCOME (LOSS) | 170,781 | (25,443) | 307,284 | 140,273 | ||||||||||||
| ||||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Gain on forgiveness of SBA loan | 0- | 0- | 111,265 | 0- | ||||||||||||
Interest expense | 0- | (11) | 0- | (132) | ||||||||||||
Total Other Income (Expenses) | 0- | (11) | 111,265 | (132) | ||||||||||||
| ||||||||||||||||
NET INCOME (LOSS) BEFORE TAXES | 170,781 | (25,454) | 418,549 | 140,141 | ||||||||||||
| ||||||||||||||||
Income tax benefit (expense) | 0- | 0- | 0- | 0- | ||||||||||||
| ||||||||||||||||
NET INCOME (LOSS) | $ | 170,781 | $ | (25,454) | $ | 418,549 | $ | 140,141 | ||||||||
| ||||||||||||||||
NET INCOME (LOSS) PER SHARE – BASIC AND DILUTED | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
| ||||||||||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | 84,739,086 | 84,739,086 | 84,739,086 | 84,739,086 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
REFLECT SCIENIFIC, INC.
Condensed Consolidated Statements of Shareholders’Stockholders’ Equity (Deficit)
For the NineThree and Six Months Ended SeptemberJune 30, 20192021 and 2020
Additional | |||||||||||||||||||
Common Stock | Paid-In | Accumulated | |||||||||||||||||
Shares | Amount | Capital | Deficit | Total | |||||||||||||||
Balance, December 31, 2020 | 84,739,086 | $ | 847,390 | $ | 20,201,931 | $ | (19,836,180) | $ | 1,213,141 | ||||||||||
| |||||||||||||||||||
Net income for the three-month period ended March 31, 2021 | - | - | - | 247,768 | 247,768 | ||||||||||||||
| |||||||||||||||||||
Balance, March 31, 2021 | 84,739,086 | 847,390 | 20,201,931 | (19,588,412) | 1,460,909 | ||||||||||||||
| |||||||||||||||||||
Net income for the three-month period ended June 30, 2021 | - | - | - | 170,781 | 170,781 | ||||||||||||||
| |||||||||||||||||||
Balance, June 30, 2021 | 84,739,086 | $ | 847,390 | $ | 20,201,931 | $ | (19,417,631) | $ | 1,631,690 | ||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total | |||
Shares | Amount |
| ||||
Balance, December 31, 2018 | 79,108,086 | $ 791,081 | $ 20,027,369 | $ (20,300,707) | $ 517,743 | |
|
|
|
|
|
| |
Net loss for the three-month period ended March 31, 2019 | - | - | - | (5,535) | (5,535) | |
|
|
|
|
|
| |
Balance, March 31, 2019 | 79,108,086 | 791,081 | 20,027,369 | (20,306,242) | 512,208 | |
|
|
|
|
|
| |
Net loss for the three-month period ended June 30, 2019 | - | - | - | (18,230) | (18,230) | |
|
|
|
|
|
| |
Balance, June 30, 2019 | 79,108,086 | $ 791,081 | $ 29,027,369 | $ (20,324,472) | $ 493,978 | |
|
|
|
|
|
| |
Net income for the three-month period ended September 30, 2019 | - | - | - | 1,521 | 1,521 | |
|
|
|
|
|
| |
Balance, September 30, 2019 | 79,108,086 | $ 791,081 | $ 20,027,369 | $ (20,322,951) | $495,499 | |
Additional | |||||||||||||||||||
Common Stock | Paid-In | Accumulated | |||||||||||||||||
Shares | Amount | Capital | Deficit | Total | |||||||||||||||
Balance, December 31, 2019 | 84,739,086 | $ | 847,390 | $ | 20,201,931 | $ | (20,496,295 | ) | $ | 553,026 | |||||||||
| |||||||||||||||||||
Net income for the three-month period ended March 31, 2020 | - | - | - | 165,595 | 165,595 | ||||||||||||||
| |||||||||||||||||||
Balance, March 31, 2020 | 84,739,086 | 847,390 | 20,201,931 | (20,330,700) | 718,621 | ||||||||||||||
| |||||||||||||||||||
Net loss for the three-month period ended June 30, 2020 | - | - | - | (25,454) | (25,454) | ||||||||||||||
| |||||||||||||||||||
Balance, June 30, 2020 | 84,739,086 | $ | 847,390 | $ | 20,201,931 | $ | (20,356,154 | ) | $ | 693,167 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
REFLECT SCIENTIFIC, INC.
REFLECT SCIENIFIC, INC.
Condensed Consolidated Statements of Shareholders’ Equity (Deficit)Cash Flows
For the Nine Months Ended September 30, 2018(Unaudited)
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total | ||
Shares | Amount |
| ||||
Balance, December 31, 2017 | 71,312,086 | $ 713,121 | $ 19,793,489 | $(20,051,184) | $ 455,426 | |
|
|
|
|
|
| |
Net income for the three-month period ended March 31, 2018 | - | - | - | 98,721 | 98,721 | |
|
|
|
|
|
| |
Balance, March 31, 2018 | 71,312,086 | 713,121 | 19,793,489 | (19,952,463) | 554,147 | |
|
|
|
|
|
| |
Stock issued for consulting services | 4,200,000 | 42,000 | 126,000 | - | 168,000 | |
Stock issued for compensation | 1,000,000 | 10,000 | 30,000 | - | 40,000 | |
Net loss for the three-month period ended June 30, 2018 | - | - | - | (217,747) | (217,747) | |
|
|
|
|
|
| |
Balance, June 30, 2018 | 76,512,086 | $ 765,121 | $19,949,489 | $(20,170,210) | $ 544,400 | |
|
|
|
|
|
| |
Net loss for the three-month period ended September 30, 2018 | - | - | - | (42,573) | (42,573) | |
|
|
|
|
|
| |
Balance, September 30, 2018 | 76,512,086 | $ 765,121 | $ 19,949,489 | $ (20,212,783) | $ 501,827 | |
For the Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
| ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 418,549 | $ | 140,141 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 0- | 1,990 | ||||||
Amortization of operating lease right-of-use asset | 30,115 | 32,935 | ||||||
Gain on forgiveness of SBA loan | (111,265) | 0- | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 136,428 | 8,382 | ||||||
Inventory | (85,475) | (53,923) | ||||||
Prepaid expenses | (27,845) | 20,973 | ||||||
Accounts payable and accrued expenses | (10,442) | 24,944 | ||||||
Operating lease liabilities | (28,237) | (33,396) | ||||||
Customer deposits | 93,337 | (225,409) | ||||||
Net Cash provided by (used in) Operating Activities | 415,165 | (83,363) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | 0- | 0- | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Net funds received from PPP loan | 0- | 121,524 | ||||||
Net funds received from line of credit | 0- | (8,738 | ) | |||||
Net cash provided by financing activities | 0- | 112,786 | ||||||
| ||||||||
NET CHANGE IN CASH | 415,165 | 29,423 | ||||||
| ||||||||
CASH AT BEGINNING OF PERIOD | 642,542 | 555,156 | ||||||
CASH AT END OF PERIOD | $ | 1,057,707 | $ | 584,579 | ||||
| ||||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash Paid For: | ||||||||
Interest | $ | 0- | $ | 588 | ||||
Income taxes | $ | 0- | $ | 0- | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
REFLECT SCIENTIFIC, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the
Nine Months Ended
September 30,
|
| 2019 |
| 2018 |
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
Net loss | $ | (22,244) | $ | (161,599) |
Adjustments to reconcile net income to net cash |
|
|
|
|
used in operating activities: |
|
|
|
|
Common stock issued for services |
| - |
| 158,322 |
Stock-based compensation |
| - |
| 40,000 |
Depreciation |
| 2,985 |
| - |
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
| 114,854 |
| (67,554) |
Inventory |
| (40,399) |
| 12,542 |
Prepaid expenses |
| - |
| (11,159) |
Accounts payable and accrued expenses |
| 8,603 |
| 20,860 |
Operating lease right-of-use asset |
| 33,950 |
| - |
Operating lease liabilities |
| (34,445) |
| - |
Customer deposits |
| 173,231 |
| (55,783) |
Net Cash provided by (used in) Operating Activities |
| 237,535 |
| (67,371) |
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
Payments on short-term line of credit |
| (868) |
| - |
Net Cash used in investing Activities |
| (868) |
| - |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
Net funds received from line of credit |
| - |
| 10,177 |
Net Cash provided by Financing Activities |
| - |
| 10,177 |
NET CHANGE IN CASH |
| 236,667 |
| (57,194) |
CASH AT BEGINNING OF PERIOD |
| 220,427 |
| 235,858 |
CASH AT END OF PERIOD | $ | 457,094 | $ | 178,664 |
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
Cash Paid For: |
|
|
|
|
Interest | $ | 588 | $ | 203 |
Income taxes | $ | - | $ | - |
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
Operating lease right of use assets obtained for operating lease liabilities | $ | 95,087 | $ | - |
The accompanying notes are an integral part of these condensed consolidated financial statements.
REFLECT SCIENTIFIC, INC.
Notes to the Condensed Consolidated Financial Statements
SeptemberJune 30, 20192021
(Unaudited)
NOTE 1 -
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to accounting principles generally accepted in the United States of America. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission. The information furnished in the interim condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed consolidated financial statements be read in conjunction with the Company’s most recent audited consolidated financial statements and notes thereto included in its December 31, 20182020 financial statements. Operating results for the three and ninesix months ended SeptemberJune 30, 20192021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2021.
NOTE 2 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND LINE OF BUSINESS:
Cole,Reflect Scientific, Inc. (the Company) was incorporated under the laws of the State of Utah on November 3, 1999.1999 as Cole, Inc. The Company was organized to engage in any lawful activity for which corporations may be organized under the Utah Revised Business Corporation Act. On December 30, 2003 the Company changed its name to Reflect Scientific, Inc.
Reflect Scientific designs, develops and sells scientific equipment for the Life Science and Manufacturing industries. The Company’s business activities include the manufacture and distribution of unique laboratory consumables and disposables such as filtration and purification products, customized sample handling vials, electronic wiring assemblies, high temperature silicone, graphite and vespel/graphite sealing components for use by original equipment manufacturers (“OEM”) in the chemical analysis industries, primarily in the field of gas/liquid chromatography.
SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:The accompanying consolidated financial statements include the accounts of Reflect Scientific, Inc. and its wholly owned subsidiary, Cryometrix. Intercompany transactions and accounts have been eliminated in consolidation.
10
REFLECT SCIENTIFIC, INC.
Notes to the Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)
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 at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
REVENUE RECOGNITION.
RECOGNITION.
We have applied the new revenue standard to all contracts from the date of initial application. We recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon shipment of goods or, with our freezers, upon final acceptance of the unit by the customer, in accordance with the terms of each contract with the customer.
A part of our customer base is made up of international customers. The table below allocates revenue between domestic and international customers.
For the Three Months Ended | For the Three Months Ended | |||||||||||
June 30, 2021 | June 30, 2020 | |||||||||||
Segments | Total | Total | ||||||||||
Domestic | $ | 356,855 | $ | 356,855 | $ | 232,661 | $ | 232,661 | ||||
International | 350,278 | 318,694 | 270,245 | 270,245 | ||||||||
$ | 707,133 | $ | 707,133 | $ | 502,906 | $ | 502,906 | |||||
| ||||||||||||
| ||||||||||||
Components | $ | 213,740 | $ | 213,740 | $ | 271,406 | $ | 271,406 | ||||
Equipment | 493,393 | 493,393 | 231,500 | 231,500 | ||||||||
$ | 707,133 | $ | 707,133 | $ | 502,906 | $ | 502,906 | |||||
For the Six Months Ended | For the Six Months Ended | |||||||||||
June 30, 2021 | June 30, 2020 | |||||||||||
Segments | Total | Total | ||||||||||
Domestic | $ | 600,448 | $ | 600,448 | $ | 1,150,077 | $ | 1,150,077 | ||||
International | 669,047 | 669,047 | 336,637 | 336,637 | ||||||||
$ | 1,269,495 | $ | 1,269,495 | $ | 1,486,714 | $ | 1,486,714 | |||||
| ||||||||||||
| ||||||||||||
Components | $ | 442,273 | $ | 442,273 | $ | 463,414 | $ | 463,414 | ||||
Equipment | 827,222 | 827,222 | 1,023,300 | 1,023,300 | ||||||||
$ | 1,269,495 | $ | 1,269,495 | $ | 1,486,714 | $ | 1,486,714 | |||||
11
|
|
| September 30, 2019 |
|
|
| September 30, 2018 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
|
|
| Consumer | Long-term |
|
|
|
| Consumer | Long-term |
| |||||||||||
Segments |
|
| Products | Contract | Total |
|
|
| Products | Contract | Total | |||||||||||
Domestic |
| $ | 735,566 | - | 735,566 |
|
| $ | 845,216 |
| 845,216 | |||||||||||
International |
|
| 241,746 |
| 241,746 |
|
|
| 274,275 |
| 274,275 | |||||||||||
|
| $ | 977,312 |
| 977,312 |
|
| $ | 1,119,491 |
| 1,119,491 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Components |
|
| 682,537 | - | 682,537 |
|
|
| 792,376 | - | 792,376 | |||||||||||
Engineering Services |
|
| 229,425 |
| 229,425 |
|
|
| 327,115 |
| 327,115 | |||||||||||
|
| $ | 977,312 |
| 977,312 |
|
| $ | 1,119,491 |
| 1,119,491 | |||||||||||
REFLECT SCIENTIFIC, INC.
Notes to the Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)
ACCOUNTS RECEIVABLE: Accounts receivables are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. At SeptemberJune 30, 20192021 and December 31, 2018,2020, the Company had accounts receivable, net of the allowance, of $40,689$206,999 and $155,543,$340,427, respectively. At SeptemberJune 30, 20192021 and December 31, 2018,2020, the allowance for doubtful accounts was $4,000 and $4,000, respectively.
INVENTORY:
Inventories are presented net of an allowance for obsolescence and are stated at the lower of cost or market value based upon the average cost inventory method. The Company’s inventory consists of parts for scientific vial kits, refrigerant gases, components for detectors and ultra-low temperature freezers which it builds and other scientific items. At SeptemberJune 30, 20192021 and December 31, 2018,2020, the Company had inventory consisting of raw materials and finished goods, net of allowance, of $182,724$524,081 and $142,325,$438,606, respectively. Of the total raw materials represented $6,425 at June 30, 2021 and $10,767 at December 31, 2020. At SeptemberJune 30, 20192021 and December 31, 2018,2020, the allowance for obsolescence was $86,339$106,044 and 86,339,$106,044, respectively.
INTANGIBLE ASSETS: Costs to obtain or develop patents are capitalized and amortized over the life of the patents. Patents are amortized from the date the Company acquires or is awarded the patent over their estimated useful lives, which range from 5 to 15 years. An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows. We perform an impairment analysis on an annual basis. The Company’s analysis did not indicate any impairment of intangible assets as of the impairment analysis conducted December 31, 2020. As of SeptemberJune 30, 20192021 and December 31, 2018,2020, all of the intangible assets were fully amortized.
GOODWILL: Goodwill represents the excess of the Company’s acquisition cost over the fair value of net assets of the acquisition. Goodwill is not amortized, but is tested for impairment annually, or when a triggering event occurs. As described in ACS 360, the Company has adopted the goodwill impairment analysis that includes quantitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. A fair-value-based test is applied at the overall Company level. The test compares the estimated fair value of the Company at the date of the analysis to the carrying value of its net assets. The analysis also requires various judgments and estimates, including general and macroeconomic conditions, industry and the Company’s targeted market conditions, as well as relevant entity-specific events, such as a change in the market for the Company’s products and services. After considering the qualitative factors that would indicate a need for interim impairment of goodwill and applying the two-step process described in ASC 360, management has determined that the value of Company’s assets is not more likely than not less than the carrying value of the Company including goodwill, and that no impairment charge needs be recognized during the reporting periods.
REFLECT SCIENTIFIC, INC.
Notes to the Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)
LEASES: In February of 2016, the Financial Accounting Standards Board ("FASB"The Company, in accordance with ASC 842, accounts for leases as right-of-use assets (“ROU”) issued Accounting Standards Update No. 2016-02 - Leases (Topic 842), which significantly amends the way companies are required to account for leases. Under the updated leasing guidance, some leases that did not have to be reported previously are now required to be presented as an asset and liabilitylease liabilities on the balance sheet. In addition, for certain leases, what was previously classified as an operating expense must now be allocated between amortization expense and interest expense. The Company adopted this updateelected not to separate lease and non-lease components, but to treat as single lease costs. We estimate our incremental borrowing rate, which is defined as the interest rate we would pay to borrow on a collateralized basis, considering such factors as length of January 1, 2019 usinglease term and the modified retrospective transition method. Prior periods have not been restated. Upon implementation,risks of the Company recognized an initial right-of-useeconomic environment in which the leased asset of $95,087operates. The lease term used to calculate ROU assets and lease liability of $95,087. Dueliabilities only includes renewal and termination options that are deemed reasonably certain to the simplistic nature of the Company's leases, no change to retained earnings was required. See Note 4 for further details.be exercised.
12
RESEARCH AND DEVELOPMENT EXPENSE - The Company accounts for research and development costs in accordance with the Financial Accounting Standards Board's Accounting Standard Codification Topic 730 “Research and Development". Under ASC 730, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.
NET INCOME (LOSS) PER SHARE: The computation of basic profit and loss per share of common stock is based on the weighted average number of shares outstanding during the period. Diluted EPS is computed by dividing net earnings by the weighted-average number of common shares and dilutive common stock equivalents during the period. Common stock equivalents are not used in calculating dilutive EPS when their inclusion would be anti-dilutive. At SeptemberJune 30, 20192021 and 2018,2020, the Company had no common stock equivalents.
RECENT ACCOUNTING PRONOUNCEMENTS: In March 2019 the Financial Accounting Standards Board issued ASU No. 2019-01 “Leases”, a clarification of the guidance issued in February 2016, ASU No. 2016-02, “Leases” Topic 842. The Company adopted this standard effective January 2019. The adoption of this standard resulted in recording right-of-use assets and lease liabilities on its balance sheet. The adoption was made on a prospective basis and, as a result, prior period amounts were not adjusted to reflect the impact of the updated guidance. The adoption of this new accounting guidance did not have a significant impact on our financial statements.
June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based
REFLECT SCIENTIFIC, INC.
Notes to the Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)
payments granted to employees. This standard became effective for us on January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.
PRONOUNCEMENTS: The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position and cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its current or future earnings or operations.
NOTE 3 - GOING CONCERN
The Company continues to accumulate significant operating losses and has an accumulated deficit of $20,322,951 at September 30, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Management has taken a number of actions to reduce expenses. Management is seeking additional funding through the capital markets to facilitate the settlement of the remaining debentures, as well as to provide operating capital for its operations. However, there is no assurance that additional funding will be available on acceptable terms, if at all.
NOTE 4 - LEASES
We adopted ASC 842 using the modified retrospective approach, which allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019. As a result, prior period presented before this adoption are not adjusted to reflect the effect of this new standard.
We have operating leases for our office and warehouse facility as well as for an automobile. We used the lease termination dates of November 30, 20202023 for the building and July 7, 2021 for the automobile to calculate right of use (“ROU”) assets and lease liabilities.
The following was included in our consolidated condensed balance sheet as of SeptemberJune 30, 2019:2021:
Leases
As of September 30, 2019
Assets
ROU operating lease assets
$ 61,137
Liabilities
Operating lease liabilities – current portion
$ 48,765
Operating lease liabilities
12,877
Total operating lease liabilities $ 61,642
Leases | As of June 30, 2021 | |||
Assets | ||||
ROU operating lease assets | $ | 137,526 | ||
| ||||
Liabilities | ||||
Operating lease liabilities – current portion | $ | 58,144 | ||
Operating lease liabilities | 81,639 | |||
Total operating lease liabilities | $ | 139,783 | ||
REFLECT SCIENTIFIC, INC.
Notes to the Condensed Consolidated Financial Statements
September 30, 2019
(Unaudited)
We recognize lease expense on a straight-line basis over the term of the lease.
Six Months Ended | ||||
Lease Cost | June 30, 2021 | |||
Operating lease cost | ||||
Administrative expenses | $ | 3,774 | ||
Rent expense | 26,701 | |||
Total operating lease cost | $ | 30,475 | ||
Nine Months Ended
Lease Cost13
September 30, 2019
Operating lease cost
Administrative expenses
$ 5,754
Rent expense
28,173
Total operating lease cost
$ 33,927
Our building lease does not specify an implicit rate of interest. Therefore, we estimate our incremental borrowing rate, which is defined as the interest rate we would pay to borrow on a collateralized basis, considering such factors as length of lease term and the risks of the economic environment in which the leased asset operates. As of SeptemberJune 30, 2019,2021, the following disclosures for remaining lease term and incremental borrowing rates were applicable:
Six Months Ended | ||
Supplemental Disclosures | June 30, 2021 | |
Weighted average remaining lease term | 2.42 years | |
Weighted average discount rate | 5.24% |
NOTE 4 - INVENTORY
Nine Months Ended
Supplemental Disclosures
SeptemberInventories are presented net of an allowance for obsolescence and are stated at the lower of cost or market value based upon the average cost inventory method. The Company’s inventory consists of parts for scientific vial kits, refrigerant gases, components for detectors and ultra-low temperature freezers which it builds and other scientific items. At June 30, 2019
Weighted average remaining lease term
1.29 years
Weighted average discount rate
7%
As of September 30, 2019, maturities of operating lease liabilities were the following:
Amounts under
Years ended2021 and December 31, 2020, the Company had inventory consisting of finished goods and raw materials, net of allowance, of $524,081 and $438,606, respectively. At June 30, 2021 and December 31, 2020, the allowance for obsolescence was $106,044 and $106,044, respectively.
operating leasesNOTE 5 - NOTE PAYABLE
Remaining 2019On April 5, 2020, we received approval from our bank Chase Bank for the Paycheck Protection Program Loan (“PPP”). The terms of the loan were for 24 months at 0.98% per annum. The Company received notification that the PPP loan was fully forgiven by the Small Business Administration on February 7, 2021, both as to principal and interest, resulting in a $111,265 gain.
$ 12,749
2020
48,160
2021
3,774
Total lease payments
64,682
Less imputed interest
(3,040)
Total
$ 61,642
NOTE 56 - SUBSEQUENT EVENTS
In accordance with ASC 855-10 management reviewed all material events through the date of this report. There are no material subsequent events to report.
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward-looking statements made by or on behalf of our Company.Reflect Scientific, Inc., a Utah corporation (the “Company”). Our Company and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this AnnualQuarterly Report and other filings with the Securities and Exchange Commission (the “SEC”) and in reports to our Company’s stockholders. Management believes that all statements that express expectations and projections with respect to future matters, as well as from developments beyond our Company’s control including changes in global economic conditions are forward-looking statements within the meaning of the Act. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and business performance. There can be no assurance however, that management’s expectations will necessarily come to pass. Factors that may affect forward- looking statements include a wide range of factors that could materially affect future developments and performance, including the following:
| · | 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. |
·
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.
This list of factors that may affect future performance and the accuracy of forward-looking statements are illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited Financial Statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. The Company has adopted the new revenue recognition and lease accounting standards. The Company believes there have been no other significant changes during the nine-monthsix-month period ended SeptemberJune 30, 2019,2021, to the items disclosed as significant accounting policies in management's Notes to the Financial Statements in the Company's Annual ReportRegistration Statement on Form 10-K for10 filed with the year ended December 31, 2018.
SEC on March 30, 2021, and amendments thereto.
15
Plan of Operation and Business Growth
Our efforts continue to be focused on increasing the sales of our life science consumables while, at the same time, working to enhance the design of our liquid nitrogen refrigeration products. Of those liquid nitrogen refrigeration products, the ultra-low temperature freezer is receiving highest priority. We have received positive feedback of the improvements and enhancements made to the design of the ultra-low temperature freezer. We also continue work on the refrigerated trailer, or “reefer.”
We are receiving considerable interest in our latest product introduction, which is an ultra-cold chiller used in the manufacture of CBD oil. This unit improves the efficiency of the manufacturing process and enables the production of a higher purity in the CBD oil produced.
Concurrent with the development and commercialization of the above products, we have completed our on-line catalog and are making progress in enrolling new distributors for our consumable products.
An analysis of operating results for the three months ended SeptemberJune 30, 20192021 and 20182020 follows.
Results of Operations
Three Months Ended SeptemberJune 30, 20192021 and 20182020
|
| For the three months ended September 30, | For the three months ended June 30, | |||||||||
|
| 2019 |
| 2018 |
| Change | 2021 | 2020 | Change | |||
Revenues | $ | 366,431 | $ | 359,151 | $ | 7,280 | $ | 707,133 | $ | 502,906 | $ | 204,227 |
Cost of goods sold |
| 101,366 |
| 151,178 |
| (49,812) | 235,179 | 122,538 | 112,641 | |||
Gross profit |
| 265,065 |
| 207,973 |
| 57,092 | 471,954 | 380,368 | 91,586 | |||
Operating expenses |
| 261,828 |
| 250,090 |
| 11,738 | 301,173 | 405,811 | (104,638) | |||
Other expense |
| 1,716 |
| 456 |
| 1,260 | - | 11 | (11) | |||
Net profit (loss) | $ | 1,521 | $ | (42,573) | $ | 44,094 | ||||||
| Net income (loss) | $ | 170,781 | $ | (25,454) | $ | 196,235 | ||||||
Revenues increased during the three-month period ended SeptemberJune 30, 2019,2021, to $366,431$707,133 from $359,151$502,906 for the three-month period ended SeptemberJune 30, 2018,2020, an increase of $7,280$204,227. The increase results primarily fromis attributable to the increased salesales of ultra-low temperature freezers. freezers and chillers. We are continuing work to increase our market penetration in the ultra-low temperature freezer market and in the ultra-cold chiller.
Cost of goods decreasedincreased in the quarter ending SeptemberJune 30, 2019,2021, as compared to SeptemberJune 30, 2018,2020, to $101,366$235,179 from $151,178, a decrease$122,538, an increase of $49,812.$112,641. We realized a gross profit percentage of 72%67% for the three months ended SeptemberJune 30, 2019,2021, compared to 58%76% for the three months ended SeptemberJune 30, 2018.2020. The gross profit percentage is dependent on the mix of product sales, which varies from quarter to quarter. The increasesincreased sale of freezers and chillers during this2021 period providedresulted in the higherlower margins. We continue to actively work to obtain more favorable pricing from our vendors in order to increase the margins realized on all product lines.
16
Operating expenses increased to $261,828 inwere $301,173 for the three months ended SeptemberJune 30, 2019, an increase2021, a decrease of
$11,738 $104,638 over the expenses of $250,090$405,811 incurred in the three-month period ended SeptemberJune 30, 2018.2020. The increasedecrease results primarily from small increasesthe $57,316 decrease in research and development costs and a number of expense accounts.$66,003 reduction in salaries and wages, offset by higher general and administrative expenses. While we continue to monitor and minimize operating costs, we also realize that certain levels of expenditures are required in order to commercialize the products and achieve market penetration.
Research and development expenses for the three months ended SeptemberJune 30, 20192021 were $75,417, an increase$19,456, a decrease of $40,875$57,316 in expenses for the same period in 2018, due to2020, as the development work on the ultra-cold CBD oil chiller. R&D expenses are expectedchiller was minimized.
Salaries and wages for the three months ended June 30, 2021 were reduced by $66,003 as compared to remain above the prior year level as work continues to commercialize this unit.expense for the three month period ended June 30, 2020. The termination of two employees resulted in the lower expense level.
Net income for the three-month period ended SeptemberJune 30, 20192021 was $1,521,$170,781, which compares to a net loss of $42,573$25,454 for the three-month period ended SeptemberJune 30, 2018.2020. Management continues to look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.
The net income of $1,521$170,781 for the three-month period ended SeptemberJune 30, 20192021 represents income of $0.00 per share. This compares to thea net loss of $42,573,$25,454, or loss of $0.00 per share, for the three months ended SeptemberJune 30, 2018.2020.
NineSix Months Ended SeptemberJune 30, 20192021 and 20182020
|
| For the nine months ended September 30, | For the six months ended June 30, | |||||||||
|
| 2019 |
| 2018 |
| Change | 2021 | 2020 | Change | |||
Revenues | $ | 977,312 | $ | 1,119,491 | $ | (142,179) | $ | 1,269,495 | $ | 1,486,714 | $ | (217,219) |
Cost of goods sold |
| 300,901 |
| 381,015 |
| (80,114) | 378,974 | 593,169 | (214,195) | |||
Gross profit |
| 676,411 |
| 738,476 |
| (62,065) | 890,521 | 893,545 | (3,024) | |||
Operating expenses |
| 698,072 |
| 899,619 |
| (201,547) | 583,237 | 753,272 | (170,035) | |||
Other income (expense) |
| 583 |
| 456 |
| 127 |
111,265 |
(132) |
111,397 | |||
Net loss | $ | (22,244) | $ | (161,599) | $ | (139,355) | ||||||
| Net profit (loss) | $ | 418,549 | $ | 140,141 | $ | 278,408 | ||||||
Revenues decreased during the nine monthssix-month period ended SeptemberJune 30, 2019,2021, to $977,312$1,269,495 from $1,119,491$1,486,714 for the nine monthssix-month period ended SeptemberJune 30, 2018,2020, a decrease of $142,179.$217,219. The decrease results primarily lower sales of specialty lab supplies.is attributable to the additional chillers shipped in 2020. We are continuing work to increase our sales of specialty lab products.market penetration in the ultra-low temperature freezer market and in the ultra-cold chiller.
Cost of goods decreased in the quartersix months ending SeptemberJune 30, 2019,2021, as compared to SeptemberJune 30, 2018,2020, to $300,901$378,974 from $381,015$593,169, a decrease of $80,114.$214,195. We realized a gross profit percentage of 69%70% for the ninesix months ended SeptemberJune 30, 2019,2021, compared to 69%60% for the ninesix months ended SeptemberJune 30, 2018.2020. The gross profit percentage is dependent on the mix of product sales, which varies from quarter to quarter. Work has been done to reduce the component and assembly costs of the freezers and chillers. We continue to actively
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work to obtain more favorable pricing from our vendors in order to increase the margins realized on all product lines.
Operating expenses decreased to $698,072 inwere $583,237 for the ninesix months ended SeptemberJune 30, 2019,2021, a decrease of $201,547$170,035 over the expenses of $899,619$753,272 incurred in the nine-monthsix-month period ended SeptemberJune 30, 2018.2020. The decrease results primarily from stock-based consulting feesthe $161,703 decrease in research and stock-based compensation paiddevelopment costs and a $46,190 decrease in 2018.salaries and wages. While we continue to monitor and minimize operating costs, we also realize that certain levels of expenditures are required in order to commercialize the products and achieve market penetration.
Research and development expenses for the ninesix months ended SeptemberJune 30, 20192021 were $105,040, an increase$28,153, a decrease of $55,593$161,703 in expenses for the same period in 2018, due to2020, as the development work on the ultra-cold CBD oil chiller. R&Dchiller was minimized.
Operating expenses are expectedwere also reduced due to remain abovelower salaries and wages in the prior year levelsix month period ended June 30, 2021 as work continuescompared to commercialize this unit.2020. The $46,190 reduction resulted from the reduction of two full-time employees.
The net lossNet income for the nine-monthsix-month period ended SeptemberJune 30, 20192021 was $22,244,$418,549, which compares to a net lossincome of $161,599$140,141 for the nine-monthsix-month period ended SeptemberJune 30, 2018.2020. Management continues to look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.
The net lossincome of $22,244$418,549 for the nine-monthsix-month period ended SeptemberJune 30, 20192021 represents a lossincome of $0.00 per share. This compares to the net lossincome of $161,599,$140,141, or income of $0.00 per share, for the ninesix months ended SeptemberJune 30, 2018.2020.
Seasonality and Cyclicality
We do not believe our business is cyclical.
Liquidity and Capital Resources
Our cash resources at SeptemberJune 30, 2019,2021, were $457,094,$1,057,707, with accounts receivable of $40,689,$206,999, net of allowance, and inventory of $182,724,$524,081, net of allowance. Our working capital on SeptemberJune 30, 2019,2021, was $379,358.$1,512,703. Working capital on December 31, 20182020 was $446,877.$1,203,080.
For the nine-monthsix-month period ended SeptemberJune 30, 2019,2021, net cash provided by operating activities was $237,535$415,165, which compares to $67,371is an improvement of $498,528 over the $83,363 net cash used inby operating activities for the nine-monthsix-month period ended SeptemberJune 30, 2018. 2020.
Off-Balance Sheet Arrangements
None.
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Item 3. Quantitative and Qualitative Disclosure about Market Risk
Not required.
Item 4. Controls and Procedures
| (a) | Evaluation of Disclosure Controls and Procedures. |
(a)
Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer and Principal Financial Officer concluded that information required to be disclosed is recorded, processed, summarized and reported within the specified periods, and is accumulated and communicated to management, including our Chief Executive Officer and
Principal Financial Officer, to allow for timely decisions regarding required disclosure of material information required to be included in our periodic Securities and Exchange CommissionSEC reports. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures are not effective at that reasonable assurance level as of the end of the period covered by this report based upon our current level of transactions and staff. However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote
| (b) | Changes in Internal Control Over Financial Reporting. |
(b)
Changes in Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act.Act). Management reviewed our internal controls over financial reporting, and there have been no changes in our internal controls over financial reporting for the nine-monthsix-month period ended SeptemberJune 30, 20192021 that have materially affected, or are like to affect, our internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None; not applicable.
ITEM 1A. Risk Factors
As a smaller reporting issuer, the Company is not required to provide the information required by this item.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
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None; not applicable.
Use of Proceeds of Registered Securities
None; not applicable.
Purchases of Equity Securities by Us and Affiliated Purchasers
During the ninesix months ended SeptemberJune 30, 2019,2021, we have not purchased any equity securities nor have any officers or directors of the Company.
ITEM 3. Defaults Upon Senior Securities
NoneNone.
ITEM 4. Mine Safety Disclosure
Not applicable.
ITEM 5. Other Information.
None
ITEM 6. Exhibits
(a)
Exhibits.
| (a) | Exhibits. |
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302 Certification of Kim Boyce | ||
302 Certification of Keith Merrell | ||
906 Certification |
Exhibits
Additional Exhibits Incorporated by Reference
| 101.SCH | Inline XBRL Taxomony Extension Schema Document | |
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* 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: | August 16, 2021 | By: | /s/ Kim Boyce | ||
| Kim Boyce, CEO, President and Director | |||||
| Date: | August 16, 2021 | By: | /s/ Tom Tait | ||
| Tom Tait, Vice President and Director | |||||
| Date: | August 16, 2021 | By: | /s/ Kim Boyce | ||
| Kim Boyce, CFO, Principal Financial Officer |
Reflect Scientific, Inc.21
(Registrant)
Date:
November 18, 2019
By: /s/ Kim Boyce
Kim Boyce, CEO, President and Director
Date:
November 18, 2019
By: /s/ Tom Tait
Tom Tait, Vice President and Director
Date:
November 18, 2019
By: /s/ Keith Merrell
Keith Merrell, CFO, Principal Financial Officer