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, 2022March 31, 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 7, 2022,May 11, 2023, there were 84,989,08685,214,086 common shares of the registrant issued and outstanding.
REFLECT SCIENTIFIC, INC.
Quarterly Report on Form 10-Q
Period Ended September 30, 2022March 31, 2023
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
| Item 1: | 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
| Item 1: | Legal Proceedings | |
| Item 1A. | Risk Factors | |
| 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 | |
| Item 6: | Exhibits |
21
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
REFLECT SCIENTIFIC, INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Page | ||
| Condensed Consolidated Balance Sheets as of | ||
| Condensed Consolidated Statements of Operations for the Three | ||
| Condensed Consolidated Statements of Stockholders’ Equity for the Three Ended March 31, 2023 and | ||
| Condensed Consolidated Statements of Cash Flows for the | ||
| Notes to Condensed Consolidated Financial Statements (Unaudited) |
REFLECT SCIENTIFIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 1,324,706 | $ | 1,473,924 | ||||
| Accounts receivable, net | 115,561 | 178,649 | ||||||
| Inventories, net | 904,076 | 624,486 | ||||||
| Prepaid expenses and other current assets | 15,430 | 28,306 | ||||||
| Total Current Assets | 2,359,773 | 2,305,365 | ||||||
| Operating lease right-of-use assets | 68,598 | 110,483 | ||||||
| Goodwill | 60,000 | 60,000 | ||||||
| Other long-term assets | 3,100 | 3,100 | ||||||
| TOTAL ASSETS | $ | 2,491,471 | $ | 2,478,948 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 59,358 | $ | 66,837 | ||||
| Customer deposits | 9,014 | 118,566 | ||||||
| Current portion of operating lease liabilities | 61,286 | 56,446 | ||||||
| Total Current Liabilities | 129,658 | 241,849 | ||||||
| Operating lease liabilities, net of current portion | 10,774 | 57,393 | ||||||
| TOTAL LIABILITIES | 140,432 | 299,242 | ||||||
| Stockholders' Equity | ||||||||
| Preferred Stock, $0.01 par value, 5,000,000 shares authorized; none issued and outstanding | - | - | ||||||
| Common shares, $0.01 par value, 100,000,000 shares authorized; 84,989,086 shares issued and outstanding as of September 30, 2022 and December 31, 2021 | 849,890 | 849,890 | ||||||
| Additional paid-in capital | 20,247,556 | 20,226,931 | ||||||
| Accumulated deficit | (18,746,407 | ) | (18,897,115 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | 2,351,039 | 2,179,706 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,491,471 | $ | 2,478,948 | ||||
| March 31, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 1,199,069 | $ | 1,381,927 | ||||
| Accounts receivable, net | 108,368 | 129,329 | ||||||
| Inventories, net | 850,620 | 797,352 | ||||||
| Prepaid expenses and other current assets | 6,000 | 20,221 | ||||||
| Total Current Assets | 2,164,057 | 2,328,829 | ||||||
| Operating lease right-of-use assets | 39,736 | 54,265 | ||||||
| Goodwill | 60,000 | 60,000 | ||||||
| Other long-term assets | 3,100 | 3,100 | ||||||
| TOTAL ASSETS | $ | 2,266,893 | $ | 2,446,194 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 68,196 | $ | 78,969 | ||||
| Customer deposits | 810 | 13,230 | ||||||
| Current portion of operating lease liabilities | 42,249 | 57,393 | ||||||
| Total Current Liabilities | 111,255 | 149,592 | ||||||
| TOTAL LIABILITIES | 111,255 | 149,592 | ||||||
| Stockholders' Equity | ||||||||
| Preferred Stock, $0.01 par value, 5,000,000 shares authorized; none issued and outstanding as of March 31, 2023 and December 31, 2022 | - | - | ||||||
| Common shares, $0.01 par value, 100,000,000 shares authorized; 85,214,086 shares issued and outstanding as of March 31, 2023 and December 31, 2022 | 852,140 | 852,140 | ||||||
| Additional paid-in capital | 20,259,056 | 20,252,181 | ||||||
| Accumulated deficit | (18,955,558 | ) | (18,807,719 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | 2,155,638 | 2,296,602 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,266,893 | $ | 2,446,194 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
REFLECT SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2023 | 2022 | |||||||||||||||||||
| Revenues | $ | 253,233 | $ | 716,145 | $ | 1,562,424 | $ | 1,985,640 | $ | 241,127 | $ | 753,576 | ||||||||||||
| Cost of goods sold | 122,204 | 242,343 | 552,314 | 621,317 | 113,633 | 234,289 | ||||||||||||||||||
| Gross profit | 131,029 | 473,802 | 1,010,110 | 1,364,323 | 127,494 | 519,287 | ||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||
| Salaries and wages | 154,648 | 146,697 | 484,492 | 429,417 | 162,275 | 170,279 | ||||||||||||||||||
| General and administrative | 94,781 | 149,672 | 315,734 | 422,036 | 106,992 | 117,178 | ||||||||||||||||||
| Research and development | 14,820 | 17,544 | 58,474 | 45,697 | 6,066 | 25,325 | ||||||||||||||||||
| Total Operating Expenses | 264,249 | 313,913 | 858,700 | 897,150 | 275,333 | 312,782 | ||||||||||||||||||
| INCOME (LOSS) FROM OPERATIONS | (133,220 | ) | 159,889 | 151,410 | 467,173 | (147,839 | ) | 206,505 | ||||||||||||||||
| Other Income | ||||||||||||||||||||||||
| Gain on forgiveness of debt | - | - | - | 111,265 | ||||||||||||||||||||
| Total Other Income | - | - | - | 111,265 | ||||||||||||||||||||
| NET INCOME (LOSS) BEFORE INCOME TAXES | (133,220 | ) | 159,889 | 151,410 | 578,438 | (147,839 | ) | 206,505 | ||||||||||||||||
| INCOME TAX BENEFIT (EXPENSE) | (702 | ) | - | (702 | ) | - | - | - | ||||||||||||||||
| NET INCOME (LOSS) | $ | (133,922 | ) | $ | 159,889 | $ | 150,708 | $ | 578,438 | $ | (147,839 | ) | $ | 206,505 | ||||||||||
| Earnings (loss) per common share | ||||||||||||||||||||||||
| Basic | $ | (0.00 | ) | $ | 0.00 | $ | 0.00 | $ | 0.01 | $ | (0.00 | ) | $ | 0.00 | ||||||||||
| Diluted | $ | (0.00 | ) | $ | 0.00 | $ | 0.00 | $ | 0.01 | $ | (0.00 | ) | $ | 0.00 | ||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||
| Basic | 84,989,086 | 84,739,086 | 84,989,086 | 84,739,086 | 85,214,086 | 84,989,086 | ||||||||||||||||||
| Diluted | 84,989,086 | 84,739,086 | 85,739,086 | 84,739,086 | 85,214,086 | 85,739,086 | ||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
REFLECT SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Three and Nine Months Ended September 30, 2022March 31, 2023
| Common Shares | 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 | ||||||||||
| Common Shares | 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 | ||||||||||
Three and Nine Months Ended September 30, 2021March 31, 2022
| Common Shares | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at December 31, 2020 | 84,739,086 | $ | 847,390 | $ | 20,201,931 | $ | (19,836,180 | ) | $ | 1,213,141 | ||||||||||
| Net income | - | - | - | 247,768 | 247,768 | |||||||||||||||
| Balance at March 31, 2021 | 84,739,086 | 847,390 | 20,201,931 | (19,588,412 | ) | 1,460,909 | ||||||||||||||
| Net income | - | - | - | 170,781 | 170,781 | |||||||||||||||
| Balance at June 30, 2021 | 84,739,086 | 847,390 | 20,201,931 | (19,417,631 | ) | 1,631,690 | ||||||||||||||
| Net income | - | - | - | 159,889 | 159,889 | |||||||||||||||
| Balance at September 30, 2021 | 84,989,086 | $ | 849,890 | $ | 20,201,931 | $ | (19,257,742 | ) | $ | 1,791,579 | ||||||||||
| Common Shares | 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 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
REFLECT SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCASHFLOWS
(UNAUDITED)
Nine Months Ended September 30, | Three Months Ended March 31, | |||||||||||||||
| 2022 | 2021 | 2023 | 2022 | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||
| Net income | $ | 150,708 | $ | 578,438 | ||||||||||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||||||||||
| Net income (loss) | $ | (147,839 | ) | $ | 206,505 | |||||||||||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||
| Stock-based compensation | 20,625 | - | 6,875 | 12,844 | ||||||||||||
| Gain on forgiveness of debt | - | (111,265 | ) | |||||||||||||
| Amortization of right-of-use assets | 41,885 | 43,552 | 14,529 | 13,871 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| Accounts receivable | 60,088 | 192,739 | 20,961 | (57,680 | ) | |||||||||||
| Inventories | (279,590 | ) | (146,451 | ) | (53,268 | ) | (71,121 | ) | ||||||||
| Prepaid expenses and other current assets | 15,876 | 1,493 | 14,221 | 27,796 | ||||||||||||
| Accounts payable and accrued expenses | (7,479 | ) | 19,437 | (10,773 | ) | 16,609 | ||||||||||
| Customer deposits | (109,552 | ) | (41,058 | ) | (12,420 | ) | (29,563 | ) | ||||||||
| Operating lease liabilities | (41,779 | ) | (35,429 | ) | (15,144 | ) | (13,652 | ) | ||||||||
| Net cash (used in) provided by operating activities | (149,218 | ) | 501,456 | (182,858 | ) | 105,609 | ||||||||||
| 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 | (149,218 | ) | 501,456 | (182,858 | ) | 105,609 | ||||||||||
| CASH AND CASH EQUIVALENTS | ||||||||||||||||
| Beginning of the period | 1,473,924 | 642,542 | 1,381,927 | 1,473,924 | ||||||||||||
| End of the period | $ | 1,324,706 | $ | 1,143,998 | $ | 1,199,069 | $ | 1,579,533 | ||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||||||||||
| Cash paid for interest | $ | - | $ | - | $ | - | $ | - | ||||||||
| Cash paid for income taxes | $ | - | $ | - | $ | - | $ | - | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
REFLECT SCIENTIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
SEPTEMBER 30, 2022March 31, 2023
(UNAUDITED)(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 information and footnotes required by GAAP for complete financial statements. The December 31, 20212022 consolidated balance sheet data was derived from audited financial statements but do 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, 20212022 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 31, 2022.2023. 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, 2022March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.2023.
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”). ASUs not listed below were assessedThe Company has evaluated all recent accounting pronouncements and determined that the adoption of pronouncements applicable to be eitherthe Company has not applicablehad or areis not expected to have minimala material impact on the Company’sCompany's condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our condensed consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU amends ASC 805 to require acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in business combinations. The ASU is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This ASU should be applied prospectively to acquisitions occurring on or after the effective date of December 15, 2022, and early adoption is permitted. The Company has not completed its assessment of the standard but does not expect the adoption to have a material impact on our condensed consolidated financial statements.
87
REFLECT SCIENTIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
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 and nine months ended September 30,March 31, 2023 and 2022 and 2021 are disaggregated as follows:
| Three Months Ended September 30, 2022 | Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| United States | International | Total | United States | International | Total | |||||||||||||||||||
| Revenues | ||||||||||||||||||||||||
| Freezers and chillers | $ | 54,768 | $ | - | $ | 54,768 | $ | 45,250 | $ | - | $ | 45,250 | ||||||||||||
| OEM and other | 129,695 | 68,770 | 198,465 | 127,880 | 67,997 | 195,877 | ||||||||||||||||||
| Total Revenues | $ | 184,463 | $ | 68,770 | $ | 253,233 | $ | 173,130 | $ | 67,997 | $ | 241,127 | ||||||||||||
| Three Months Ended September 30, 2021 | ||||||||||||
| United States | International | Total | ||||||||||
| Revenues | ||||||||||||
| Freezers and chillers | $ | 236,884 | $ | 56,381 | $ | 293,265 | ||||||
| OEM and other | 190,200 | 232,680 | 422,880 | |||||||||
| Total Revenues | $ | 427,084 | $ | 289,061 | $ | 716,145 | ||||||
| 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 | ||||||
| Nine Months Ended September 30, 2021 | ||||||||||||
| United States | International | Total | ||||||||||
| Revenues | ||||||||||||
| Freezers and chillers | $ | 507,982 | $ | 612,505 | $ | 1,120,487 | ||||||
| OEM and other | 519,550 | 345,603 | 865,153 | |||||||||
| Total Revenues | $ | 1,027,532 | $ | 958,108 | $ | 1,985,640 | ||||||
9
REFLECT SCIENTIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
| Three Months Ended March 31, 2022 | ||||||||||||
| United States | International | Total | ||||||||||
| Revenues | ||||||||||||
| Freezers and chillers | $ | 348,458 | $ | 153,236 | $ | 501,694 | ||||||
| OEM and other | 172,443 | 79,439 | 251,882 | |||||||||
| Total Revenues | $ | 520,901 | $ | 232,675 | $ | 753,576 | ||||||
NOTE 4—INVENTORIES
Inventories at September 30, 2022March 31, 2023 and December 31, 20212022 consisted of the following:
| September 30, 2022 | December 31, 2021 | March 31, 2023 | December 31, 2022 | |||||||||||||
| Finished goods | $ | 299,258 | $ | 342,835 | $ | 363,010 | $ | 376,334 | ||||||||
| Raw materials | 710,862 | 387,695 | 593,654 | 527,062 | ||||||||||||
| Total inventories | 1,010,120 | 730,530 | 956,664 | 903,396 | ||||||||||||
| Less reserve for obsolescence | (106,044 | ) | (106,044 | ) | (106,044 | ) | (106,044 | ) | ||||||||
| Total inventories, net | $ | 904,076 | $ | 624,486 | $ | 850,620 | $ | 797,352 | ||||||||
Inventory balances are composed of finished goods. Raw materials and work in process inventory are immaterial to the condensed consolidated financial statements.
8
NOTE 5—LEASES
The following was included in our condensed consolidated balance sheet at September 30, 2022March 31, 2023 and December 31, 2021:2022:
| September 30, 2022 | December 31, 2021 | March 31, 2023 | December 31, 2022 | |||||||||||||
| Operating lease right-of-use assets | $ | 68,598 | $ | 110,483 | $ | 39,736 | $ | 54,265 | ||||||||
| Lease liabilities, current portion | 61,286 | 56,446 | 42,249 | 57,393 | ||||||||||||
| Lease liabilities, long-term | 10,774 | 57,393 | - | - | ||||||||||||
| Total operating lease liabilities | $ | 72,060 | $ | 113,839 | $ | 42,249 | $ | 57,393 | ||||||||
| Weighted-average remaining lease term (months) | 14 | 23 | 8 | 11 | ||||||||||||
| Weighted average discount rate | 5.25% | 5.25% | 5.25% | 5.25% | ||||||||||||
Total lease expense for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 is as follows:
Three Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating lease expense | $ | 15,216 | $ | 15,216 | ||||
| Variable lease expense | 1,334 | 1,887 | ||||||
| Total lease expense | $ | 16,550 | $ | 17,103 | ||||
Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating lease expense | $ | 45,648 | $ | 45,648 | ||||
| Variable lease expense | 5,122 | 5,661 | ||||||
| Total lease expense | $ | 50,770 | $ | 51,309 | ||||
10
REFLECT SCIENTIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating lease expense | $ | 15,216 | $ | 15,216 | ||||
| Variable lease expense | 4,437 | 2,393 | ||||||
| Total lease expense | $ | 19,653 | $ | 17,609 | ||||
As of September 30, 2022,March 31, 2023, maturities of operating lease liabilities were as follows:
| Year Ending December 31, | Amount | Amount | ||||||
| 2022 – remaining | $ | 15,550 | ||||||
| 2023 | 58,920 | |||||||
| Total | 74,470 | |||||||
| 2023 – remaining | $ | 43,089 | ||||||
| Less: imputed interest | (2,410 | ) | (840 | ) | ||||
| Total operating lease liabilities | $ | 72,060 | $ | 42,249 | ||||
NOTE 6—STOCKHOLDERS’ EQUITY
Common Stock
As of September 30, 2022,March 31, 2023, the Company was authorized to issue 100,000,000 common shares. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company had 84,989,08685,214,086 common shares issued and outstanding.
Restricted Stock Awards
On December 28, 2021, the Company granted 1,000,000 shares of restricted common stock to its patent attorney. The restricted stock vest over three years, with 250,000 shares vesting immediately on the grant date and 250,000 shares vesting on the next three anniversary dates.
Below is a table summarizing the changes in restricted stock awards outstanding during the ninethree months ended September 30, 2022:March 31, 2023:
| Restricted Stock Awards | Weighted-Average Exercise Price | |||||||
| Outstanding at December 31, 2021 | 750,000 | $ | 0.11 | |||||
| Granted | - | - | ||||||
| Vested | - | - | ||||||
| Forfeited | - | - | ||||||
| Outstanding at September 30, 2022 | 750,000 | $ | 0.11 | |||||
| Restricted Stock Awards | Weighted- Average Exercise Price | |||||||
| Outstanding at December 31, 2022 | 450,000 | $ | 0.11 | |||||
| Granted | - | - | ||||||
| Vested | - | - | ||||||
| Forfeited | - | - | ||||||
| Outstanding at March 31, 2023 | 450,000 | $ | 0.11 | |||||
Stock-based compensation expense of $6,875 and $20,625$12,844 was recorded during the three and nine months ended September 30,March 31, 2023 and 2022, respectively. Stock-based compensation expense was $nil during the three and nine months ended September 30, 2021.
As of September 30, 2022,March 31, 2023, the remaining unrecognized stock-based compensation expense related to non-vested restricted stock awards is $61,875$48,125 and is expected to be recognized over 2.251.75 years.
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REFLECT SCIENTIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
NOTE 7—EARNINGS (LOSS) PER SHARE
The computation of weighted average shares outstanding and the basic and diluted earnings per share for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 consisted of the following:
Three Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Net income (loss) | $ | (133,922 | ) | $ | 159,889 | |||
| Weighted average shares outstanding | 84,989,086 | 84,739,086 | ||||||
| Basic earnings (loss) per share | $ | (0.00 | ) | $ | 0.00 | |||
| Weighted average shares outstanding | 84,989,086 | 84,739,086 | ||||||
| Effect on dilutive stock awards | - | - | ||||||
| Total potential shares outstanding | 84,989,086 | 84,739,086 | ||||||
| Diluted earnings (loss) per share | $ | (0.00 | ) | $ | 0.00 | |||
Nine Months Ended September 30, | Three Months Ended March 31, | |||||||||||||||
| 2022 | 2021 | 2023 | 2022 | |||||||||||||
| Net income | $ | 150,708 | $ | 578,438 | ||||||||||||
| Net income (loss) | $ | (147,839 | ) | $ | 206,505 | |||||||||||
| Weighted average shares outstanding | 84,989,086 | 84,739,086 | 85,214,086 | 84,989,086 | ||||||||||||
| Basic earnings per share | $ | 0.00 | $ | 0.01 | ||||||||||||
| Basic earnings (loss) per share | $ | (0.00 | ) | $ | 0.00 | |||||||||||
| Weighted average shares outstanding | 84,989,086 | 84,739,086 | 85,214,086 | 84,989,086 | ||||||||||||
| Effect on dilutive stock awards | 750,000 | - | - | 750,000 | ||||||||||||
| Total potential shares outstanding | 85,739,086 | 84,739,086 | 85,214,086 | 85,739,086 | ||||||||||||
| Diluted earnings per share | $ | 0.00 | $ | 0.01 | ||||||||||||
| Diluted earnings (loss) per share | $ | (0.00 | ) | $ | 0.00 | |||||||||||
For the three months ended September 30, 2022 March 31, 2023,there were 750,000450,000 common share equivalents excluded from the diluted earnings per share calculation as their effect is anti-dilutive. For the nine months ended September 30, 2022 there were 750,000 potentially dilutive shares that needed to be considered as common share equivalents.
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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.
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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.
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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, 20212022 filed with the SEC on March 31, 2022.2023.
During the three and nine months ended September 30, 2022,March 31, 2023, there were no significant changes in our accounting policies and estimates.
Results of Operations
Comparison of the Three Months Ended September 30,March 31, 2023 and 2022 and 2021
The following table sets forth key components of our results of operations during the three months ended September 30,March 31, 2023 and 2022, and 2021, both in dollars and as a percentage of our revenues.
| Three Months Ended September 30, | Three Months Ended March 31, | |||||||||||||||||||||||||||||||
| 2022 | 2021 | 2023 | 2022 | |||||||||||||||||||||||||||||
| Amount | % of Revenues | Amount | % of Revenues | Amount | % of Revenues | Amount | % of Revenues | |||||||||||||||||||||||||
| Revenues | $ | 253,233 | 100.0 | % | $ | 716,145 | 100.0 | % | $ | 241,127 | 100.0 | % | $ | 753,576 | 100.0 | % | ||||||||||||||||
| Cost of goods sold | 122,204 | 48.3 | % | 242,343 | 33.8 | % | 113,633 | 47.1 | % | 234,289 | 31.1 | % | ||||||||||||||||||||
| Gross profit | 131,029 | 51.7 | % | 473,802 | 66.2 | % | 127,494 | 52.9 | % | 519,287 | 68.9 | % | ||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||
| Salaries and wages | 154,648 | 61.1 | % | 146,697 | 20.5 | % | 162,275 | 67.3 | % | 170,279 | 22.6 | % | ||||||||||||||||||||
| General and administrative | 94,781 | 37.4 | % | 149,672 | 20.9 | % | 106,992 | 44.4 | % | 117,178 | 15.5 | % | ||||||||||||||||||||
| Research and development | 14,820 | 5.9 | % | 17,544 | 2.4 | % | 6,066 | 2.5 | % | 25,325 | 3.4 | % | ||||||||||||||||||||
| Total operating expenses | 264,249 | 104.4 | % | 313,913 | 43.8 | % | 275,333 | 114.2 | % | 312,782 | 41.5 | % | ||||||||||||||||||||
| Income (loss) from operations | (133,220 | ) | (52.6) | % | 159,889 | 22.3 | % | (147,839 | ) | (61.3 | )% | 206,505 | 27.4 | % | ||||||||||||||||||
| Other income | ||||||||||||||||||||||||||||||||
| Gain on forgiveness of debt | - | - | % | - | - | % | ||||||||||||||||||||||||||
| Net income before income taxes | (133,220 | ) | (52.6) | % | 159,889 | 22.3 | % | (147,839 | ) | (61.3 | )% | 206,505 | 27.4 | % | ||||||||||||||||||
| Income tax expense | (702 | ) | (0.3) | % | - | - | % | - | - | % | - | - | % | |||||||||||||||||||
| Net income | $ | (133,922 | ) | (52.9) | % | $ | 159,889 | 22.3 | % | $ | (147,839 | ) | (61.3 | )% | $ | 206,505 | 27.4 | % | ||||||||||||||
Revenues. Revenues decreased by $462,912,$512,449, or 64.6%68.0%, to $253,233$241,127 for the three months ended September 30, 2022March 31, 2023 from $716,145$753,576 for the three months ended September 30, 2021. Such decreaseMarch 31, 2022. The change was primarily due to a significant decrease in freezer and chiller sales during the third quarter and ongoing supply chain delays with manufactures.manufacturers.
13
Cost of goods sold. Cost of good sold decreased by $120,139,$120,656, or 49.6%51.5%, to $122,204$113,633 for the three months ended September 30, 2022March 31, 2023 from $242,343$234,289 for the three months ended September 30, 2021. Such decreaseMarch 31, 2022. The change was primarily due to decreased freezer and chillers sales, offset by increased product and shipping costs.sales.
15
Gross profit. Our gross profit as a percentage of sales decreased to 51.7%52.9% for the three months ended September 30, 2022,March 31, 2023, compared to 66.2%68.9% for the three months ended September 30, 2021.March 31, 2022. The decreasechange in gross profit percentage was primarily due to the decrease in freezer and chiller sales (freezer and chillers have higher margins than other products) and increased product and shipping costs.
Salaries and wages. Salaries and wages increaseddecreased by $7,951,$8,004, or 5.4%4.7%, to $154,648$162,275 for the three months ended September 30, 2022March 31, 2023 from $146,697$170,279 for the three months ended September 30, 2021.March 31, 2022. Such increasedecrease was primarily due to increased headcount as well as stock-based compensation.decreased headcount.
General and administrative. General and administrative expenses decreased by $54,891,$10,186, or 36.7%8.7%, to $94,781$106,992 for the three months ended September 30, 2022March 31, 2023 from $149,672$117,178 for the three months ended September 30, 2021.March 31, 2022. The lower expense level was not the result of significant savings in any one expense category but is, rather, the cumulative result of small savings in numerous expenses.expenses, offset by increased public filing and insurance costs.
Research and development. Research and development expenses decreased by $2,724,$19,259, or 15.5%76.0%, to $14,820$6,066 for the three months ended September 30, 2022March 31, 2023 from $17,544$25,325 for the three months ended September 30, 2021. Such decreaseMarch 31, 2022. The change was primarily a result of decreased enhancements to the ultra-cold CBD oil chiller during the third quarter.
Net income (loss). As a result of the cumulative effect of the factors described above, our net loss was $133,220$147,839 for the three months ended September 30, 2022,March 31, 2023, as compared to net income of $159,889$206,505 for the three months ended September 30, 2021. 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, 2022 and 2021
The following table sets forth key components of our results of operations during the nine months ended September 30, 2022 and 2021, both in dollars and as a percentage of our revenues.
| Nine Months Ended September 30, | ||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||
| Amount | % of Revenues | Amount | % of Revenues | |||||||||||||||
| Revenues | $ | 1,562,424 | 100.0 | % | $ | 1,985,640 | 100.0 | % | ||||||||||
| Cost of goods sold | 552,314 | 35.3 | % | 621,317 | 31.3 | % | ||||||||||||
| Gross profit | 1,010,110 | 64.7 | % | 1,364,323 | 68.7 | % | ||||||||||||
| Operating expenses | ||||||||||||||||||
| Salaries and wages | 484,492 | 31.0 | % | 429,417 | 21.6 | % | ||||||||||||
| General and administrative | 315,734 | 20.2 | % | 422,036 | 21.3 | % | ||||||||||||
| Research and development | 58,474 | 3.7 | % | 45,697 | 2.3 | % | ||||||||||||
| Total operating expenses | 858,700 | 55.0 | % | 897,150 | 45.2 | % | ||||||||||||
| Income from operations | 151,410 | 9.7 | % | 467,173 | 23.5 | % | ||||||||||||
| Other income | ||||||||||||||||||
| Gain on forgiveness of debt | - | % | 111,265 | 5.6 | % | |||||||||||||
| Net income before income taxes | 151,410 | 9.7 | % | 578,438 | 29.1 | % | ||||||||||||
| Income tax expense | (702) | (0.0) | % | - | - | % | ||||||||||||
| Net income | $ | 150,708 | 9.6 | % | $ | 578,438 | 29.1 | % | ||||||||||
Revenues. Revenues decreased by $423,216, or 21.3%, to $1,562,424 for the nine months ended September 30, 2022 from $1,985,640 for the nine months ended September 30, 2021. Such decrease was primarily due to a significant decrease in freezer and chiller sales during the third quarter and ongoing supply chain delays with manufactures.
16
Cost of goods sold. Cost of good sold decreased by $69,003, or 11.1%, to $552,314 for the nine months ended September 30, 2022 from $621,317 for the nine months ended September 30, 2021. Such decrease was primarily due to decreased freezer and chillers sales, offset by increased product and shipping costs.
Gross profit. Our gross profit as a percentage of sales decreased to 64.7% for the nine months ended September 30, 2022, compared to 68.7% for the nine months ended September 30, 2021. The decrease in gross profit percentage was primarily due to the decrease in freezer and chiller sales, and increased product and shipping costs.
Salaries and wages. Salaries and wages increased by $55,075, or 12.8%, to $484,492 for the nine months ended September 30, 2022 from $429,417 for the nine months ended September 30, 2021. Such increase was primarily due to increased headcount as well as stock-based compensation.
General and administrative. General and administrative expenses decreased by $106,302, or 25.2%, to $315,734 for the nine months ended September 30, 2022 from $422,036 for the nine months ended September 30, 2021. Such decrease is a result of decreased revenues and operations, as well as, the cumulative result of small savings in numerous expenses.
Research and development. Research and development expenses increased by $12,777, or 28.0%, to $58,474 for the nine months ended September 30, 2022 from $45,697 for the nine months ended September 30, 2021. Such increase is a result of continued enhancements to the ultra-cold CBD oil chiller during the period.
Other income. Other income was $0 for the nine months ended September 30, 2022 as compared to $111,265 for the nine months ended September 30, 2021, a result of forgiveness of our PPP loans.
Net income. As a result of the cumulative effect of the factors described above, our net income was $150,708 for the nine months ended September 30, 2022, as compared to net income of $578,438 for the nine months ended September 30, 2021.March 31, 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, 2022March 31, 2023 and December 31, 2021,2022, our current assets exceeded current liabilities by $2,230,115$2,052,802 and $2,063,516,$2,179,237, respectively, and we had cash and cash equivalents of $1,324,706$1,199,069 and $1,473,924,$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, | Three Months Ended March 31, | |||||||||||||||
| 2022 | 2021 | 2023 | 2022 | |||||||||||||
| Net cash (used in) provided by operating activities | $ | (149,218 | ) | $ | 501,456 | $ | (182,858 | ) | $ | 105,609 | ||||||
| Net cash provided by investing activities | - | - | - | - | ||||||||||||
| Net cash provided by financing activities | - | - | - | - | ||||||||||||
| Net change in cash and cash equivalents | (149,218 | ) | 501,456 | (182,858 | ) | 105,609 | ||||||||||
| Cash and cash equivalents at beginning of period | 1,473,924 | 642,542 | 1,381,927 | 1,473,924 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 1,324,706 | $ | 1,143,998 | $ | 1,199,069 | $ | 1,579,533 | ||||||||
Net cash used in operating activities was $149,218$182,858 for the ninethree months ended September 30, 2022,March 31, 2023, as compared to net cash provided by operating activities of $501,456$105,609 for the ninethree months ended September 30, 2021.March 31, 2022. Significant factors affecting operating cash flows was primarily a result of increased inventory purchases, decreased customer deposits,accounts payable and accrued expense payments and decreased net income during the ninethree months ended September 30, 2022.March 31, 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.
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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, 2022.March 31, 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, 2022March 31, 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, 2021,2022, 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.
18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
15
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 Keith Merrell | |
| 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.
1916
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: May 11, 2023 By: /s/ Kim Boyce
Kim Boyce, CEO, President and Director
Date: May 11, 2023 By: /s/ Tom Tait
Tom Tait, Vice President and Director
Date: May 11, 2023 By: /s/ Kim Boyce
Kim Boyce, CFO, Principal Financial Officer
2017