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: March 31, 2024
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) |
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 May 10, 2024, there were 85,664,086 common
shares of the registrant issued and outstanding.
REFLECT SCIENTIFIC, INC.
Quarterly Report on Form 10-Q
Period Ended March 31, 2024
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
| Item 1: |
Financial Statements |
4 |
| Item 2: |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 |
| Item 3: |
Quantitative and Qualitative Disclosure about Market Risk |
15 |
| Item 4: |
Controls and Procedures |
16 |
PART II
OTHER INFORMATION
| Item 1: |
Legal Proceedings |
16 |
| Item 1A. |
Risk Factors |
16 |
| Item 2: |
Unregistered Sales of Equity Securities and Use of Proceeds |
16 |
| Item 3: |
Defaults Upon Senior Securities |
16 |
| Item 4: |
Mine Safety Disclosure |
16 |
| Item 5: |
Other Information |
16 |
| Item 6: |
Exhibits |
17 |
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
REFLECT SCIENTIFIC, INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| |
|
Page |
| Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023 |
|
5 |
| Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (Unaudited) |
|
6 |
| Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023 (Unaudited) |
|
7 |
| Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (Unaudited) |
|
8 |
| Notes to Condensed Consolidated Financial Statements (Unaudited) |
|
9 |
REFLECT SCIENTIFIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
|
March 31,
2024 |
|
|
December 31, 2023 |
|
| ASSETS |
|
(Unaudited) |
|
|
|
|
| |
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
1,009,424 |
|
|
$ |
1,277,951 |
|
| Accounts receivable, net |
|
|
335,003 |
|
|
|
108,191 |
|
| Inventories, net |
|
|
950,917 |
|
|
|
972,293 |
|
| Prepaid expenses and other current assets |
|
|
10,301 |
|
|
|
11,715 |
|
| Total Current Assets |
|
|
2,395,645 |
|
|
|
2,370,150 |
|
| |
|
|
|
|
|
|
|
|
| Operating lease right-of-use assets |
|
|
218,025 |
|
|
|
235,653 |
|
| Goodwill |
|
|
60,000 |
|
|
|
60,000 |
|
| Other long-term assets |
|
|
3,100 |
|
|
|
3,100 |
|
| TOTAL ASSETS |
|
$ |
2,676,770 |
|
|
$ |
2,668,903 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
|
$ |
101,272 |
|
|
$ |
86,241 |
|
| Customer deposits |
|
|
486,229 |
|
|
|
447,444 |
|
| Current portion of operating lease liabilities |
|
|
67,675 |
|
|
|
62,681 |
|
| Total Current Liabilities |
|
|
655,176 |
|
|
|
596,366 |
|
| |
|
|
|
|
|
|
|
|
| Operating lease liabilities, net of current portion |
|
|
160,991 |
|
|
|
179,963 |
|
| TOTAL LIABILITIES |
|
|
816,167 |
|
|
|
776,329 |
|
| |
|
|
|
|
|
|
|
|
| Stockholders' Equity |
|
|
|
|
|
|
|
|
| Preferred Stock, $0.01 par value, 5,000,000 shares authorized; none issued and outstanding as of March 31, 2024 and December 31, 2023 |
|
|
- |
|
|
|
- |
|
| Common stock, $0.01 par value, 100,000,000 shares authorized; 85,664,086 shares issued and outstanding as of March 31, 2024 and December 31, 2023 |
|
|
856,640 |
|
|
|
856,640 |
|
| Additional paid-in capital |
|
|
20,302,681 |
|
|
|
20,302,681 |
|
| Accumulated deficit |
|
|
(19,298,718 |
) |
|
|
(19,266,747 |
) |
| TOTAL STOCKHOLDERS’ EQUITY |
|
|
1,860,603 |
|
|
|
1,892,574 |
|
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
2,676,770 |
|
|
$ |
2,668,903 |
|
The accompanying notes are an integral part of these
condensed consolidated financial statements.
REFLECT SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| |
|
For the Three Months Ended March 31, |
|
| |
|
2024 |
|
|
2023 |
|
| Revenues |
|
$ |
428,755 |
|
|
$ |
241,127 |
|
| Cost of goods sold |
|
|
186,966 |
|
|
|
113,633 |
|
| Gross profit |
|
|
241,789 |
|
|
|
127,494 |
|
| |
|
|
|
|
|
|
|
|
| Operating Expenses |
|
|
|
|
|
|
|
|
| Salaries and wages |
|
|
142,614 |
|
|
|
162,275 |
|
| General and administrative |
|
|
132,304 |
|
|
|
106,992 |
|
| Research and development |
|
|
7,375 |
|
|
|
6,066 |
|
| Total Operating Expenses |
|
|
282,293 |
|
|
|
275,333 |
|
| |
|
|
|
|
|
|
|
|
| LOSS FROM OPERATIONS |
|
|
(40,504 |
) |
|
|
(147,839 |
) |
| |
|
|
|
|
|
|
|
|
| Other income |
|
|
8,533 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
| NET LOSS BEFORE INCOME TAXES |
|
|
(31,971 |
) |
|
|
(147,839 |
) |
| INCOME TAX EXPENSE |
|
|
- |
|
|
|
- |
|
| NET LOSS |
|
$ |
(31,971 |
) |
|
$ |
(147,839 |
) |
| |
|
|
|
|
|
|
|
|
| Loss per common share |
|
|
|
|
|
|
|
|
| Basic and diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
| Weighted average shares outstanding |
|
|
|
|
|
|
|
|
| Basic and diluted |
|
|
85,664,086 |
|
|
|
85,214,086 |
|
The accompanying notes are an integral part of these
condensed consolidated financial statements.
REFLECT SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
Three Months Ended March 31, 2024
| |
|
Common Stock |
|
|
Additional
Paid-In |
|
|
Accumulated |
|
|
Total
Stockholders’ |
|
| |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
| Balance at December 31, 2023 |
|
|
85,664,086 |
|
|
$ |
856,640 |
|
|
$ |
20,302,681 |
|
|
$ |
(19,266,747 |
) |
|
$ |
1,892,574 |
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(31,971 |
) |
|
|
(31,971 |
) |
| Balance at March 31, 2024 |
|
|
85,664,086 |
|
|
$ |
856,640 |
|
|
$ |
20,302,681 |
|
|
$ |
(19,298,718 |
) |
|
$ |
1,860,603 |
|
Three Months Ended March 31, 2023
| |
|
Common Stock |
|
|
Additional
Paid-In |
|
|
Accumulated |
|
|
Total
Stockholders’ |
|
| |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
| Balance at December 31, 2022 |
|
|
85,214,086 |
|
|
$ |
852,140 |
|
|
$ |
20,252,181 |
|
|
$ |
(18,807,719 |
) |
|
$ |
2,296,602 |
|
| Stock-based compensation |
|
|
- |
|
|
|
- |
|
|
|
6,875 |
|
|
|
- |
|
|
|
6,875 |
|
| Net Loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(147,839 |
) |
|
|
(147,839 |
) |
| Balance at March 31, 2023 |
|
|
85,214,086 |
|
|
$ |
852,140 |
|
|
$ |
20,259,056 |
|
|
$ |
(18,955,558 |
) |
|
$ |
2,155,638 |
|
The accompanying notes are an integral part of these
condensed consolidated financial statements.
REFLECT SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
|
For the Three Months Ended
March 31, |
|
| |
|
2024 |
|
|
2023 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(31,971 |
) |
|
$ |
(147,839 |
) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
- |
|
|
|
6,875 |
|
| Amortization of right-of-use assets |
|
|
17,628 |
|
|
|
14,529 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
(226,812 |
) |
|
|
20,961 |
|
| Inventories |
|
|
21,376 |
|
|
|
(53,268 |
) |
| Prepaid expenses and other current assets |
|
|
1,414 |
|
|
|
14,221 |
|
| Accounts payable and accrued expenses |
|
|
15,031 |
|
|
|
(10,773 |
) |
| Customer deposits |
|
|
38,785 |
|
|
|
(12,420 |
) |
| Operating lease liabilities |
|
|
(13,978 |
) |
|
|
(15,144 |
) |
| Net cash used in operating activities |
|
|
(178,527 |
) |
|
|
(182,858 |
) |
| |
|
|
|
|
|
|
|
|
| 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 |
|
|
(178,527 |
) |
|
|
(182,858 |
) |
| |
|
|
|
|
|
|
|
|
| CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
|
|
| Beginning of the period |
|
|
1,277,951 |
|
|
|
1,381,927 |
|
| End of the period |
|
$ |
1,099,424 |
|
|
$ |
1,199,069 |
|
| |
|
|
|
|
|
|
|
|
| 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.
REFLECT SCIENTIFIC, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1—BASIS OF PRESENTATION AND OTHER INFORMATION
The accompanying unaudited condensed consolidated
financial statements of Reflect Scientific, Inc. (the “Company,” “we,” “us,” or “our”)
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for
interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all the information and footnotes
required by GAAP for complete financial statements. The December 31, 2023 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, 2023 included in the
Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 29, 2024. 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 months ended March 31, 2024 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2024.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment
Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires a public entity to disclose significant
segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable
segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after
December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. These amendments
are to be applied retrospectively. The Company is currently evaluating the impact this standard will have on its condensed consolidated
financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income
Taxes (Topic 740): Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income
tax disclosures by requiring; (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income
taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures.
ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be
applied prospectively, with retrospective application permitted. The Company is currently evaluating the impact this standard will have
on its condensed consolidated financial statements.
The Company currently believes there are no other
issued and not yet effective accounting standards that are materially relevant to our condensed consolidated financial statements.
NOTE 2—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 include non-mechanical Cyrometrix freezers, chillers, and original equipment manufacturer (“OEM”) value-added
products and components for the life sciences industry.
The Company’s revenues for the three months
ended March 31, 2024 and 2023 are disaggregated as follows:
| |
|
For the Three Months Ended
March 31, 2024 |
|
| |
|
United States |
|
|
International |
|
|
Total |
|
| Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
| Freezers and chillers |
|
$ |
264,270 |
|
|
$ |
- |
|
|
$ |
264,270 |
|
| OEM and other |
|
|
137,796 |
|
|
|
26,689 |
|
|
|
164,485 |
|
| Total Revenues |
|
$ |
402,066 |
|
|
$ |
26,689 |
|
|
$ |
428,755 |
|
| |
|
For the Three Months Ended March 31, 2023 |
|
| |
|
United States |
|
|
International |
|
|
Total |
|
| Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
| Freezers and chillers |
|
$ |
45,250 |
|
|
$ |
- |
|
|
$ |
45,250 |
|
| OEM and other |
|
|
127,880 |
|
|
|
67,997 |
|
|
|
195,877 |
|
| Total Revenues |
|
$ |
173,130 |
|
|
$ |
67,997 |
|
|
$ |
241,127 |
|
NOTE 3—INVENTORIES
Inventories at March 31, 2024 and December 31, 2023
consisted of the following:
| |
|
March 31, |
|
|
December 31, |
|
| |
|
2024 |
|
|
2023 |
|
| Finished goods |
|
$ |
460,001 |
|
|
$ |
493,565 |
|
| Raw materials |
|
|
596,960 |
|
|
|
584,772 |
|
| Total inventories |
|
|
1,056,961 |
|
|
|
1,078,337 |
|
| Less reserve for obsolescence |
|
|
(106,044 |
) |
|
|
(106,044 |
) |
| Total inventories, net |
|
$ |
950,917 |
|
|
$ |
972,293 |
|
Inventory balances are composed of finished goods
and raw materials. Work in process inventory is immaterial to the condensed consolidated financial statements.
NOTE 4—LEASES
The following was included in our condensed consolidated
balance sheets at March 31, 2024 and December 31, 2023:
| |
|
March 31, |
|
December 31, |
|
| |
|
2024 |
|
2023 |
|
| Operating lease right-of-use assets |
|
$ |
218,025 |
|
$ |
235,653 |
|
| |
|
|
|
|
|
|
|
| Lease liabilities, current portion |
|
|
67,675 |
|
|
62,681 |
|
| Lease liabilities, long-term |
|
|
160,991 |
|
|
179,963 |
|
| Total operating lease liabilities |
|
$ |
228,666 |
|
$ |
242,644 |
|
| |
|
|
|
|
|
|
|
| Weighted-average remaining lease term (months) |
|
|
32 |
|
|
35 |
|
| Weighted average discount rate |
|
|
10.5 |
% |
|
10.5 |
% |
Total lease expense for the three months ended March
31, 2024 and 2023 is as follows:
| |
|
For the Three Months Ended March 31, |
|
| |
|
2024 |
|
|
2023 |
|
| Operating lease expense |
|
$ |
23,875 |
|
|
$ |
15,216 |
|
| Variable lease expense |
|
|
- |
|
|
|
4,437 |
|
| Total lease expense |
|
$ |
23,875 |
|
|
$ |
19,653 |
|
Cash payments included in the measurement of our operating
lease liabilities were $20,225 and $15,831 for the three months ended March 31, 2024 and 2023, respectively.
As of March 31, 2024, maturities of operating
lease liabilities were as follows:
| Year Ending December 31, |
|
Amount |
|
| 2024 |
|
$ |
65,084 |
|
| 2025 |
|
|
98,532 |
|
| 2026 |
|
|
101,708 |
|
| Total |
|
|
265,324 |
|
| Less: imputed interest |
|
|
(36,658 |
) |
| Total operating lease liabilities |
|
$ |
228,666 |
|
NOTE 5—STOCKHOLDERS’ EQUITY
Common Stock
As of March 31, 2024 and December 31, 2023,
the Company was authorized to issue 100,000,000 common shares, of which 85,664,086 common shares were issued and outstanding.
Potential Common Stock Equivalents
As of March 31, 2024, there were no potential
common share equivalents from restricted stock awards. As of December 31, 2023, there were 450,000, potential common share
equivalents from restricted stock awards excluded from the diluted loss per share calculations as their effect is anti-dilutive.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following management’s discussion and
analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and
understanding of our plans and financial condition. The following financial information is derived from our financial statements and should
be read in conjunction with such financial statements and notes thereto set forth elsewhere herein.
Use of Terms
Except as otherwise indicated by the context and for
the purposes of this report only, references in this report to “we,” “us,” “our” and the “Company”
refer to Reflect Scientific, Inc., and its consolidated subsidiaries.
Special Note Regarding Forward Looking Statements
This report contains forward-looking statements that
are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements
of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied
by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
| |
● |
Changes in Company-wide strategies, which may result in changes in the types or mix of businesses in which our Company is involved or chooses to invest; |
| |
● |
Changes in U.S., global or regional economic conditions; |
| |
● |
Changes in U.S. and global financial and equity markets, including significant interest rate fluctuations, which may impede our Company’s access to, or increase the cost of, external financing for our operations and investments; |
| |
● |
Increased competitive pressures, both domestically and internationally; |
| |
● |
Legal and regulatory developments, such as regulatory actions affecting environmental activities; |
| |
● |
The imposition by foreign countries of trade restrictions and changes in international tax laws or currency controls; |
| |
● |
Adverse weather conditions or natural disasters, such as hurricanes and earthquakes, labor disputes, which may lead to increased costs or disruption of operations. |
In some cases, you can identify forward-looking statements
by terms such as “may,” “could,” “will,” “should,” “would,” “expect,”
“plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,”
“potential,” “project” or “continue” or the negative of these terms or other comparable terminology.
These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results.
In addition, statements that “we believe”
and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available
to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information
may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or
review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to
unduly rely upon these statements.
The forward-looking statements made in this report
relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the
federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new
information, future events, changed circumstances or any other reason.
Overview
Reflect Scientific is engaged in the manufacture and
distribution of innovative products targeted at the life science market. Our customers include hospitals, diagnostic laboratories, pharmaceutical
and biotech companies, cold chain management, universities, government and private sector research facilities, chemical and industrial
companies.
Our goal is to provide our customers with the best
solution for their needs. This philosophy extends into our business strategies and acquisition plans. Through a series of strategic acquisitions,
we acquired technology that has enabled us to expand our line of products to align with, and capitalize on, market needs. Our growing
product portfolio includes ultra-low temperature freezers, blast freezers, solvent chillers and refrigerated transportation in addition
to supplying OEM products to the life sciences industry.
Our Cryometrix brand ultra-low temperature and blast
freezers innovative design enables our customers to save substantially on energy costs related to cryogenic storage. Ultra-low temperature
freezers are used worldwide for the storage of vaccines, DNA, RNA, proteins and many other biological and chemical substances. There is
a growing need for energy efficient, reliable ultra-low temperature storage units. Our Cryometrix freezers are targeted to this growing
market and we have had tremendous success in blood storage and pharmaceutical manufacturing applications. The application of this technology
for use in refrigerated trailers (commonly called “reefers”) used to transport goods which need to be maintained in a cold
environment significantly broadens the market for this technology. The utilization of this technology in reefers eliminates the current
method of cooling, which uses engines run on hydrocarbon fuels. The Cryometrix technology is pollutant free and is more efficient and
cost effective than the technologies currently used. Reflect Scientific has added a new product line of solvent chillers. Solvent chillers
are used in natural products extraction for optimizing product yield and purity.
Recent Developments
None.
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, 2023 filed with the SEC on March 29, 2024.
During the three months ended March 31, 2024,
there were no significant changes in our accounting policies and estimates.
Results of Operations
Comparison of the Three Months Ended March 31,
2024 and 2023
The following table sets forth key components of our
results of operations during the three months ended March 31, 2024 and 2023:
| |
|
For the Three Months Ended March 31, |
|
| |
|
2024 |
|
|
2023 |
|
| |
|
Amount |
|
|
% of Revenues |
|
|
Amount |
|
|
% of Revenues |
|
| Revenues |
|
$ |
428,755 |
|
|
|
100.0 |
% |
|
$ |
241,127 |
|
|
|
100.0 |
% |
| Cost of goods sold |
|
|
186,966 |
|
|
|
43.6 |
% |
|
|
113,633 |
|
|
|
47.1 |
% |
| Gross profit |
|
|
241,789 |
|
|
|
56.4 |
% |
|
|
127,494 |
|
|
|
52.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Salaries and wages |
|
|
142,614 |
|
|
|
33.3 |
% |
|
|
162,275 |
|
|
|
67.3 |
% |
| General and administrative |
|
|
132,304 |
|
|
|
30.8 |
% |
|
|
106,992 |
|
|
|
44.4 |
% |
| Research and development |
|
|
7,375 |
|
|
|
1.7 |
% |
|
|
6,066 |
|
|
|
2.5 |
% |
| Total Operating Expenses |
|
|
282,293 |
|
|
|
65.8 |
% |
|
|
275,333 |
|
|
|
114.2 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) from operations |
|
|
(40,504 |
) |
|
|
(9.4) |
% |
|
|
(147,839 |
) |
|
|
(61.3) |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income |
|
|
8,533 |
|
|
|
2.0 |
% |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss before income taxes |
|
|
(31,971 |
) |
|
|
(7.4) |
% |
|
|
(147,839 |
) |
|
|
(61.3) |
% |
| Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Net loss |
|
$ |
(31,971 |
) |
|
|
(7.4) |
% |
|
$ |
(147,839 |
) |
|
|
(61.3) |
% |
Revenues. Revenues increased by $187,628, or
77.8%, to $428,755 for the three months ended March 31, 2024, as compared to $241,127 for the three months ended March 31, 2023. Such
increase was primarily due to a heightened demand for freezer and chiller sales, driven by increased customer capital expenditures during
the current period.
Cost of goods sold. Cost of goods sold increased
by $73,333, or 64.5%, to $186,966 for the three months ended March 31, 2024, as compared to $113,633 for the three months ended March
31, 2023. Such increase was primarily due to increased freezer and chillers sales during the current period.
Gross profit. Our gross profit as a percentage
of sales increased to 56.4% for the three months ended March 31, 2024, as compared to 52.9% for the three months ended March 31, 2023.
The increase in gross profit percentage was primarily due to the increase in freezer and chiller sales during the current period, which
have better margins than other products. This was partially offset by increased product costs during the current period.
Salaries and wages. Salaries and wages
decreased by $19,661, or 12.1%, to $142,614 for the three months ended March 31, 2024, as compared to $162,275 for the three months
ended March 31, 2023. Such decrease was primarily due to no stock-based compensation during the current period and decreased
employee headcount.
General and administrative. General and
administrative expenses increased by $25,312, or 23.7%, to $132,304 for the three months ended March 31, 2024, as compared to
$106,992 for the three months ended March 31, 2023. Such increase was primarily due to increased advertising and marketing,
professional fees, public filing costs, and rent expense during the current period.
Research and development. Research and
development expenses increased by $1,309, or 21.6%, to $7,375 for the three months ended March 31, 2024, as compared to $6,066 for
the three months ended March 31, 2023. Such increase was primarily a result of increased enhancements to the ultra-cold CBD oil
chiller as a result of the improved operations during the current period.
Other income. Other income was $8,533 for the
three months ended March 31, 2024, as compared to $0 for the three months ended March 31, 2023. The increase in the current period was
from interest income earned on our business money market savings accounts, which were opened during the fourth quarter of 2023.
Net loss. As a result of the cumulative
effect of the factors described above, our net loss was $31,971 for the three months ended March 31, 2024, as compared to a net loss
of $147,839 for the three months ended March 31, 2023. Management continues to look for opportunities to increase sales, improve
gross margins and control ongoing operating expenses.
Liquidity and Capital Resources
As of March 31, 2024 and December 31, 2023, our
current assets exceeded current liabilities by $1,740,469 and $1,773,784, respectively, and we had cash and cash equivalents of
$1,099,424 and $1,277,951, 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:
| |
|
Three Months Ended
March 31, |
|
| |
|
2024 |
|
|
2023 |
|
| Net cash used in operating activities |
|
$ |
(178,527 |
) |
|
|
(182,858 |
) |
| Net cash provided by investing activities |
|
|
- |
|
|
|
- |
|
| Net cash provided by financing activities |
|
|
- |
|
|
|
- |
|
| Net change in cash and cash equivalents |
|
|
(178,527 |
) |
|
|
(182,858 |
) |
| |
|
|
|
|
|
|
|
|
| Cash and cash equivalents at beginning of period |
|
|
1,277,951 |
|
|
|
1,381,927 |
|
| Cash and cash equivalents at end of period |
|
$ |
1,099,424 |
|
|
$ |
1,199,069 |
|
Net cash used in operating activities was $178,527
and $182,858 for the three months ended March 31, 2024 and 2023, respectively. Significant factors affecting operating cash flows were
primarily a result of increased accounts receivable during the current period.
We continue working to enhance our on-line ordering
system to increase sales, develop the market for our ultra-low temperature freezers, work with current vendors to obtain more favorable
pricing, and locate new vendors to provide opportunities to further reduce our cost of goods.
We will continue to focus our efforts on our core
business activities while pursuing capital resources and evaluating potential future acquisitions which fit within and enhance our core
business.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Disclosure controls
and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file
or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our chief
executive officer and chief principal officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(e) of the Exchange Act,
our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and principal
financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of March 31, 2024. 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 March 31, 2024 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, 2023, our disclosure controls and procedures
were not effective.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we may become involved in various
lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties,
and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of
any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating
results.
ITEM 1A. RISK FACTORS.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. Exhibits
| 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, 2008* |
| 4.2 |
Form of Purchasers Warrant |
8-K Current Report dated June 29, 2008* |
| 4.3 |
Registration Rights Agreement |
8-K Current Report dated June 29, 2008* |
| 4.4 |
Form of Placement Agreement |
8-K Current Report dated June 29, 2008* |
| 10.1 |
Securities Purchase Agreement |
8-K Current Report dated June 29, 2008* |
| 10.2 |
Placement Agent Agreement |
8-K Current Report dated June 29, 2008* |
| 10.3 |
JMST Purchase Agreement |
8-K Current Report dated April 4, 2006* |
| 10.4 |
Cryomastor Merger Agreement |
8-K Current Report dated April 19, 2006* |
| 10.5 |
Image Labs Merger Agreement |
8-K Current Report dated November 15, 2006* |
| 10.7 |
Debenture Settlement |
8-K Current Report dated November 17, 2006* |
| 14 |
Code of Ethics |
December 31, 2003 10-K Annual Report* |
| 21 |
Subsidiaries of the Company |
December 31, 2006 10-K Annual Report* |
| Exhibit No. |
Title of Document |
Location if other than attached hereto |
| 31.1 |
302 Certification of Kim Boyce |
This Filing |
| 31.2 |
302 Certification of Kim Boyce |
This Filing |
| 32 |
906 Certification |
This Filing |
Exhibits
Additional Exhibits Incorporated by Reference
* 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: May 13, 2024 By: /s/ Kim Boyce
Kim Boyce, Chief Executive Officer and Director
Date: May 13, 2024 By: /s/ Kim Boyce
Kim Boyce, Principal Financial Officer