# Reflect Scientific, Inc.: Form 10-Q for the period ended Jun 30, 2017

- Company: [Reflect Scientific, Inc.](/companies/rscf.md) (CIK 1103090)
- Form: 10-Q
- Filed: 2017-08-14
- Accepted by EDGAR: Aug 11, 2017, 19:31 ET
- Period: 2017-06-30
- Accession: 0001548123-17-000187
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1103090/000154812317000187/f10qq217v3.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1103090/000154812317000187/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2017-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2017-04-01 to 2017-06-30 | $298.3k | us-gaap:Revenues |
| Revenue | 6 months, 2017-01-01 to 2017-06-30 | $554.2k | us-gaap:Revenues |
| Cost of revenue | 3 months, 2017-04-01 to 2017-06-30 | $119.1k | us-gaap:CostOfGoodsSold |
| Cost of revenue | 6 months, 2017-01-01 to 2017-06-30 | $209.1k | us-gaap:CostOfGoodsSold |
| Gross profit | 3 months, 2017-04-01 to 2017-06-30 | $179.2k | us-gaap:GrossProfit |
| Gross profit | 6 months, 2017-01-01 to 2017-06-30 | $345.1k | us-gaap:GrossProfit |
| Research and development | 3 months, 2017-04-01 to 2017-06-30 | $6.3k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2017-01-01 to 2017-06-30 | $18.0k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2017-04-01 to 2017-06-30 | $13.1k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2017-01-01 to 2017-06-30 | $10.7k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2017-04-01 to 2017-06-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2017-01-01 to 2017-06-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2017-04-01 to 2017-06-30 | $13.1k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2017-01-01 to 2017-06-30 | $10.7k | us-gaap:NetIncomeLoss |
| Operating cash flow | 6 months, 2017-01-01 to 2017-06-30 | −$88.4k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2017-06-30 | $175.5k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2017-06-30 | $551.3k | us-gaap:AssetsCurrent |
| Total assets | at 2017-06-30 | $614.4k | us-gaap:Assets |
| Current liabilities | at 2017-06-30 | $32.2k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2017-06-30 | $32.2k | us-gaap:Liabilities |
| Shareholders' equity | at 2017-06-30 | $582.2k | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 10,595 characters.

#### 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. Our Company and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this Annual Report and other filings with the Securities and Exchange Commission 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.

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 believes there have been no significant changes during the six month period ended June 30, 2017, to the items disclosed as significant accounting policies in management's Notes to the Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

#### Plan of Operation and Business Growth

Our efforts continue to be focused on increasing the sales of our life science consumables and detectors while, at the same time, working to commercialize our liquid nitrogen refrigeration products. Of those liquid nitrogen refrigeration products, the ultra-low temperature freezer is receiving highest priority. We also continue work on the refrigerated trailer, or “reefer.” We have our first manufactured unit operational, have conducted a number of road tests and are working to develop alliances with contract manufacturers for those products.

We also continue to focus on the expansion of our detector. We believe that the enhanced functionality of our new detector, coupled with its low cost, provides us with a competitive edge over products currently being sold in that specialized market.

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.

Our revenues during the three month reporting periods decreased 32% during 2017 compared to 2016 revenues.

#### Results of Operations

#### Three Months Ended June 30, 2017 and 2016

|  | For the three months ended June 30, 2017 | 2016 | Change |
| --- | ---: | ---: | ---: |
| Revenues | $298,287 | $387,393 | $(89,106) |
| Cost of goods sold | 119,080 | 105,184 | 13,896 |
| Gross profit | 179,207 | 282,209 | (103,002) |
| Operating expenses | 166,108 | 200,312 | (34,204) |
| Other expense | - | (102) | 102 |
| Net profit (loss) | $13,099 | $81,795 | $(68,696) |

Revenues decreased during the quarter ended June 30, 2017, to $298,267 from $387,393 for the quarter ended June 30, 2016, a decrease of $89,106. The decrease results primarily from the sale of ultra-low temperature freezers which generated revenue of $115,670 in 2016 but only $36,512 in 2017. We are continuing work to increase our market penetration in the ultra-low temperature freezer market.

Cost of goods increased in the quarter ending June 30, 2017, as compared to June 30, 2016, to $119,080 from $105,184, an increase of $13,896. The increase was the result of lower ultra-low temperature freezer sales, which carry higher margins than the specialty laboratory products. We realized a gross profit percentage of 60% for the three months ended June 30, 2017, compared to 73% for the three months ended June 30, 2016. The gross profit percentage is dependent on the mix of product sales, which varies from quarter to quarter. We continue to actively work to obtain more favorable pricing from our vendors in order to increase the margins realized on all product lines.

Operating expenses decreased to $166,108 in the three months ended June 30, 2017, a decrease of $34,204 over the expenses of $200,312 incurred in the three month period ended June 30, 2016. The largest contributor to the reduction was a $17,967 decrease in expenditures for research and development. 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.

The net profit for the three month period ended June 30, 2017 was $13,099, a decrease of $68,696 from the $81,795 profit for the three month period ended June 30, 2016. Management continues to look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.

The net profit of $13,099 for the three month period ended June 30, 2017 represents a profit of $0.00 per share. This compares to the net profit of $81,795, or $0.00 per share for the three months ended June 30, 2016.

#### Six Months Ended June 30, 2017 and 2016

|  | For the six months ended June 30, 2017 | 2016 | Change |
| --- | ---: | ---: | ---: |
| Revenues | $554,202 | $761,357 | $(207,155) |
| Cost of goods sold | 209,108 | 212,365 | (3,257) |
| Gross profit | 345,094 | 548,992 | (203,898) |
| Operating expenses | 338,384 | 431,063 | (96,679) |
| Other expense | - | (245) | 245 |
| Net profit (loss) | $10,710 | $117,684 | $(106,974) |

Revenues decreased during the quarter ended June 30, 2017, to $554,202 from $761,357 for the quarter ended June 30, 2016, a decrease of $207,155. The decrease results primarily from the sale of ultra-low temperature freezers which generated revenue of $231,340 in 2016 compared to $63,853 in 2017. We are continuing work to increase our market penetration in the ultra-low temperature freezer market.

With lower sales during the reporting period, cost of goods decreased in the quarter ending June 30, 2017, as compared to June 30, 2016, to $209,108 from $212,365, a decrease of $3,257. We realized a gross profit percentage of 62% for the six months ended June 30, 2017, compared to 72% for the six months ended June 30, 2016. The gross profit percentage is dependent on the mix of product sales, which varies from quarter to quarter. The ultra-low temperature freezers provide higher gross margins than do our laboratory supplies. We continue to actively work to obtain more favorable pricing from our vendors in order to increase the margins realized on all product lines.

Operating expenses decreased to $334,384 in the six months ended June 30, 2017, a decrease of $96,679 over the expenses of $431,063 incurred in the six month period ended June 30, 2016. The reduction was primarily the result of lower expenditures for research and development of $28,626, commission expense of $8,933, licenses of $5,540 and promotion expense of $3,313. 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.

The net profit for the six month period ended June 30, 2017 was $10,710, a decrease of $106,974 from the $117,684 profit for the six month period ended June 30, 2016. Management continues to look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.

The net profit of $10,710 for the six month period ended June 30, 2017 represents a profit of $0.00 per share. This compares to the net profit of $117,684, or $0.00 per share for the six months ended June 30, 2016.

#### Seasonality and Cyclicality

We do not believe our business is cyclical.

#### Liquidity and Capital Resources

Our cash resources at June 30, 2017, were $175,517, with accounts receivable of $156,045, net of allowance, and inventory of $216,656, net of allowance. Our working capital on June 30, 2017, was $519,097. Working capital on December 31, 2016 was $508,387.

For the six month period ended June 30, 2017, net cash used by operating activities was $88,447 which compares to $48,588 net cash used by operating activities for the six month period ended June 30, 2016.

### Off-Balance Sheet Arrangements

We lease office and warehouse space under a non-cancelable operating lease in Utah which runs through November 30, 2017. Future minimum lease payments under the operating lease at June 30, 2017, are $15,500 for that facility. In addition, on May 9, 2014, the Company entered into an automobile lease. Future minimum lease payments under this lease are $624 at June 30, 2017. The lease has an expiration date of August 8, 2017.

## Controls and procedures

As filed, 2,094 characters.

### (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 Commission 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.

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. Management reviewed our internal controls over financial reporting, and there have been no changes in our internal controls over financial reporting for the six month period ended June 30, 2017 that have materially affected, or are like to affect, our internal controls over financial reporting.

Filed Aug 14, 2017.
Source: SEC EDGAR, the filing index for accession 0001548123-17-000187. Last ingested by Listed: Oct 24, 2026, 15:01 ET. No prices; not investment advice.