U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 000-31377
REFLECT SCIENTIFIC, INC.
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(Name of Small Business Issuer in its Charter)
UTAH 87-0642556
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
970 Terra Bella Avenue
Mountain View, California, 94043
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(Address of Principal Executive Offices)
Issuer's Telephone Number: (650) 960-0300
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
March 31, 2004
24,000,000
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
-------------------------------
The Financial Statements of the Company required to be filed with
this 10-QSB Quarterly Report were prepared by management, and commence on the
following page, together with Related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Company.
REFLECT SCIENTIFIC, INC.
(FORMERLY COLE, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004 and December 31, 2003
REFLECT SCIENTIFIC, INC.
(FORMERLY COLE, INC.)
Consolidated Balance Sheets
ASSETS
March 31, December 31,
2004 2003
(Unaudited)
CURRENT ASSETS
Cash $ 17,800 $ 99,924
Accounts receivable, net 283,017 232,464
Inventory, net 239,375 210,446
Prepaid expenses 800 800
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Total Current Assets 540,992 543,634
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FIXED ASSETS (NET) 21,431 21,923
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OTHER ASSETS
Deposits 5,350 5,350
Capitalized loan costs, net 5,950 6,125
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Total Other Assets 11,300 11,475
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TOTAL ASSETS $ 573,723 $ 577,032
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
2
REFLECT SCIENTIFIC, INC.
(FORMERLY COLE, INC.)
Consolidated Balance Sheets (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
2004 2003
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 178,196 $ 199,375
Accrued expenses 12,496 15,179
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Total Current Liabilities 190,692 214,554
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NON-CURRENT LIABILITIES
Long term line of credit 268,986 269,011
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Total Non-Current Liabilities 268,986 269,011
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Total Liabilities 459,678 483,565
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value, authorized
50,000,000 shares; 24,000,000 shares
issued and outstanding 240,000 240,000
Additional paid-in capital (deficit) (188,319) (210,841)
Retained earnings 62,364 64,308
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Total Shareholders' Equity 114,045 93,467
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 573,723 $ 577,032
============= ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
REFLECT SCIENTIFIC, INC.
(FORMERLY COLE, INC.)
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
March 31,
2004 2003
REVENUES $ 500,051 $ 493,355
COST OF GOODS SOLD 311,123 276,074
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GROSS PROFIT 188,928 217,281
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OPERATING EXPENSES
Salaries and wages 89,334 76,922
Payroll taxes 8,792 6,983
Rent expense 19,059 12,542
General and
administrative expense 70,530 64,642
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Total Operating Expenses 187,715 161,089
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OPERATING INCOME 1,213 56,192
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OTHER EXPENSES
Miscellaneous expenses (301) (268)
Interest expense (2,856) (4,633)
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Total Other Expenses (3,157) (4,901)
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NET INCOME (LOSS) $ (1,944) $ 51,291
============ ==========
EARNINGS (LOSS) PER SHARE $ (0.00) $ 0.00
============ ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 24,000,000 22,914,949
============ ==========
The accompanying notes are an integral part of these consolidated financial
statements.
4
REFLECT SCIENTIFIC, INC.
(FORMERLY COLE, INC.)
Consolidated Statements of Shareholders' Equity
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings
Balance, December 31, 2001 22,914,949 $ 10,000 $ - $ 83,619
Dividend - - - (63,000)
Net income for the year ended
December 31, 2002 - - - 141,018
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Balance, December 31, 2002 22,914,949 10,000 - 161,637
Dividend - - - (156,000)
Contributed Capital - - 26,950 -
Recapitalization (Note 2) 1,085,051 230,000 (237,791) -
Net income for the year ended
December 31, 2003 - - - 58,671
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Balance, December 31, 2003 24,000,000 240,000 (210,841) 64,308
Contributed capital (unaudited) - - 22,522 -
Net loss for the three months
ended March 31, 2004 (unaudited) - - - (1,944)
---------- -------- --------- ----------
Balances, March 31, 2004
(unaudited) 24,000,000 $240,000 $(188,319) $ 62,364
========== ======== ========= ==========
The accompanying notes are an integral part of these consolidated financial
statements.
5
REFLECT SCIENTIFIC, INC.
(FORMERLY COLE, INC.)
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,944) $ 51,291
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 492 591
Amortization of capitalized loan
costs 175 175
Changes in operating assets and
liabilities:
(Increase) in accounts
receivable (50,554) (73,370)
(Increase) in inventory (28,928) (42,313)
Increase (decrease) in accounts
payable and accrued expenses (23,862) 52,799
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Net Cash Used by Operating
Activities (104,621) (10,827)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets - -
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Net Cash Used by Investing
Activities - -
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CASH FLOWS FROM FINANCING ACTIVITIES
Payments on short term lines of credit - (103,049)
Change in long term line of credit (25) 101,524
Contributed capital 22,522 -
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Net Cash (Used) Provided by
Financing Activities 22,497 (1,525)
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NET DECREASE IN CASH (82,124) (12,352)
CASH AT BEGINNING OF PERIOD 99,924 115,644
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CASH AT END OF PERIOD $ 17,800 $ 103,292
========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash Paid For:
Interest $ 1,879 $ -
Income taxes $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
6
REFLECT SCIENTIFIC, INC.
(FORMERLY COLE, INC.)
Notes to the Consolidated Financial Statements
March 31, 2004 and December 31, 2003
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared by the Company pursuant to accounting principles generally
accepted in the United States of America. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted in accordance
with such rules and regulations. The information furnished in the
interim condensed financial statements include normal recurring
adjustments and reflects all adjustments, which, in the opinion of
management, are necessary for a fair presentation of such financial
statements. Although management believes the disclosures and
information presented are adequate to make the information not
misleading, it is suggested that these interim condensed financial
statements be read in conjunction with the Company's most recent audited
financial statements and notes thereto included in its December 31, 2003
financial statements. Operating results for the three months ended
March 31, 2004 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2004.
NOTE 2 - ACQUISITION OF REFLECT SCIENTIFIC
On December 30, 2003, pursuant to an agreement and plan of
reorganization, the Company completed a reverse merger with the
shareholder of Reflect Scientific, Inc. in which it acquired 100% of
Reflect Scientific, Inc., a California Company in exchange for
22,914,949 common shares of the Company. The terms of the acquisition
are detailed in an 8-K filing dated December 31, 2003. Under the terms
of the agreement, the President of Reflect Scientific, Inc. became the
President of the Company and was elected to the Board of Directors, the
acquisition was accounted for as a recapitalization of Reflect
Scientific, Inc. because the members of Reflect Scientific, Inc.
controlled the Company after the acquisition. Reflect Scientific, Inc.
was treated as the acquiring entity for accounting purposes and Cole,
Inc. was the surviving entity for legal purposes. There was no
adjustment to the carrying values of the assets or liabilities of
Reflect Scientific, Inc. and no goodwill was recorded.
7
Item 2. Management's Discussion and Analysis or Plan of Operation.
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Results of Operations.
----------------------
Our revenues increased during the quarter ended March 31, 2004, to
$500,051, from $493,355 for the quarter ended March 31, 2003, primarily as
a result of a general improvement in sales across several new product lines
and improving market conditions.
Our cost of goods increased in the period ending March 31, 2004,
as compared to March 31, 2003, to $311,123 from $276,074. The difference
was partly as a result of an increase in sales, increased raw material costs
and increased labor costs.
General and administrative expenses increased to $70,530 during the
quarter ended March 31, 2004, from $64,642 during the quarter ended March 31,
2003. This increase was due to the addition of one full-time employee,
increased payroll and increased operational expenses, like legal and
accounting fees.
Liquidity and Capital Resources.
--------------------------------
Our cash resources at March 31, 2004, were $17,800, with accounts
receivable of $283,017. We have relied on revenues and lines of credit for
our cash resources. At March 31, 2004, we had utilized $268,986 of our
$400,000 line of credit. These funds should be adequate for the next 12
months for continuing operations; however, plans for expansion will require
additional capital of between $500,000 and $750,000.
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 its representatives may from time to time make
written or oral statements that are "forward- looking," including statements
contained in this Quarterly 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 is illustrative, but by no means
exhaustive. Accordingly, all forward-looking statements should be evaluated
with the understanding of their inherent uncertainty.
Item 3. Controls and Procedures.
----------------------------------
Within 90 days prior to the date of this Quarterly Report and as of
the end of the period covered thereby or March 31, 2004, we carried out an
evaluation, under the supervision and with the participation of our President
and Secretary, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on this evaluation, our President
and Secretary concluded that our disclosure controls and procedures are
effective in timely alerting them to material information required to be
included in our periodic Securities and Exchange Commission reports. 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. In addition,
we reviewed our internal controls, and there have been no significant changes
in our internal controls or in other factors that could significantly affect
those controls subsequent to the date of their last evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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None; not applicable.
Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
Securities.
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None; not applicable.
Item 3. Defaults Upon Senior Securities.
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None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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None; not applicable.
Item 5. Other Information.
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None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits.
31.1 302 Certification of Kim Boyce
31.2 302 Certification of Pamela Boyce
32 906 Certification.
(b) Reports on Form 8-K.
None.
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.
Date: 5/14/04 /s/Kim Boyce
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Kim Boyce, President
Date: 5/14/04 /s/Pamela Boyce
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Pamela Boyce, Secretary