SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act
November 17, 2006
-----------------
Date of Report
(Date of earliest event reported)
Reflect Scientific, Inc.
------------------------
(Exact name of registrant as specified in its charter)
UTAH 000-31377 87-0642556
----- --------- ----------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
1270 South 1380 West
Orem, Utah 84058
----------------
(Address of Principal Executive Offices)
(801-226-4100
-------------
(Registrant's Telephone Number)
N/A
---
(Former Name or Former Address if changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the Registrant under any of
the following provisions (see general instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14-a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
(a) Effective as of November 17, 2006, the Registrant ("Reflect," the
"Company," "we," "our," "us" and words of similar import) entered into an
Agreement and Plan of Merger (the "Merger Agreement" and the "Merger") among
Reflect; Cryometrix, Inc., a California corporation and wholly-owned
subsidiary of Reflect ("Merger Subsidiary"); All Temp Engineering Inc., a
California corporation ("All Temp"); J F Dain & E L Dain CO T Tee Dain
Family Revocable Trust U/A Dated 12/17/2001 (the "Dain Trust") and Nicholas J.
Henneman ("Henneman"), the sole All Temp Shareholders (collectively, the "All
Temp Shareholders"); and John F. Dain, individually ("Dain"). Pursuant to the
Merger Agreement, All Temp will merge with and into the Merger Subsidiary with
the Merger Subsidiary being the surviving corporation.
Under the Merger Agreement, Reflect will:
1. Issue to the All Temp Shareholders an aggregate of 2,000,000 shares
of its common stock that are "restricted securities" as defined in Rule 144,
1,000,000 shares to each, with no registration rights to have these securities
included in a registration statement filed with the Securities and Exchange
Commission.
2. Pay the All Temp Shareholders a pro-rata running royalty totaling
5.0% of the gross annual revenues earned after Closing (the "Royalty") on All
Temp's business that will be maintained as a separate division within the
Surviving Corporation (the "Royalty Business Segment"). The Royalty shall be
paid so long as Reflect owns and operates the Royalty Business Segment of All
Temp and on revenues earned, providing it does not result in the Royalty
Business Segment earnings as measured by earnings before interest and taxes
("EBIT") of less than 10%, and accordingly, such Royalty shall be paid in
accordance with Exhibit 1.3(c) to the Merger Agreement. The foregoing royalty
shall be paid quarterly within 45 days following the close of each quarter and
assumes the Royalty Business Segment of All Temp that will be maintained
separately within the Surviving Corporation ("Company Business Division") is
profitable as represented by the All Temp Shareholders. Reflect shall
maintain complete and accurate financial and other records necessary to comply
with Section 1.3(c) of the Merger Agreement. Reflect shall submit written
summary financial reports on a quarterly basis to the All Temp Shareholders.
The All Temp Shareholders shall have the right to, through independent
accountants of their own choosing and at their own expense, audit the
financial and other records of Reflect respecting the Company Business
Division at reasonable times, at least once per fiscal year, to determine
compliance with Section 1.3(c) of the Merger Agreement. In the event such
audit reveals that Reflect has not accurately or adequately complied with
Section 1.3(c) of the Merger Agreement, the costs of said audit shall be borne
by Reflect. Reflect shall provide Company Business Division with an adequate
operating budget reasonably required to allow the Company Business Division to
maximize revenues which operating budget shall be no less than as is
consistent with All Temp's historical operating budget. If, within three (3)
years of the closing, the Company Business Division is transferred (by means
of a sale of assets, merger, sale of stock or otherwise), the All Temp
Stockholders shall receive a cash payment of Six Hundred Thousand Dollars
($600,000) less any accumulated royalties payable under the merger Agreement,
which will partially reimburse the All Temp Shareholders for loans they are
forgiving in connection with this transaction. However, no payment shall be
made if the Company Business Division is terminated or liquidated due to non
performance.
Reflect's Board of Directors unanimously approved the Merger and
related agreements. During the course of its deliberations regarding the
Merger, the Board of Directors considered a number of factors relevant to the
Merger, such as All Temp's business history, financial condition and
intellectual property, the terms of the Merger, and historical information
concerning All Temp's business, financial performance and condition,
operations, technology, management and competitive position; and also
considered a number of the Company's key needs, including, but not limited to:
* Reflect's desire to expand its services offerings, either through
internal development or by licensing or acquiring complimentary or new
technologies; and
* its desire to attract and retain talented technical personnel
to compliment these new developments or technologies.
Reflect's Board of Directors also assessed the value of the Merger
to its shareholders in light of various factors and potential benefits of the
Merger, including:
* the current intrinsic value of the combined companies;
* strategic and financial advantages to the combined businesses that may
result from the Merger, such as potential improvements in their ability
to access financial markets and acquisition purposes;
* potential for future appreciation of Reflect's common stock;
* potential risks associated with the Merger; and
* the long-term interests of Reflect and its shareholders;
* information concerning the business prospects and potential operations
and financial condition of Reflect and All Temp, both individually
and on a combined basis;
* the terms of the Merger Agreement, including that the Merger will likely
qualify as a tax free reorganization to Reflect for federal income
tax purposes;
* projected relative ownership interests of Reflect's shareholders and
All Temp shareholders in Reflect immediately following the Merger;
* the likelihood that the Merger would be consummated; and
* Reflect's desire to find an attractive candidate for a reorganization or
merger that would be beneficial to it and its shareholders and provide
products that current clients and customers would be interested in
purchasing, as well as others.
A copy of the Merger Agreement accompanies this Current Report, which, by
this reference, is incorporated herein; the foregoing summary is modified in
its entirety by such reference. See Item 9.01, Exhibit 2.1.
Item 7.01 Regulation FD Disclosure
See Exhibit 99.1, Press Release dated November 20, 2006, a copy of which
is attached hereto and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(c)(i) Registrant's Exhibits:
Attached:
---------
2.1 Agreement and Plan of Merger
99.1 Press Release
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Current Report to be signed on its
behalf by the undersigned hereunto duly authorized.
REFLECT SCIENTIFIC, INC.
Date: /s/Kim Boyce
-------------- ------------------------
Kim Boyce
President and Director