10-K

U. S. Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended December 31, 2018

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from __________________ to __________________

Commission File No. - 000-31377

REFLECT SCIENTIFIC, INC.

(Name of Registrant in its Charter)

Utah	87-0642556
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

1266 South 1380 West

Orem, Utah 84058

(Address of Principal Executive Offices)

Issuer’s Telephone Number: (801) 226-4100

Securities registered under Section 12(b) of the Act: None

Name of Each Exchange on Which Registered: None

Securities registered under Section 12(g) of the Act:

$0.01 par value common stock

Title of Class

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  [  ]     No  [X]

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Yes  [  ]     No  [X]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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  [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [  ]  No  [X]

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not

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be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definition 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 [  ]	(Do not check if a smaller reporting company)
Smaller reporting company [X]	Emerging Growth company [X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the Issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]  No [X]

State Issuer’s revenues for its most recent fiscal year:  December 31, 2018 - $1,551,985.

Aggregate Market Value of Non-Voting Common Stock Held by Non-Affiliates

There are approximately 36,087,753 shares of common voting stock of the Registrant held by non-affiliates, and based upon the average bid and asked prices of our common stock on June 30, 2018 of $0.05, as reported by the OTC Bulletin Board of the National Association of Securities Dealers, Inc., the aggregate market value of our common stock held by non-affiliates was approximately $1,804,388.

Applicable Only to Registrants Involved in Bankruptcy Proceedings During the Past Five Years

None; not applicable.

Outstanding Shares

As of March 28, 2019, the Registrant had 79,108,086 shares of common stock outstanding.

Documents Incorporated by Reference

A description of “Documents Incorporated by Reference” is contained in Part IV, Item 15, of this Annual Report.

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INDEX

PART I

Item 1.	Business	4
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	9
Item 2.	Properties	9
Item 3.	Legal Proceedings	10
Item 4.	Mine Safety Disclosure	10

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities	10
Item 6.	Selected Financial Data	11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 7A	Quantitative and Qualitative Disclosure about Market Risk	15
Item 8.	Financial Statements and Supplementary Data	16
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	16
Item 9A.	Controls and Procedures	16
Item 9B.	Other Information	17

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	17
Item 11.	Executive Compensation	19
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	20
Item 13.	Certain Relationships and Related Transactions, and Director Independence	21
Item 14.	Principal Accounting Fees and Services	21

PART IV

Item 15. Exhibits and Financial Statement Schedules 22

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Forward-Looking Statements

When used in this Annual Report on Form 10-K, the words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements specifically include, but are not limited to, our expectations regarding strategic business initiatives, our intentions to defend our intellectual property rights, continue our research and development, seek regulatory approvals and plans regarding sales and marketing.

We caution readers not to place undue reliance on the forward-looking statements, which speak only as of the date of this Annual Report, are based on certain assumptions and expectations which may or may not be valid or actually occur and which involve various risks and uncertainties, including but not limited to competitive products and pricing, difficulties in product development, commercialization and technology, changes in the regulation of life science products, or other necessary approvals to sell future products and other risk described elsewhere herein.  If and when sales of our new product lines commence, sales may not reach the levels anticipated.  As a result, our actual results for future periods could differ materially from those anticipated or projected.  All forward-looking statements reflect our present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

Unless otherwise required by applicable law, we do not undertake, and specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

PART I

Item 1. Description of Business

Business Development

History

Reflect Scientific, Inc., a Utah corporation (the “Company,” “we,” “our,” “us” and words of similar import), was organized under the laws of the State of Utah on November 3, 1999, under the name “Cole, Inc.”  On December 31, 2003, we acquired Reflect Scientific, Inc., a California corporation.  We changed our name to “Reflect Scientific, Inc.” and succeeded to the business operations of our wholly-owned subsidiary, that involved the manufacture and distribution of unique laboratory consumables and disposables such as filtration and purification products, customized sample handling vials, electronic wiring assemblies, high temperature silicone, graphite and vespel/graphite sealing components for use by original equipment manufacturers (“OEM”) in the chemical analysis industries, primarily in the field of gas/liquid chromatography.  See our 8-K Current Report dated December 31, 2003, which was filed with the Securities and Exchange Commission on January 15, 2004, and is incorporated herein by reference.  See Part IV, Item 15.

On November 29, 2005, we announced the execution of a Letter of Intent to acquire Cryomastor Corporation, a California corporation (“Cryomastor” [sometimes called “Cryometrix,” its amended name]).

Effective as of April 4, 2006, we entered into a Purchase Agreement (the “JMST Agreement”) with JM SciTech, LLC, a limited liability company organized under the laws of the State of Colorado, and doing business as JMST Systems (“JMST”); David Carver, an individual (“Carver”); and Julie Martin, an individual (“Martin”) (JMST, Carver and Martin are sometimes hereinafter referred to collectively as “Sellers”).  Pursuant to the JMST Agreement, we purchased and JMST sold all right, title and interest in and to the JMST Technology (the “JMST Technology”), as described in the JMST Agreement; and Carver conveyed and assigned any rights he had in and to certain patents (the “Carver Patents”) and related intellectual assets as described in the JMST Agreement (collectively, including the Carver Patents, referred to herein as the “Carver Technology”).  JMST had created a line of chemical detection instruments that are used in the pharmaceutical, biotechnology and homeland security markets. The patented technology allows researchers to accurately analyze chemical formulations for their composition and identity.  See our 8-K Current Report dated April 4, 2006, which was filed with the Securities and Exchange Commission on April 7, 2006, and is incorporated herein by reference.  See Part IV, Item 15.

On June 27, 2006, we completed the acquisition of Cryomastor pursuant to an Agreement and Plan of Merger (the “Cryomastor Merger Agreement”), which became our wholly-owned subsidiary; changed its name to “Cryometrix, Inc.”; and succeeded to its business operations, which involved the manufacture and sale of ultra low temperature freezer systems powered by liquid nitrogen for use in bio-repositories associated with the biotech and pharmaceutical industries, as well as government facilities, universities and many other diverse applications that require a large number of reliable and energy efficient freezers.  See our 8-K Current Report dated June 27,

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2006, which was filed with the Securities and Exchange Commission on June 30, 2006, and is incorporated herein by reference.  See Part IV, Item 15.

Business

Emerging Growth Company Status

As part of the Jumpstart Startups Act of 2012 (“JOBS ACT”), companies with less than $1.0 billion in gross revenue

can qualify as an “emerging growth company.” We will qualify as an emerging growth company as defined in the JOBS Act, and, as such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, (ii) reduced disclosure obligations regarding executive compensation in our periodic and annual reports, (iii) not being required to comply with certain new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, and (iv) not being required to obtain stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of the reduced disclosure obligations.  Additionally, we qualify as a “Smaller Reporting Company” and also have the advantage of not being required to provide the same level of disclosure as larger companies.  Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.  We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed one billion dollars, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common units that are held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, and (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.  At this time, we expect to remain both a “Smaller Reporting Company” and “Emerging Growth Company” for the foreseeable future.

Overview

Reflect Scientific is engaged in the manufacture and distribution of innovative products targeted at the life science market. Our customers include hospitals and diagnostic laboratories, pharmaceutical and biotech companies, cold chain management, universities, government and private sector research facilities, and 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 that take advantage of market needs. Our growing product portfolio includes ultra low temperature freezers, blast freezers and refrigerated transportation in addition to supplying OEM products to the life science industry.

Our Visacon brand chemical detector product line has been discontinued. We launched our next generation detector in late 2013 and expected that, due to price and features advantages, detector sales would grow significantly.  While sales have been steady, we did not experience the growth that had been anticipated at the time of the product introduction into the marketplace. In addition patent positions have expired on the core technology. In November 2018, management made the decision to remove the detectors from its product line due to declining demand for the product. This will allow us to focus in on the more lucrative Cryometrix brand of low temperature freezers and blast freezers for the Bio/Pharma  market.

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 samples. 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 

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of this technology in reefers eliminates the current method of cooling, which utilize engines run on hydrocarbon fuels.  The Cryometrix technology is pollutant free and is more cost effective and efficient than the technologies currently used.

Products

Reflect Scientific designs, develops and sells scientific equipment for the Life Science and Manufacturing industries.  Since Reflect Scientific’s organization in 1991, our focus is and has been on providing value added products, analytic testing supplies and equipment, and stand alone products for the life science and industrial market place.  Reflect Scientific’s products range from non-mechanical Cyrometrix™ freezers, products and parts for the life science industry to tools and analytical services for industrial manufacturing.

All of Reflect Scientific’s products and services are developed with one key factor in mind:  Providing a superior cost/benefit to the customer verses other products in the same market space.  With years of experience in the life science and industrial manufacturing markets, Reflect Scientific has been able to develop not only unique patentable products, but products that we believe offer a superior value proposition to the customer  over any other competing and existing products in the market.

We have developed a business model with a focus on intellectual expertise in the design and development of products and solutions for life science and industrial manufacturing industries.  We outsource the majority of our manufacturing, allowing us to maintain the flexibility to develop products across multiple lines and industries.  Our strength is in developing and providing products which we believe offer immediate and verifiable cost saving solutions.  

We have found a number of companies that can manufacture products to our specification, allowing us to focus on our core competencies of development and design, and maintain a flexible corporate structure capable of taking advantage of new opportunities without the large capital investment required to acquire tooling and manufacturing equipment.  Our focus on the intellectual expertise, as opposed to manufacturing of products, allows us to develop products along multiple industry lines and to tailor our products to specific needs in a variety of industrial settings.  Our products are sold in the biotechnology, pharmaceutical, cold chain management and medical industries, as well as the manufacturing industries, such as automotive.

Cryometrix Freezers

Our Cryometrix ultra low temperature and blast freezers are, we believe, a technological breakthrough that provides energy savings and other critically important benefits to cryo-storage customers in the Life Science related industries.  Ultra low temperature and blast freezers are used in multiple industries for the storage and fast freezing profiles of everything from blood to cancer vaccines.  These types of freezers are used by hospitals and biotechnology research facilities.  

The only ultra low temperature freezers currently available are produced by a limited number of companies and rely on a mechanical process for cooling.  Because of inadequacies in the mechanical process, we believe there is wastage of inventory each year because of the problems of reliable cooling inherent in the mechanical freezers.  

Our freezers incorporate a disruptive technology, as they are based on a complete divergence from the technology currently used in ultra low temperature freezers.  Through the advantages of our technology, we believe our freezers solve the current inadequacies and provide immediate cost savings and reliability for our clients.   Current cryogenic storage equipment falls short of customer expectations in a variety of key performance criteria.

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High energy usage – a growing problem with rising energy costs

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Inflexible temperature range – existing units cannot be easily modified for colder requirements (colder temperatures are an industry trend)

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Sample inventory is at risk in the event of a power failure

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Poor temperature uniformity –samples in different areas of the freezer can experience wide variations in temperatures which is undesirable from a regulatory standpoint.

Our Cryometrix ultra low temperature and blast freezer uses a patented design and technology which is powered by liquid nitrogen. Through the use of a liquid nitrogen powered freezer system we are able to address the market need for:

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Low energy requirements

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Flexible temperature control – wide range of usable temperatures

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Power failures have little effect - uses passive liquid nitrogen technology rather than electrically powered compressors.

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Uniform temperatures throughout freezer – more usable storage volume

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Much larger storage volume per area of floor space occupied – reduced facilities cost

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Reliable and essentially maintenance free, further lowering cost of ownership

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Environmental issues related to pollution using the current refrigerated trailer (“reefer”) technology

We believe existing mechanical freezers are outdated and our freezers will be the desired technology to which the industry will move, providing us the opportunity to gain a significant market share in this large market.

The adaptation of the freezer technology to reefers for transporting perishable items opens a significant new market.  Trailers can easily be retrofit with the Cryometrix unit, which operates pollutant free, more efficiently, and at a cost savings compared to the diesel powered units currently used.  The reefer market is a $1 billion market.  The non-polluting Cryometrix unit provides significant benefits over any other unit currently marketed.

Competition

The environment for our products and services is intensely competitive. Although the complexity of the products we produce limits the number of companies we compete with, the companies with competing technology are generally larger and often subsidiaries or divisions of very large multinational companies.  Our competitor’s size and association with large multinational companies gives them advantages over us in the ability to access potential customers.  Many potential customers already purchase products either directly from our competitors or from another subsidiary of these large multinational companies, creating natural inroads to sales that we do not possess.  

Given our relative size versus our competitors, we are often required to seek niche markets for our products or focus on selling consumable components to be used in our competitors larger detection units.  We believe, however, that our technology and experience in the ultra low freezers allows us to be competitive in those markets.  As our ultra low freezer products are new to the marketplace, the products long term commercial acceptance is still unknown.  Most of our products compete against multiple competitors, with our refrigeration products competing primarily against Thermo Fisher Scientific and Sanyo Corporation.

Growth Plan

While we will continue to evaluate acquisitions of businesses and technologies to enhance our revenues in the Life Science and green technology markets, our primary focus is on growing our own product lines through increasing market share and the addition of new products to our current offerings.  

We seek to expand the applications for our products and equipment into additional markets as we develop brand recognition.  We hope to be able to obtain market leverage from our existing products and name recognition as we use our existing offerings and product strengths to position us as a key supplier of cryogenic storage, blast freezing and cold chain management solutions.  This strategic plan will also enable us to further diversify our customer base.

Manufacturing, Supplies, and Quality Control

Many of our products are manufactured by carefully selected third party manufacturers. By outsourcing our manufacturing we are able to reduce the overall cost of our products.  We our lower volume products that are less labor and parts intensive in our facility in Orem, Utah.  

Regulation and Environmental Compliance

Presently, none of our products are in highly regulated industries.

Sources and Availability of Raw Materials and Names of Principal Suppliers

Sources and availability of key materials and intermediates continue to remain stable. Where supply is considered a critical success factor for our business, we have certified primary vendors in place and have identified secondary vendors.

Dependence on One or a Few Major Customers

We have four major customers who represented 44% and 54% of our sales volume in 2018 and 2017, respectively. The company has strong relationships with each of these customers and does not believe this concentration poses a significant risk due to those long-term relationships and the uniqueness of the products they purchase from us.

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Need for any Governmental Approval of Principal Products or Services

No products presently being manufactured or sold by us are subject to prior governmental approvals.

Effect of Existing or Probable Governmental Regulations on the Business

We are subject to the Sarbanes-Oxley Act of 2002. This Act creates a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members appointment, compensation and oversight of the work of public companies’ auditors; prohibits certain insider trading during pension fund blackout periods; and establishes a federal crime of securities fraud, among other provisions.

Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the Securities and Exchange Commission regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to stockholders of our Company at a special or annual meeting thereof or pursuant to a written consent will require our Company to provide our stockholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the Securities and Exchange Commission at least 10 days prior to the date that definitive copies of this information are forwarded to our stockholders.

We are also required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the Securities Exchange Commission on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; changes in executive officers and directors; and bankruptcy) in a Current Report on Form 8-K.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration

All patents and trademarks relating to acquired technologies have been assigned to us. Where appropriate, we seek patent protection for inventions and developments made by our personnel and incorporated into our products or otherwise falling within our fields of interest.

We protect some of our technology as trade secrets and, where appropriate, we use trademarks or registered trademarks used in connection with our products.

Patents have been issued and current cover the following products:

Cryometrix Ultra Low Temperature and Blast freezers – 15 patents

PATENT INFORMATION

Patent number	Appl No	Title	Issue	Filing	Expiration
10,188,098	15/296,009	Extremely fast freezing, low-temperature blast freezer	1/29/2019	10/17/2016	1/29/2037
10,088,227	14/613,702	Systems and methods for a wide range cryo-processor	10/2/2018	2/4/2015	10/2/2036
10,065,196	15/708,131	Low fat food processor	9/4/2018	9/19/2017	9/4/2036
10,047,978	15/708,143	ULT freezer with heater	8/14/2018	9/19/2017	8/14/2036
9,951,907	15/054,267	Self-generating power generator for cryogenic systems	4/24/2018	2/26/2016	4/24/2036
9,857,120	14/512,107	System and methods for improvements to a ultra-low temperature bio-sample storage system	1/2/2018	1/8/2015	1/2/2036
9,388,944	13/872,038	Controlled environment expander	7/12/2016	4/26/2013	7/12/2034
9,303,905	14/279,288	Self-generating power generator for cryogenic systems	4/5/2016	5/15/2014	4/5/2034
9,134,061	13/357,617	Flow Control of a Cryogenic Element to Remove Heat	9/15/2015	1/25/2012	9/15/2033
8,534,078	12/431,756	Self-generating power generator for cryogenic systems	9/17/2013	4/29/2009	9/17/2031
8,448,454	12/574,670	Cryogenic cooling system with vaporized cryogen sparging cooling enhancement	5/28/2013	10/6/2009	5/28/2031

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Patent number	Appl No	Title	Issue	Filing	Expiration
8,424,317	12/894,206	Thermal insulation technique for ultra-low temperature cryogenic processor	4/23/2013	11/2/2007	4/23/2031
7,823,394	11/934,696	Thermal insulation technique for ultra-low temperature cryogenic processor	11/2/2010	11/2/2007	11/2/2028
7,621,148	11/890451	Ultra-low temperature bio-sample storage system	11/24/2009	8/7/2007	11/24/2027
6,804,976	10/734509	High reliability multi-tube thermal exchange structure	10/19/2004	12/12/2003	12/12/2023

Royalty agreements were executed with JMST and Cryometrix as a condition of the companies’ acquisition of the patents and technology related to the detectors. Under the terms of the royalty agreements:

JMST – David Carver will receive a royalty payment on gross revenues related to revenues derived from the Carver Patents or Carver Technology.  Such payments are due on revenue in excess of $500,000 derived from products under the Carver Patents or Carver Technology.  The royalty payment is 2.5% on the revenue in excess of $500,000 and is payable quarterly.  Payments are to be made in the common stock of Reflect Scientific, not to exceed 500,000 shares in total. New products developed from the Carver Technology are subject to a royalty of 3% of gross revenues in excess of $100,000, with an additional 2% if gross revenues exceed $600,000. Royalties will also be paid in our common stock annually.  Common stock will be valued at $3.00 per share for these purposes.  Royalty payments are only due for years where there are valid Carver Patents.  To date no royalties have been earned or paid under this agreement.  In December 2018, management made the decision to remove the detectors from its product line due to low demand.

Research and Development Costs During the Last Two Fiscal Years

During the year ended December 31, 2018, we expended $104,046 for research and development.  During the year ended December 31, 2017, we expended $46,696 for research and development.  The majority of the research and development on our products is performed by independent contractors who have been enhancing technologies, primarily on the reefer unit and the detectors.  We expect research and development cost to increase in the future with the development work required to commercialize our Cryometrix freezers.

Employees

As of April 1, 2019, subsequent to the balance sheet date, we had 7 full-time and 5 part-time employees. None of our employees are represented under a collective bargaining agreement. We believe our relations with our employees to be good.   

Reports to Security Holders

You may read and copy any materials that we file with the Securities and Exchange Commission at the Securities and Exchange Commissions’ Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  You may also find all of the reports that we have filed electronically with the Securities and Exchange Commission at their Internet site www.sec.gov.

Item 1A. Risk Factors

Not applicable for Registrant.

Item 1B. Unresolved Staff Comments

None. Not applicable.

Item 2. Description of Property

Reflect Scientific conducts all of its business operations from one facility, located in Orem, UT.  This is a combination warehouse, manufacturing and office facility with 6,000 square feet of space; we lease this facility at $3,584 per month to the end of the lease term on November 30, 2020.

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Item 3. Legal Proceedings

None.

Item 4. Mine Safety Disclosure

Not applicable.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters and Registrant Purchases of Equity Securities.

Market Information

Since July 6, 2005, our common stock has been listed under the symbol “RSCF” on the OTCBB.  Prior to July 6, 2005, our stock traded under the symbol “COLH” since its initial listing on May 24, 2001.  

As of April 1, 2019, there were 79,108,086 shares of our common stock outstanding.  On March 28, 2019, the high and low bid price for our common stock was $0.05 and $0.05, respectively.

Holders

The number of record holders of our common stock as of March 28, 2019, was approximately 149; this number does not include an indeterminate number of stockholders whose shares may be held by brokers in street name.

Dividends

We have not declared any cash dividends with respect to our common stock, and do not intend to declare dividends in the foreseeable future. Our future dividend policy cannot be ascertained with any certainty. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our securities.

Securities Authorized for Issuance under Equity Compensation Plans

Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
	(a)	(b)	(c)
Equity compensation plans approved by security holders	-	-	12,000,000
Equity compensation plans not approved by security holders	-	-	None
Total	-	-	12,000,000

Recent Sales of Unregistered Securities

None.

Use of Proceeds of Registered Securities

There were no proceeds received during the calendar year ended December 31, 2018 and 2017, from the sale of registered securities.

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Issuance of Equity Securities by Us

In December 2018, the board approved the issuance of 1,000,000 shares of restricted stock to its President/CEO, 200,000 shares of restricted common stock to directors, 81,000 shares of restricted stock to its CFO, 325,000 shares of restricted common stock to employees, and 990,000 shares of restricted common stock to consultants.

Item 6. Select Financial Data

We are not required to provide information under this item.

Item 7. Management’s Discussion and Analysis or Plan of Operation

This periodic report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the Plan of Operations provided below, including information regarding the Company’s financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities, and the plans and objectives of management. The statements made as part of the Plan of Operations that are not historical facts are hereby identified as "forward-looking statements."

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition.  The discussion should be read in conjunction with the financial statements and notes included in this report as Part II, Item 8.

Critical Accounting Policies

Reflect Scientific’s accounting policies are more fully described in Note 2 of the consolidated financial statements.  As discussed in Note 2, 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 about the future events that affect the amounts reported in the consolidated financial statements and the 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.  Reflect Scientific believes that the following addresses Reflect Scientific’s most critical accounting policies.  There have been no significant changes during the year ended December 31, 2018.

REVENUE RECOGNITION:  In January 1, 2018, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers, and all of the related amendments (“new revenue standard”). We recorded the change, which was immaterial, related to adopting the new revenue standard using the modified retrospective method. Under this method, we recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. This results in no restatement of prior periods, which continue to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new revenue standard to continue to be immaterial on an ongoing basis.

We sell our specialty science and environmental lab supplies through direct sales and through distributor relationships.  We sell our ultra-low temperature freezers through consultants and commission-only sales personnel.   Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps:

Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers.

Identify the performance obligations in the contract. Generally, our contracts with our laboratory supply customers do not include multiple performance obligations to be completed over a period of time. Our performance obligations generally relate to delivering specialty laboratory products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds. We do not have significant returns. We do not typically offer extended warranty or service plans. For ultra-low temperature freezers sold to customers which are built to order, generally, 50% of the value of the contract is paid by the customer prior to work beginning on manufacturing the freezer.  Upon completion of manufacturing and testing the customer will accept the unit and make payment of the remaining balance on the contract, at which time control passes to

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the customer and we have satisfied our performance obligation and recognize revenues.  The customer may either arrange to transport the unit with a carrier uses or ask the Company to arrange such shipment, the charges of which are the responsibility of the customer.  In some instances, a customer may, after accepting the unit, request that it be upgraded with additional hardware or software options, which is a new contract and performance obligation.

Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of December 31, 2018 contained a significant financing component.

Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our laboratory supply contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer's control at contractually stated pricing.  The freezers likewise do not have milestone or percentage of completion clauses in the contract, so revenue is only recognized when the work has been completed.

Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon shipment of goods, or, with our freezers, upon final acceptance of the unit by the customer, in accordance with the terms of each contractwith the customer. We do not have significant service revenue. 

ESTIMATES:  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

CASH:  The Company considers all deposit accounts and investment accounts with an original maturity of 90 days or less to be cash equivalents.  

ACCOUNTS RECEIVABLE:  The Company writes off trade receivables when deemed uncollectible.  The Company estimates allowance for doubtful accounts based on the aged receivable balances and historical losses.  The Company charges off uncollectible accounts when management determines there is no possibility of collecting the related receivable.The Company considers accounts receivable to be past due or delinquent based on contractual terms, which is generally net 30 days.

The Company charged $0 and $236 to bad debt expense for the years ended December 31, 2018 and 2017, respectively. The Company has historically experienced minimal bad debts.  The allowance for doubtful accounts balance of $4,000 at December 31, 2017 was reviewed and it was deemed that no adjustment to the provision was required at December 31, 2018.  Management feels this to be an adequate reserve based on the experience seen over multiple years.

The Company maintains an allowance for doubtful accounts to provide for losses arising from customers’ inability to make required payments.  If there is deterioration of our customers’ credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required.

FIXED ASSETS:  Fixed assets are stated at cost.  Expenditure for minor repairs, maintenance, and replacement parts which do not increase the useful lives of the assets are charged to expense as incurred.  All major additions and improvements are capitalized.  Depreciation is computed using the straight-line method.  The lives over which the fixed assets are depreciated range from 5 to 7 years, except for computer equipment, which is depreciated over a 3 year life.  

INVENTORY:  Inventories are stated at the lower of cost or market value based upon the average cost inventory method.  The Company’s inventory consists of parts for scientific vial kits, refrigerant gases, components for the imaging and inspection systems which it builds, and other scientific items.

INCOME TAXES:  We account for income taxes in accordance with Statement of Financial Accounting Standards Board Accounting Codification (ASC) 740, “Income Taxes”.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse.  Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized.

STOCK BASED COMPENSATION: The Company, in accordance with ASC 718, Compensation – Stock Compensation, records all share-based payments to employees at the grant-date fair value of the equity instruments issued. In accordance with ASC 718-10-30-9, Measurement Objective – Fair Value at Grant Date, the Company uses the closing price of the stock, as quoted by NASDAQ, on the 

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date of the grant.  The Company believes this pricing method provides the best estimate of fair the fair value of the consideration given. Compensation cost is recognized over the requisite service period.

The Company, in accordance with ASC 505, Compensation – Stock Compensation, establishes the value of equity instruments issued to non-employees for goods and services by using the closing price of the stock, as quoted by NASDAQ, on the date of the grant.  The Company believes this method fairly establishes the value of the goods and/or services received.

Overview

During the year ended December 31, 2018 revenue increased by 45.6% compared to the year ended December 31, 2017.  The revenue growth resulted from a $298,642 increase in the sale of our ultra-cold freezers, combined with the increased sales of some of a number of our specialty lab products.  While there can be no assurance that freezer sales will increase in future periods, it is encouraging that the marketplace has embraced our disruptive technology, and our installed operating base continues to increase.  Historically, the core business of the company has been the sale of specialty laboratory supplies.  Orders of those supplies increased as a group nearly $100,000 in 2018 as compared to 2017.  We are working to attract new distributors to build sales of these specialty items to historical levels.

The Company focused its resources during 2018 to the marketing of our ultra-cold freezers.  Increasing sales of the ultra-low temperature freezers and commercialization of the refrigerated trailer will provide opportunity for the Company to expand sales in the higher margin technology markets.

The Company has been proactive in making those business decisions which it believes will enable it to carry out its business plan. Significant cost reduction measures have been implemented, unprofitable subsidiaries divested, facilities consolidated and personnel reductions made.  However, we are still generating operating losses and we cannot assure that financing will be made available at acceptable rates to allow the execution of our business plan.  If we are unable to secure adequate financing, our ability to proceed with and implement our business plan will be negatively impacted.

Financial Position

The table below presents a summary of our consolidated balance sheets at December 31, 2018 and 2017:

SUMMARY OF BALANCE SHEET INFORMATION
	Year ended Dec. 31, 2087	Year ended Dec 31, 2017	Increase (Decrease)
Cash	$     220,427	$     235,858	$     (15,431)
Total current assets	521,805	516,745	5,060
Total assets	592,671	579,845	12,826
Total current liabilities	74,928	124,419	(49,491)
Accumulated deficit	(20,300,707)	(20,051,184)	(249,523)
Total stockholders’ equity (deficit)	$  517,743	$  579,845	$      (62,102)

We had $220,427 in cash as of December 31, 2018, a decrease of $15,431 from December 31, 2017.  We had working capital of $446,877 at December 31, 2018, compared to working capital of $392,326 at December 31, 2017.  

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Contractual Obligations

The Company leases office/warehouse space in Utah.  In addition, it has a lease on a vehicle.  The following summarizes future minimum lease payments under the operating leases at December 31, 2018:

	Minimum Lease Payments
Year Ending December 31,	Building	Automobile	Total
2019	$   43,121	$   7,548	$   50,669
2020	40,612	7,548	48,160
2021	-	3,774	3,774
Total	$    83,732	$ 18,870	$102,602

Results of Operations

December 31, 2018 and 2017

The following table summarizes revenue, cost of goods sold, and operating expenses for the years ended December 31, 2018 and 2017:

	Year Ended December 31, 2018	Year Ended December 31, 2017	Increase (Decrease)
Revenue	$ 1,551,985	$ 1,065,777	$  486,206
Cost of Goods Sold	487,185	405,935	81,250
Gross Profit	1,064,880	659,842	404,956
Salaries and wages	585,346	656,959	(71,613)
Rent expense	39,285	29,892	9,393
Research and development expense	104,046	46,696	57,350
General and administrative expense	584,985	328,484	256,501
Total operating expenses	1,313,662	1,062,031	251,631
Profit (loss) from operations	(248,862)	(402,189)	153,325
Interest expense	(661)	-	(661)
Net income (loss)	$ (249,523)	$ (402,189)	$ 152,666

Total revenue in 2018 increased 45.6% to $1,551,983 from revenue of $1,065,777 in 2017.  Revenue of $437,995 was from ultra-low temperature freezers accounts in 2018, compared with revenue of $139,352 from freezer sales in 2017.  We continue to work to increase sales of these freezer units, as well as working to develop marketing strategies to expand distribution channels of our specialty laboratory products.

Our cost of goods sold increased by $81,250 in the period ending December 31, 2018, as compared to December 31, 2017.  Gross sales margin was 68% in 2018 compared to 62% in 2017.  Our gross margin percent is influenced by the sales mix, with the ultra-low temperature freezers carrying significantly higher margins than the more generic lab supplies. We are working to further increase gross margins through working with current vendors to obtain more favorable costing or identifying and qualifying new vendors who offer more favorable pricing without compromising quality.

The salaries and wages decrease by $71,613 in 2018 compared to 2017 is the net result of salary changes, personnel additions, and an increase in stock-based compensation.  Our plan is to continue to use outside contractors where practical to enable us to minimize our number of employees.  

Research and development expense was $104,046 in 2018 compared to $46,696 in 2017, and increase of $57,350.  The increase was due to additional costs incurred in finalizing the design of the ultra-low temperature freezers.

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General and administrative expenses increased to $584,985 for 2018 as compared $328,484 in 2017, an increase of $256.651.  The majority of the increase results from an increase in consulting fees of $146,541 in 2018 over 2017. Expense levels going forward are expected to approximate the 2018 levels as we continue to use consultants for business development and the marketing of our products.

Other expense in 2018 was interest charged on our short term lines of credit.  There was no other income or expenses in 2017.

We had a net loss of $249,523 in 2018, a decrease of $152,666 over the $402,189 loss realized in 2017.  

Seasonality and Cyclicality

We do not believe our business is cyclical.

Liquidity and Capital Resources

Our cash resources at December 31, 2018, were $220,427, with accounts receivable of $155,543 and inventory of $142,325, net of reserves. Our working capital at December 31, 2018 was $446,877.  This compares to working capital of $392,326 at December 31, 2017.  

In 2018, net cash required to fund operating activities was $14,559 as compared to net cash used by operations of $28,106 in 2017.  We anticipate that in 2019, with the benefit of continued cost reductions and increased revenue, we will continue to generate positive cash from operating activities. 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 lease office and warehouse space under a non-cancelable operating lease in Utah, which expires November 30, 2020.  Future minimum lease payments under the operating lease at December 31, 2018 are $83,732 for this facility.  In addition, at December 31, 2018 we have one automobile lease which expires July 7, 2021 with future minimum lease payments of $18,870.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Not applicable to Registrant.

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Item 8.  Financial Statements

The financial statements of the Company are set forth immediately following the signature page to this Form 10-K.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

We had no disagreements on accounting and financial disclosures with our accounting firm during the reporting periods covered by this Annual Report.

Item 9A. Controls and Procedures

As of the end of the period covered by this Annual Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief/Principal Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”). Based on this evaluation, our Chief Executive Officer and Chief 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 President 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 Chief Financial Officer have concluded that our disclosure controls and procedures are not effective. 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.

Management’s Annual Report on 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). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2018.  In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework

(2013). Based on this evaluation, our management concluded that, as of December 31, 2018 our internal control over financial reporting was not effective.

Inherent Limitations over Internal Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls.  Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Changes in internal control over financial reporting

We have made no change in our internal control over financial reporting during the last fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report on Form 10-K.

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Item 9B.  Other Information

None; not applicable.

PART III

Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act

Identification of Directors and Executive Officers

The following table sets forth the names of all of our current directors and executive officers. These persons will serve until the next annual meeting of the stockholders or until their successors are elected or appointed and qualified, or their prior resignation or termination.

Name	Positions Held	Date of Election or Designation	Date of Termination or Resignation
Kim Boyce	President &
	Director	12/2003	*
Tom Tait	Vice President,
	Secretary and Director	01/2005	*
William G. Moon	Director	04/2011	*
Keith L. Merrell	Chief Financial Officer
	& Treasurer	10/2009	*

* These persons presently serve in the capacities indicated.

Business Experience

Kim Boyce - CEO, Director

Mr. Boyce, 65, founded Reflect Scientific in 1993 and has over 40 years of experience in manufacturing, sales, distribution and management.  His prior experience includes executive roles with Grace/Alltech Scientific, where he served as manager – distribution and sales and manager – plant operations.  He also co-founded Labtech Scientific Products in Northern California, a distribution company specializing in equipment for use in life science and environmental related industries.  He has an accomplished track record in strategic business development in a variety of markets, including the pharmaceutical and biotechnology sectors and cold chain management.  Mr. Boyce received his technical training at DeAnza College in Cupertino, CA and his business training at San Jose State University.

Thomas Tait - Vice President, Secretary, Director

Mr. Tait, 63, serves as Vice President. Mr. Tait brings experience with accelerated product development, “lean” process management tools, strategic market analysis, and acquisition integration.  Mr. Tait joined us from Danaher Company where he was a Business Manager over a $120 million in sales product line. Prior assignments have included General Manager of HyperQuan Inc., Product Manager J&W Scientific and Project Manager Varian Inc. He also co-founded ChiraTech Inc, a high technology Company that was sold to Thermo Electron Corporation. Mr. Tait holds an MBA in Technology Management from the University of Phoenix and a BS in Chemistry from Clarkson University. He also holds patents in Optics and MEMS technologies.

William G. Moon, Director

Mr. Moon, 70, has over 30 years experience in startup and engineering related companies.  His leadership experience includes assisting in the formation of what became the world’s largest disk drive company, Quantum Corporation, with over 10,000 employees.  He was Principal Engineer and Vice President of Engineering for over twenty years, during which time he co-designed numerous standard-setting disk drives.  During that time, he was a co-founder of a wholly owned Quantum subsidiary, Plus Development, and was key in the invention of the Hardcard, the first hard drive on a plug-in card.  He helped create a partnership with Panasonic for the world’s first totally automated disk drive assembly plant in Japan, producing over 100 million disk drives.  Prior to that, Mr. Moon designed memory products at Hewlett Packard Labs in their Disk Memory Division.  Over the past five years Mr. Moon has served as technical advisor to several companies and has sat on several boards.    

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Keith Merrell - Chief Financial Officer / Treasurer

Mr. Merrell, 73, serves as our Chief Financial Officer, Treasurer and General Manager.  Mr. Merrell draws on over 40 years of accounting experience to manage all of our accounting functions and to interface with our independent public accountants.  He spent two years in the field of public accounting, and served as Chief Financial Officer or Controller of five companies prior to joining us.  His business career also includes extensive experience in management, sales and marketing, consulting, and merger and acquisition work. He graduated from Arizona State University with a B.S. degree in Accounting.

We believe that, based on education and experience all of our directors are qualified to serve.

Significant Employees

There are no employees who are not executive officers who are expected to make a significant contribution to our Company’s business.

Family Relationships

There are no family relationships between our officers and directors.

Involvement in Certain Legal Proceedings

During the past five years, no director, person nominated to become a director, executive officer, promoter or control person of our Company:

(1) was a general partner or executive officer of any business against which any bankruptcy petition was filed, either at the time of the bankruptcy or two years prior to that time;

(2) was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) was subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

(4) was found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires that our executive officers and directors and persons who beneficially own more than 10% of our common stock, file initial reports of stock ownership and reports of changes in stock ownership with the Securities and Exchange Commission. Officers, directors, and greater than 10% owners are required by applicable regulations to furnish our Company with copies of all Section 16(a) forms that they file.

Based solely on a review of the copies of such forms furnished to us or written representations from certain persons, we believe that during our calendar year ended December 31, 2018, all filing requirements applicable to our officers, directors and 10% stockholders were met by such persons.

Code of Ethics

We have adopted a Code of Ethics that applies to all of our directors and executive officers serving in any capacity for our Company, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, which Code of Ethics was attached to our Form 10-K annual Report for the year ended December 31, 2003. See Part IV, Item 15.

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Nominating Committee

We have not established a Nominating and Corporate Governance Committee because we believe that the three members currently comprising our Board of Directors are able to effectively manage the issues normally considered by a Nominating and Corporate Governance Committee.

Audit Committee

Due to the size and status of our Company we have no Audit Committee, and are not required to have an audit committee.  We do not believe the lack of an Audit Committee will have any adverse effect on our financial statements, based upon our current operations. We will assess whether an audit committee may be necessary in the future.

Item 11. Executive Compensation

The following table sets forth the aggregate compensation paid by us for services rendered during the periods indicated:

SUMMARY COMPENSATION TABLE

Name and Principal Position (a)	Year (b)	Salary ($) (c)	Bonus ($) (d)	Stock Awards ($) (e)	Option Awards ($) (f)	Non-Equity Incentive Plan Com- pensation($) (g)	Nonqualified  Deferred Compensation ($) (h)	All  Other Compensation($) (i)	Total Earnings ($) (j)
Kim Boyce CEO & Director	12/31/18 12/31/17 12/31/16	$102,200 $102,200 $102,200	- - -	40,000 225,000 201,405	- - -	- - -	- - -	- - -	$142,200 $327,200 $303,605
Tom Tait VP & Director	12/31/18 12/31/17 12/31/16	$47,640 $47,640 $47,640	- - -	4,000    6,672    6,000	- - -	- - -	- - -	- - -	$51,640 $54,312 $53,640
Keith Merrell, CFO	12/31/18 12/31/17 12/31/16	$12,104 $  9,000 $  9,000	- - -	3,240   2,560   4,860	- - -	- - -	- - -	- - -	$15,344 $11,560 $13,860

Outstanding Equity Awards

At December 31, 2018, there are no outstanding equity awards.

Compensation of Directors

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)
None	None	None	None	None	None	None	None

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Item 12. Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners

The following table sets forth, as of March 15, 2019, the names, addresses and number of shares of common stock beneficially owned by all persons known to the management of Reflect Scientific to be beneficial owners of more than 5% of the outstanding shares of common stock, and the names and number of shares beneficially owned by all directors of Reflect Scientific and all executive officers and directors of Reflect Scientific as a group (except as indicated, each beneficial owner listed exercises sole voting power and sole dispositive power over the shares beneficially owned).  

For purposes of this table, information as to the beneficial ownership of shares of common stock is determined in accordance with the rules of the Securities and Exchange Commission and includes general voting power and/or investment power with respect to securities. Except as otherwise indicated, all shares of our common stock are beneficially owned, and sole investment and voting power is held, by the person named. For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares of common stock, which such person has the right to acquire within 60 days after the date hereof. The inclusion herein of such shares listed beneficially owned does not constitute an admission of beneficial ownership.

All percentages are calculated based upon a total number of 79,108,086 shares of common stock outstanding as of March 15, 2019, plus, in the case of the individual or entity for which the calculation is made, that number of options or warrants owned by such individual or entity that are currently exercisable or exercisable within 60 days.

		Amount and Nature of	Percentage of Outstanding
Title of Class	Name and Address of Beneficial Owner	Beneficial Owner	Common stock
	Principal Shareholders
Common Stock	Kim Boyce   1270 South 1380 West Orem, Utah 84058	41,000,000	51.83%
	Officers and Directors
Common Stock	Kim Boyce	41,000,000	51.83%
Common Stock	Tom Tait	800,000	1.01%
Common Stock	Keith Merrell	420,333	0.57%
Common Stock	William Moon.	800,000	1.01%
	All directors and executive officers of the Company as a group (Five individuals)	43,020,333	54.42%

Changes in Control

There are no current or planned transactions that would or are expected to result in a change of control of our Company.

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Securities Authorized for Issuance under Equity Compensation Plans

Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
	(a)	(b)	(c)
Equity compensation plans approved by security holders	-	-	12,000,000
Equity compensation plans not approved by security holders	-	-	None
Total	-	-	12,000,000

Item 13. Certain Relationships and Related Transactions

Transactions with Related Persons

In December 2018, the Board of Directors approved the issuance of 1,000,000 shares of restricted common stock to the President/CEO. Also in December 2018 the Board of Directors approved the issuance of 281,000 shares of restricted common stock to officers and directors. These shares were for compensation. These shares were recorded at the trading price at the date of approval, for an average of $0.04 per share, resulting in $51,240 recorded in salaries and wages.

In May 2018, the Board of Directors approved the issuance of 1,000,000 shares of restricted stock to an employee as compensation.  These shares were recorded at the trading price at the date of approval at $0.04 per share, resulting in $40,000 recorded in salaries and wages.

In October 2017, the Board of Directors approved the issuance of 4,000,000 shares of restricted common stock to the President/CEO.  In December 2017, the Board of Directors approved the issuance of 281,000 shares of restricted common stock to officers and directors. These shares were for compensation. These shares were recorded at the trading price at the time of approval, for an average of $0.04 per share, resulting in $51,240 recorded in salaries and wages.

Parents of the Issuer

None; however Kim Boyce, our President and a director, may be deemed to be our  “Parent” by virtue of his substantial shareholdings in our Company.

Transactions with Promoters and Control Persons

There were no material transactions, or series of similar transactions, during our Company’s last five fiscal years, or any currently proposed transactions, or series of similar transactions, to which we or any of our subsidiaries was or is to be a party and in which any promoter or founder of ours or any member of the immediate family of any of the foregoing persons, had an interest.

Item 14. Principal Accounting Fees and Services

The following is a summary of the fees billed to us by our principal accountants during the fiscal years ended December 31, 2018 and 2017:

Fee Category		2018		2017
Audit Fees	$	33,000	$	30,000
Audit-related Fees	$	0	$	0
Tax Fees	$	1,900	$	1,850
All Other Fees	$	0	$	0
Total Fees	$	34,900	$	31,850

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Audit Fees - Consists of fees for professional services rendered by our principal accountants for the audit of our annual financial statements and review of the financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.

Audit-related Fees - Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit fees.”

Tax Fees - Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.

All Other Fees - Consists of fees for products and services provided by our principal accountants, other than the services reported under “Audit fees,” “Audit-related fees,” and “Tax fees” above.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

We do not have an Audit Committee; therefore, there is no Audit Committee policy in this regard. However, we do require approval in advance of the performance of professional services to be provided to us by our principal accountant. Additionally, all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.

The Board of Directors has received from our auditors the matters required to be discussed by PCAOB Auditing Standard No. 16 (Communications with Audit Committees).

Item 15. Exhibits

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*
10.6	All Temp Merger Agreement	8-K Current Report dated November 17, 2006*
	Debenture Settlement	8-K Current Report dated August 17, 2010
14	Code of Ethics	December 31, 2003 10-K Annual Report*
21	Subsidiaries of the Company	December 31, 2006 10-K Annual Report*

31.1	302 Certification of Kim Boyce	This Filing
31.2	302 Certification of Keith Merrell	This Filing
32	906 Certifications	This Filing

* Previously filed with the Securities and Exchange Commission in the form indicated and incorporated by reference

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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 June 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
*	Debenture Placement	8-K Current Reported dated June 29, 2007

* Previously filed and incorporated by reference.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act, the Company caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

REFLECT SCIENTIFIC, INC.

Date:	04/02/2019	By:	/s/Kim Boyce
			Kim Boyce, Chief Executive Officer and Director

Date:	04/02/2019	By:	/s/Keith Merrell
			Keith Merrell, Chief Financial Officer (Principal Accounting Officer)

In accordance with the Securities Exchange Act, this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:

REFLECT SCIENTIFIC, INC.

Date:	04/02/2019	By:	/s/Kim Boyce
			Kim Boyce, CEO and Director
Date:	04/02/2019	By:	/s/Tom Tait
			Tom Tait, Vice President  and Director
Date:	04/02/2019	By:	/s/William Moon
			William Moon, Director

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REFLECT SCIENTIFIC, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2018 and 2017

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C O N T E N T S

Report of Independent Registered Public Accounting Firm

27

Consolidated Balance Sheets

 28 - 29

Consolidated Statements of Operations

 30

Consolidated Statements of Shareholders’ Equity

 31

Consolidated Statements of Cash Flows

 32

Notes to the Consolidated Financial Statements

 33

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Reflect Scientific, Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Reflect Scientific, Inc. (“the Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2018 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph Regarding Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.  We believe that our audits provide a reasonable basis for our opinion.  

/s/ Sadler, Gibb & Associates, LLC

We have served as the Company’s auditor since 2015.

Salt Lake City, UT

April 2, 2019  

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Consolidated Balance Sheets

ASSETS

		December 31, 2018		December 31, 2017
CURRENT ASSETS
Cash	$	220,427	$	235,858
Accounts receivable, net		155,543		122,435
Inventory, net		142,325		155,352
Prepaid assets		3,510		3,100
Total Current Assets		521,805		516,745
FIXED ASSETS, NET		7,766		-
OTHER ASSETS
Intangible assets, net		-		-
Goodwill		60,000		60,000
Deposits		3,100		3,100
Total Other Assets		63,100		63,100
TOTAL ASSETS	$	592,671	$	579,845

The accompanying notes are an integral part of these consolidated financial statements.

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REFLECT SCIENTIFIC, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Continued)

LIABILITIES AND SHAREHOLDERS’ EQUITY

		December 31, 2018		December 31, 2017
CURRENT LIABILITIES
Accounts payable	$	52,450	$	53,507
Short-term line of credit		9,878		-
Customer deposits		12,500		70,812
Income taxes payable		100		100
Total Current Liabilities		74,928		124,419
Total Liabilities		74,928		124,419
Commitments and contingencies		-		-
SHAREHOLDERS’ EQUITY
Preferred stock, $0.01 par value, authorized  5,000,000 shares; no shares issued and outstanding		-		-
Common stock, $0.01 par value, authorized  100,000,000  shares; 79,108,086 and 71,312,086 shares issued and outstanding, respectively		791,080		713,120
Additional paid in capital		20,027,370		19,793,490
Accumulated deficit		(20,300,707)		(20,051,184)
Total Shareholders’ Equity		517,743		455,426
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	592,671	$	579,845

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Operations

	For the Years Ended December 31,
		2018		2017
REVENUES	$	1,551,985	$	1,065,777
COST OF GOODS SOLD		487,185		405,935
GROSS PROFIT		1,064,800		659,842
OPERATING EXPENSES
Salaries and wages		585,346		656,959
Rent expense		39,285		29,892
Research and development expense		104,046		46,696
General and administrative expense		584,985		328,484
Total Operating Expenses		1,313,662		1,062,031
OPERATING LOSS		(248,862)		(402,189)
OTHER INCOME (EXPENSE)
Interest expense		(661)		-
Total Other Income (Expenses)		(661)		-
NET LOSS BEFORE INCOME TAX EXPENSE		(249,523)		(402,189)
Income tax expense		-		-
NET LOSS	$	(249,523)	$	(402,189)
NET LOSS PER SHARE – BASIC AND DILUTED	$	(0.00)	$	(0.01)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – BASIC AND DILUTED		74,631,494		66,326,382

The accompanying notes are an integral part of these consolidated financial statements.

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REFLECT SCIENIFIC, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

                                                                   Common Stock

	Shares	Amount	Additional Paid-In Capital	Accumulated Deficit			Total
Balance, December 31, 2016	65,401,086	654,010	19,566,472		(19,648,995)	571,487
Stock-based compensation	4,781,000	47,810	184,078		-	231,888
Common stock issued for consulting services	1,130,000	11,300	42,940		-	54,240
Net loss for the year ended December 31, 2017					(402,189)	(402,189)
Balance, December 31, 2017	71,312,086	713,120	19,793,490		(20,051,184)	455,426
Stock-based compensation	2,606,000	26,060	78,180		-	104,240
Common stock issued for consulting services	5,190,000	51,900	155,700		-	207,600
Net loss for the year ended December 31, 2018					(249,523)	(249,523)
Balance, December 31, 2018	79,108,086	$ 791,080	$ 20,027,370		$ (20,300,707)	$ 517,743

The accompanying notes are an integral part of these consolidated financial statements.

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REFLECT SCIENTIFIC, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

		For the Years Ended December 31
		2018		2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(249,523)	$	(402,189)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation		2,984		-
Stock based compensation		104,240		231,888
Common stock issued for consulting services		207,600		54,240
Changes in operating assets and liabilities:
Accounts receivable		(33,108)		(49,011)
Inventory		13,027		71,615
Prepaid assets		(410)		-
Accounts payable and accrued expenses		(1,057)		(5,461)
Customer deposits		(58,312)		70,812
Net Cash from Operating Activities		(14,559)		(28,106)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(10,750)		-
Net Cash used in Investing Activities		(10,750)		-
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term lines of credit		9,878		-
Net Cash from Financing Activities		9,878		-
NET CHANGE IN CASH		(15,431)		(28,106)
CASH AT BEGINNING OF PERIOD		235,858		263,964
CASH AT END OF PERIOD	$	220,427	$	235,858
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Paid For:
Interest	$	661	$	-
Income taxes	$	-	$	-

The accompanying notes are an integral part of these consolidated financial statements.

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REFLECT SCIENTIFIC, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 31, 2018 and 2017

NOTE 1 -

ORGANIZATION AND DESCRIPTION OF BUSINESS

Cole, Inc. (the Company) was incorporated under the laws of the State of Utah on November 3, 1999. The Company was organized to engage in any lawful activity for which corporations may be organized under the Utah Revised Business Corporation Act.  On December 30, 2003 the Company changed its name to Reflect Scientific, Inc.  Reflect has two wholly owned subsidiaries, Cryometrix and Julie Martin Scientific Technology, which are described below.

Reflect Scientific

Reflect Scientific designs, develops and sells scientific equipment for the Life Science and Manufacturing industries. The Company’s business activities include the manufacture and distribution of unique laboratory consumables and disposables such as filtration and purification products, customized sample handling vials, electronic wiring assemblies, high temperature silicone, graphite and vespel/graphite sealing components for use by original equipment manufacturers (“OEM”) in the chemical analysis industries, primarily in the field of gas/liquid chromatography.  

The Company’s chemical detector products serve the analytical instrumentation sector of the Life Sciences market. These optically based chemical detection instruments provide a cost-effective, high-performance alternative for original equipment manufacturers (OEM).   One major use for these detectors is the analysis of whole blood for metabolic diseases.

Cryometrix

The Company’s Cryometrix ultra low temperature freezers have technologies that provide energy savings and other critically important benefits to cryo-storage customers in the Life Science related industries.  Ultra low temperature freezers are used in multiple industries for the storage of everything from blood to cancer vaccines.  These types of freezers are used by companies such as hospitals and biotechnology research facilities.  The adaptation of the freezer technology to refrigeration systems used on trailers (“reefers”) for transporting perishable items opens a significant new market.  Trailers can easily be retrofit with the Cryogenix unit, which provides pollutant free and more efficient operations at a cost savings compared to the diesel powered units currently used.  

Julie Martin Scientific Technology (“JMST”)

The Company manufactures and sells a line of chemical detectors which have broad application in research facilities and laboratories.  The detectors have a price advantage over competitive products, making them affordable for use in laboratories at educational institutions.  The sale of chemical detectors also generates follow on sales of consumable supplies.   

NOTE 2 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Accounting Method

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.

b. Revenue Recognition

We sell our specialty science and environmental lab supplies through direct sales and through distributor relationships.  We sell our ultra-low temperature freezers through consultants and commission-only sales personnel.   Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps:

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Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers.

Identify the performance obligations in the contract. Generally, our contracts with our laboratory supply customers do not include multiple performance obligations to be completed over a period of time. Our performance obligations generally relate to delivering specialty laboratory products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds. We do not have significant returns. We do not typically offer extended warranty or service plans. For ultra-low temperature freezers sold to customers which are built to order, generally, 50% of the value of the contract is paid by the customer prior to work beginning on manufacturing the freezer.  Upon completion of manufacturing and testing the customer will accept the unit and make payment of the remaining balance on the contract, at which time control passes to the customer and we have satisfied our performance obligation and recognize revenues.  The customer may either arrange to transport the unit with a carrier uses or ask the Company to arrange such shipment, the charges of which are the responsibility of the customer.  In some instances, a customer may, after accepting the unit, request that it be upgraded with additional hardware or software options, which is a new contract and performance obligation.

Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of December 31, 2018 contained a significant financing component.

Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our laboratory supply contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer's control at contractually stated pricing.  The freezers likewise do not have milestone or percentage of completion clauses in the contract, so revenue is only recognized when the work has been completed.

Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon shipment of goods, or, with our freezers, upon final acceptance of the unit by the customer, in accordance with the terms of each contract with the customer. We do not have significant service revenue.

A part of our customer base is made up of international customers.  The following table presents Reflect Scientific revenues disaggregated by region and product type:

		December 31, 2018				December 31, 2017
Segments		Consumer Products	Long-term Contracts	Total		Consumer Products	Long-term Contracts	Total
Domestic	$	1,119,597	--	1,119,597	$	828,109	--	828,109
International		432,388	--	432,388		237,668	--	237,668
	$	1,551,985	--	1,551,985	$	1,065,777	--	1,065,777
Components		1,113,990	--	1,113,990	$	926,424	--	926,424
Engineering services		437,995	--	437,995		139,353	--	139,353
	$	1,551,985	--	1,551,985	$	1,065,777	--	1,065,777

c. Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

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d. Cash

The Company considers all deposit accounts and investment accounts with an original maturity of 90 days or less to be cash equivalents.  

e. Accounts Receivable

The Company maintains an allowance for doubtful accounts to provide for losses arising from customers’ inability to make required payments.  If there is deterioration of our customers’ credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required. The Company estimates allowance for doubtful accounts based on the aged receivable balances and historical losses.  The Company charges off uncollectible accounts when management determines there is no possibility of collecting the related receivable.The Company considers accounts receivable to be past due or delinquent based on contractual terms, which is generally net 30 days.

The Company charged $0 and $236, respectively, to bad debt expense for the years ended December 31, 2018 and 2017. As the Company has historically experienced minimal bad debts, management feels the allowance for doubtful accounts balance of $4,000 at December 31, 2018 to be an adequate reserve based on the experience seen over multiple years.

f. Fixed Assets

Fixed assets are stated at cost.  Expenditure for minor repairs, maintenance, and replacement parts which do not increase the useful lives of the assets are charged to expense as incurred.  All major additions and improvements are capitalized. Depreciation is computed using the straight-line method.  The lives over which the fixed assets are depreciated range from 5 to 7 years, except for computer equipment, which is depreciated over a 3 year life.  

g. Inventory

Inventories are stated at the lower of cost or market value based upon the average cost inventory method.  The Company’s inventory consists of parts for scientific vial kits, refrigerant gases, components for the imaging and inspection systems which it builds, and other scientific items. An allowance is recorded when it is determined that the amount owing is at high risk.  The Company recorded $86,339 and $62,038 in additions to the inventory allowance for the years 2018 and 2017, respectively.

h. Advertising Expense

The Company follows the policy of charging the costs of advertising to expense as incurred.  The Company recognized $10,977 and $14,646 of advertising expense during the years ended December 31, 2018, and 2017, respectively.

i. Newly Issued Accounting Pronouncements

Public Law No. 115-97, known as the Tax Cuts and Jobs Act “the “Tax Act”). Enacted on December 22, 2017, reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018.  Also on December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act.  SAB 118 provides a measurement period of up to one year from the enactment date to complete the accounting.  Any adjustments during this measurement period will be included in net earnings from continuing operations as an adjustment to income tax expense in the reporting period when such adjustments are determined.  As the Company has net operating loss carryforwards which will offset tax liability for the coming year or years, no adjustments for the effect of the income tax rate change is reflected in our financial statements.

In February 2018, the Financial Standards Accounting Board (“FASB”) issued Accounting Statement Update No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”  This ASU allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for certain income tax effects stranded in AOCI as a result of the Tax Act.  The reclassification eliminates the stranded tax effects resulting from the Tax Act and is intended to improve the usefulness of information reported to financial statement users.  ASU No. 2018-02 is effective for reporting periods beginning on January 1, 2019; early adoption is permitted. The Company does not currently have amounts to be reclassified under this and therefore believes it will not have an impact on its financial statements and statements of operations.

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In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718),” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity of financial reporting for non-employee share-based payments. Currently, the accounting requirements for non-employee and employee share-based payments are significantly different. ASU 2018-07 expands the scope of Topic 718, which currently only includes share-based payments to employees, to include share-based payments to non-employees for goods or services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, “Equity — Equity-Based Payments to Nonemployees”. The amendments to ASU 2018 - 07 are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of ASU No. 2014-09, (Topic 606), “Revenue from Contracts with Customers”. The Company is currently evaluating ASU 2018-07 and its impact on its condensed consolidated financial statements or disclosures.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company is in the process of evaluating the impact of the final rule on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” which removes Step 2 from the goodwill impairment test and replaces the qualitative assessment. Impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. Under this revised guidance, failing Step 1 will always result in a goodwill impairment. The amendments in this update should be applied prospectively for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017. The Company is evaluating the effect the implementation will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which changes lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. The standard requires a modified retrospective approach, with restatement of the prior periods presented in the year of adoption, subject to any FASB modifications. This standard will be effective for the first annual reporting period beginning after December 15, 2018. We anticipate adopting this standard on January 1, 2019. In evaluating the effect that ASU No. 2016-02 will have on our consolidated financial statements and related disclosures we believe the impact will be minimal to our ongoing consolidated statements of operations.

The Company has reviewed all other FASB-issued ASU accounting pronouncements and interpretations thereof that have effective dates during the period reported and in future periods.  The Company has carefully considered the new pronouncements that alter previous GAAP and does not believe that any new or modified principles will have a material impact on the company’s reported financial position or operations in the near term.  The applicability of any standard is subject to the formal review of the Company’s financial management and certain standards are under consideration.

j. Earnings per Share

The computation of basic earnings per share of common stock is based on the weighted average number of shares outstanding during the period.  Diluted EPS is computed by dividing net earnings by the weighted-average number of common shares and dilutive common stock equivalents during the period.  Common stock equivalents are not used in calculating dilutive EPS when their inclusion would be anti-dilutive.  At December 31, 2018 and 2017, the Company had no common stock equivalents.    

k. Shipping and Handling Fees and Costs

The Company records all shipping and handling costs as operating costs.  Freight paid on outgoing shipments in 2018 and 2017 was $47,670 and $28,355, respectively, and is recorded in general and administrative expense.

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l. Income Taxes

Deferred taxes are provided on an asset and liability approach whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company’s policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense.  For the years ended December 31, 2018 and 2017, it did not recognize any interest or penalties in its Statement of Operations, nor did it have any interest or penalties accrued in its Balance Sheet at December 31, 2018 and 2017 relating to unrecognized benefits.

m. Principles of consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, which include Cryometrix (previously Cryomastor).  All subsidiaries are wholly owned.  All material intercompany accounts and transactions are eliminated in consolidation.

n. Research and development expense

The Company accounts for research and development costs in accordance with the Financial Accounting Standards Board's Accounting Standard Codification Topic 730 “Research and Development".  Under ASC 730, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred.  Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved.  Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.  The Company had $104,046 and $46,696 in research and product development for the years ended December 31, 2018 and 2017, respectively.

o. Stock-Based Compensation

The Company, in accordance with ASC 718, Compensation – Stock Compensation, records all share-based payments to employees at the grant-date fair value of the equity instruments issued. In accordance with ASC 718-10-30-9, Measurement Objective – Fair Value at Grant Date, the Company uses the closing price of the stock, as quoted by NASDAQ, on the date of the grant.  The Company believes this pricing method provides the best estimate of fair the fair value of the consideration given. Compensation cost is recognized over the requisite service period.

The Company, in accordance with ASC 505, Compensation – Stock Compensation, establishes the value of equity instruments issued to non-employees for goods and services by using the closing price of the stock, as quoted by NASDAQ, on the date of the grant.  The Company believes this method fairly establishes the value of the goods and/or services received.

p. Intangible Assets

Intangible assets include trademarks, trade secrets, patents, customer lists and goodwill acquired through acquisition of subsidiaries.  The patents have been registered with the United States Patent and Trademarks Office.  The costs of obtaining patents are capitalized as incurred.  Intangibles, except for goodwill, are amortized over their estimated useful lives.  The Company regularly evaluates whether events or circumstances have occurred that indicate possible impairment and relies on a number of factors, including operating results, business plans, economic projections, and anticipated future cash flows. The Company uses an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value. Fair value is determined through various valuation techniques, including cost-based, market and income approaches as considered necessary. Accordingly, the Company recorded no impairment of long-lived assets during the years ended December 31, 2018 and 2017.

37

q. Goodwill

Goodwill represents the excess of purchase price of an acquisition over the fair value of net assets acquired. Goodwill is not amortized but instead is tested for impairment, at a reporting unit level, annually and when events and circumstances warrant an evaluation. The Company evaluates goodwill on an annual basis, as of the end of the fourth quarter, and whenever events and changes in circumstances indicate that there may be a potential impairment. In making this assessment, management relies on a number of factors, including operating results, business plans, economic projections, anticipated future cash flows, business trends and market conditions. Accordingly, the Company recorded no impairment of goodwill for the years ended December 31, 2018 and 2017.

NOTE 3   GOING CONCERN

The Company continues to accumulate significant operating losses and has an accumulated deficit of $20,300,707 at December 31, 2018.  These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Management has taken a number of actions to reduce expenses. Management is seeking additional funding through the capital markets to facilitate the settlement of the remaining debentures, as well as to provide operating capital for its operations. However, there is no assurance that additional funding will be available on acceptable terms, if at all.

NOTE 4 -

FIXED ASSETS

Fixed assets and related depreciation for the period are as follows:

		December 31, 2018		December 31, 2017
Machinery and equipment	$	142,752	$	132,002
Furniture and fixtures		2,697		2,697
Computer and office equipment		2,390		2,390
Leasehold improvements		10,164		10,164
Accumulated depreciation		(150,237)		(147,253)
Total Fixed Assets	$	7,766	$	-

Depreciation expense for the years ended December 31, 2018, and 2017, was $2,984 and $-0-, respectively.

NOTE 5 -

INVENTORIES

Inventory consisted of the following at December 31, 2018 and 2017:

		December 31, 2018		December 31, 2017
Finished goods	$	228,664	$	241,691
Inventory allowance		(86,339)		(86,339)
Total Inventory, net	$	142,325	$	155,352

NOTE 6 -

COMMITMENTS AND CONTINGENCIES

Operating Lease Obligations

The Company leases its office and warehouse space under a non-cancelable lease agreement accounted for as operating leases.  The Company also leases an automobile under a similar non-cancelable lease agreement, which is also accounted for as an operating lease.

Building Lease - Orem, Utah: The Company leases a manufacturing and office facility with 6,000 square feet of space.  We lease this facility at $3,480 per month on a lease with an expiration date of November 30, 2020.

38

Rent expense was $39,285 and $29,892 for the years ended December 31, 2018, and 2017, respectively.

Automobile Lease – The Company currently leases one vehicle with a monthly lease payment of $629 per month.  The automobile lease will expire on July 7, 2021.

Automobile lease expense was $7,548 and $6,263 for the years ended December 31, 2018, and 2017, respectively.

Minimum rental payments under the non-cancelable operating leases are as follows:

Years ending December 31,		Amount
2019	$	50,669
2020		48,159
2021		3,774
	$	102,602

NOTE 7 – PREFERRED STOCK

In November 2004 the Company amended its Articles of Incorporation so as to authorize 5,000,000 shares of preferred stock. Of this total, 750,000 shares have been designated as “Series A Convertible Preferred Stock”. As of December 31, 2018 and 2017, no shares of the preferred stock are issued and outstanding.

Dividends

The holders of the Series A Preferred Stock would be entitled to dividends at the rate of 8 percent per year of the liquidation preference of $1.00 per share, payable annually, if and when declared by the board of directors.  Dividends are not cumulative and the board of directors is under no obligation to declare dividends.

Convertibility

The Series A Preferred Stock is convertible into the Company’s common stock by dividing $1.00 plus any unpaid dividends by 50% of the five-day average closing bid price of the common shares.

NOTE 8 -

COMMON STOCK TRANSACTIONS

During the years ended December 31, 2018 and 2017, the following stock transactions occurred:

·

During 2018, the Board of Directors approved the issuance of 1,000,000 shares of restricted common stock, valued at $40,000, to the President/CEO.  

During 2018, the Board of Directors approved the issuance of 200,000 shares of restricted common stock, valued at $8,000 to Directors of the Company.

During 2018, the Board of Directors approved the issuance of 81,000 shares of restricted common stock, valued at $3,240 to the CFO of the Company.

During 2018, in addition to the shares stated above, the Board of Directors approved the issuance of 1,325,000 shares of restricted common stock, valued at $53,000, to employees and 5,190,000 shares of restricted common stock, valued at $207,600, to consultants

·

During 2017, the Board of Directors approved the issuance of 4,000,000 shares of restricted common stock, valued at $194,400, to the President/CEO.  

During 2017, the Board of Directors approved the issuance of 200,000 shares of restricted common stock, valued at $9,600 to Directors of the Company.

39

During 2017, the Board of Directors approved the issuance of 81,000 shares of restricted common stock, valued at $3,888 to the CFO of the Company.

During 2017, the Board of Directors approved the issuance of 500,000 shares of restricted common stock, valued at $24,000, to employees and 1,130,000 shares of restricted common stock, valued at $54,240, to consultants for services rendered.  

NOTE 9 -

CONCENTRATIONS OF RISK

Cash in Excess of Federally Insured Amount

While the Company, at December 31, 2018 and 2017 were below the FDIC insurance limit, at times during those years the Company had cash balances that exceed the federally insured limits of $250,000 per depositor per banking institution. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk with respect to its cash balances.

Sales and Accounts Receivable

The Company has four major customers who represent a significant portion of revenue.  These four customers represented 44% and 54% of total sales revenue for the year ended December 31, 2018 and 2017, respectively.  At December 31, 2018 and 2017, accounts receivable balances from these customers represent 41% and 64% respectively, of the total receivables.  The Company has strong relationships with each of these customers and does not believe this concentration poses a significant risk due to those long-term relationships and uniqueness of the products they purchase from the Company.  We have identified primary and secondary sources for each of the products we purchase for resale and for the raw materials we use to manufacture our products, so do not anticipate any difficulty in filling the orders placed by our customers.

NOTE 10 -

LINE OF CREDIT

The Company has a credit line with a commercial bank of $100,000 secured by its inventory and accounts receivable bearing a variable interest rate, which was 5.50% as of the balance sheet date, and automatically renews so long as the Company is in compliance with the loan covenants. As of December 31, 2018, there was a $9,878 drawn against that line of credit, leaving an available balance of $90,122.  The line automatically renews on April 1 of each year and the $100,000 credit amount was available at December 31, 2018.  

NOTE 11 – COMMON STOCK OPTIONS

On December 31, 2007, the Company’s Board of Directors approved an equity plan.  The equity plan known as the 2007 Equity Incentive Plan (the “Plan”) reserves up to 6,000,000 shares of the Company’s authorized common stock for issuance to officers, directors, employees and consultants under the terms of the Plan.  On December 31, 2009, the Company’s board of directors amended the Plan to authorize 12,000,000 shares.  The Plan permits the Board of Directors to issue stock options and restricted stock.  At December 31, 2018 there were no options outstanding.  The plan has a current expiration date of December 30, 2019.

NOTE 12 – INTANGIBLE ASSETS

Definite lived intangible assets are stated at cost and amortized using the straight-line method.  The remaining lives over which the intangible assets will be amortized is approximately 2 years, at which time the intangible assets will become fully amortized.  

40

Intangible assets and related amortization and impairment for the period are as follows:

December 31, 2018
	Cost	Accumulated Amortization	Net Book Value
Patents	$       1,403,045	$       (1,403,045)	$             -
Customer lists	414,532	(414,532)	-
Totals	$       1,817,577	$       (1,817,577)	$             -

December 31, 2017
	Cost	Accumulated Amortization	Net Book Value
Patents	$       1,403,045	$       (1,403,045)	$             -
Customer lists	414,532	(414,532)	-
Totals	$       1,817,577	$       (1,817,577)	$             -

Amortization expense for the years ended December 31, 2018, and 2017, was $0 and $0, respectively.

NOTE 13 – ROYALTIES

A royalty agreement was executed with JMST as a condition of the Company’s acquisitions during 2006.  Terms of the royalty agreement are as follows:

JMST – David Carver will receive a royalty payment on gross revenues related to revenues derived from the Carver Patents or Carver Technology.  Such payments are due on revenue in excess of $500,000 derived from products under the Carver Patents or Carver Technology.  The royalty payment is 2.5% on the revenue in excess of $500,000 and is payable quarterly.  Payments are to be made in Reflect Scientific’s common stock not to exceed 500,000 shares in total. New products developed from the Carver Technology are subject to a royalty of 3% of gross revenues in excess of $100,000, with an additional 2% if gross revenues exceed $600,000. Royalties will also be paid in our common stock annually.  Common stock will be valued at $3.00 per share for these purposes.  Royalty payments are only due for years where there are valid Carver Patents.

As sales did not reach or exceed the triggering threshold, no royalty payments were made under the royalty agreement during 2018 and 2017.  In December 2018, management made the decision to remove detectors from their product line due to lack of demand for the product.

NOTE 14 – INCOME TAXES

The provision (benefit) for income taxes for the years ended December 31, 2018 and 2017 consist of the following:

	2018		2017
Federal:
Current	$	-	$	-
Deferred		-		-
State:
Current		-		-
Deferred		-		-
	$	-	$	-

41

Net deferred tax assets consist of the following components as of December 31, 2018 and 2017:

		2018			2017
Deferred tax assets (liabilities):
NOL Carryover		$	2,568,963		$	2,509,214
Stock Based Compensation			283,611			240,015
Depreciation and Amortization			(557,735)			(481,815)
Inventory Reserves			18,490			18,490
R&D Tax Credits			(1,473)			(23,323)
	Debenture Interest Payable			(474,381)			(474,381)
	Other Reserves			13,060			13,060
Valuation Allowance			(1,850,535)			(1,801,260)
Net deferred tax asset (liability)		$	-		$	-

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2018 and 2017 due to the following:

	2018		2017
Tax at statutory rate:	$	(52,400)	$	(140,766)
Effects of:
Meals and Entertainment		(3,125)		(3,485)
Stock-Based Compensation		(21,890)		(81,161)
Depreciation and Amortization		75,512		125,853
Inventory Reserve		(3,808)		(22,290)
R & D Tax Credits		(21,850)		(16,344)
Other, net		-		913
Change in Valuation Allowance		27,561		137,281
	$	-	$	-

At December 31, 2018, the Company had net operating loss carryforwards of approximately $7,520,180 that may be offset against future income from the year 2018 through 2038.  

No tax benefit has been reported in the December 31, 2018 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

NOTE 15 – RELATED PARTY TRANSACTIONS

Stock Issuances

In December 2018 the Board of Directors approved the issuance of 1,000,000 shares of restricted common stock to the President/CEO and the issuance of 281,000 shares of restricted common stock to other officers and directors. These shares were for compensation. These shares were recorded at the trading price at the time of approval, for an average of $0.04 per share, resulting in $51,240 recorded as stock-based compensation expense.

In October 2017 the Board of Directors approved the issuance of 4,000,000 shares of restricted common stock to the President/CEO.  In December 2017 the Board of Directors approved the issuance of 281,000 shares of restricted common stock to officers and directors. These shares were for compensation. These shares were recorded at the trading price at the time of approval, for an average of $0.05 per share, resulting in $231,888 recorded as stock-based compensation expense.

NOTE 16 – SUBSEQUENT EVENTS

None.

42

EX-31

Exhibit 31   

EX-31

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

     I, Keith L. Merrell certify that:

          1.   I have reviewed this Annual Report on Form 10-K of Reflect Scientific, Inc.;

     2.   Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

     3.   Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

     4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

b)  Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: 4/02/2019                             Signature:/s/Keith L. Merrell

                                                          Keith L. Merrell

                                                          Chief/Principal Financial Officer and Treasurer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Reflect Scientific, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), we, Kim Boyce, our Chief Executive Officer and director and Keith L. Merrell, our Chief Financial Officer and Treasurer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Annual Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in our Annual Report fairly presents, in all material respects, our financial condition and result of operations.

Dated: 4/02/2019                              /s/Kim Boyce

                                                           Kim Boyce

                                                           Chief Executive Officer and Director

Dated: 4/02/2019                             /s/Keith L. Merrell

                                                          Keith L. Merrell

                                                          Chief/Principal Financial Officer and Treasurer

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2018	Mar. 28, 2019	Jun. 30, 2018
Details
Registrant Name	REFLECT SCIENTIFIC INC
Registrant CIK	0001103090
SEC Form	10-K
Period End date	Dec. 31, 2018
Fiscal Year End	--12-31
Trading Symbol	RSCF
Tax Identification Number (TIN)	870642556
Number of common stock shares outstanding		79,108,086
Public Float			$ 1,804,388
Filer Category	Non-accelerated Filer
Current with reporting	Yes
Voluntary filer	No
Well-known Seasoned Issuer	No
Shell Company	false
Small Business	true
Emerging Growth Company	true
Ex Transition Period	false
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Entity Incorporation, State Country Name	Utah

XML

Consolidated Balance Sheets - USD ($)	Dec. 31, 2017	Dec. 31, 2016
CURRENT ASSETS
Cash	$ 220,427	$ 235,858
Accounts receivable, net	155,543	122,435
Inventory, net	142,325	155,352
Prepaid assets	3,510	3,100
Total Current Assets	521,805	516,745
FIXED ASSETS, NET	7,766	0
OTHER ASSETS
Intangible assets, net	0	0
Goodwill	60,000	60,000
Deposits	3,100	3,100
Total Other Assets	63,100	63,100
TOTAL ASSETS	592,671	579,845
CURRENT LIABILITIES
Accounts payable and accrued expense	52,450	53,507
Short-term lines of credit	9,878	0
Customer deposits	12,500	70,812
Income taxes payable	100	100
Total Current Liabilities	74,928	124,419
Total Liabilities	74,928	124,419
COMMITMENTS AND CONTINGENCIES	0	0
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, authorized 5,000,000 shares; No shares issued and outstanding	0	0
Common stock, $0.01 par value, authorized 100,000,000 shares; 79,108,086 and 71,312,086 issued and outstanding, respectively	791,080	713,120
Additional paid in capital	20,027,370	19,793,490
Accumulated deficit	(20,300,707)	(20,051,184)
Total Stockholders' Equity	517,743	455,426
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 592,671	$ 579,845

XML

Consolidated Balance Sheets - Parenthetical - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Details
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Preferred Stock, Shares Issued	0	0
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	100,000,000	100,000,000
Common Stock, Shares, Outstanding	79,108,086	71,312,086
Common Stock, Shares, Issued	79,108,086	71,312,086

XML

Consolidated Statements of Operations - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Details
REVENUES	$ 1,551,985	$ 1,065,777
COST OF GOODS SOLD	487,185	405,935
GROSS PROFIT	1,064,800	659,842
OPERATING EXPENSES
Salaries and wages	585,346	656,959
Rent expense	39,285	29,892
Research and development expense	104,046	46,696
General and administrative expense	584,985	328,484
Total Operating Expenses	1,313,662	1,062,031
OPERATING PROFIT (LOSS)	(248,862)	(402,189)
OTHER INCOME (EXPENSE)
Interest Expense	(661)	0
Total Other Income (Expenses)	(661)	0
NET LOSS BEFORE TAXES	(249,523)	(402,189)
Income tax benefit (expense)	0	0
NET LOSS	$ (249,523)	$ (402,189)
NET INCOME (LOSS) PER SHARE - BASIC	$ (0.00)	$ (0.01)
NET INCOME (LOSS) PER SHARE - DILUTED	$ (0.00)	$ (0.01)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED		66,326,382

XML

Consolidated Statements of Stockholders' Equity - USD ($)	Total	Common Stock	Additional Paid-in Capital	Retained Earnings
Balance, December 31, 2016 at Dec. 31, 2016	$ 571,487	$ 654,010	$ 19,566,472	$ (19,648,995)
Balance, December 31, 2016 at Dec. 31, 2016		65,401,086
Stock-based compensation	231,888	$ 47,810	184,078	0
Stock-based compensation		4,781,000
Common stock issued for consulting services	54,240	$ 11,300	42,940	0
Common stock issued for consulting services		1,130,000
Net loss	$ (402,189)			(402,189)
Common Stock, Shares, Outstanding, Ending Balance at Dec. 31, 2017	71,312,086	71,312,086
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Dec. 31, 2017	$ 455,426	$ 713,120	19,793,490	(20,051,184)
Stock-based compensation	104,240	$ 26,060	78,180	0
Stock-based compensation		2,606,000
Common stock issued for consulting services	207,600	$ 51,900	155,700	0
Common stock issued for consulting services		5,190,000
Net loss	$ (249,523)			(249,523)
Common Stock, Shares, Outstanding, Ending Balance at Dec. 31, 2018	79,108,086	79,108,086
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Dec. 31, 2018	$ 517,743	$ 791,080	$ 20,027,370	$ (20,300,707)

XML

Condensed Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (249,523)	$ (402,189)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	2,984	0
Stock-based compensation	104,240	231,888
Common stock issued for consulting services	207,600	54,240
Accounts receivable	(33,108)	(49,011)
Inventory	13,027	71,615
Prepaid expenses	(410)	0
Accounts payable and accrued expenses	(1,057)	(5,461)
Customer deposits	(58,312)	70,812
Net Cash (used in) provided by Operating Activities	(14,559)	(28,106)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets	(10,750)	0
Net Cash used in investing Activities	(10,750)	0
CASH FLOWS FROM FINANCING ACTIVITIES
Net funds received from line of credit	9,878	0
Net Cash used in Financing Activities	9,878	0
NET CHANGE IN CASH	(15,431)	(28,106)
CASH AT BEGINNING OF PERIOD	235,858	263,964
CASH AT END OF PERIOD	220,427	235,858
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest	661	0
Income taxes	$ 0	$ 0

XML

Organization, Consolidation and Presentation of Financial Statements

12 Months Ended

Dec. 31, 2018

Notes

Organization, Consolidation and Presentation of Financial Statements

NOTE 1 -    ORGANIZATION AND DESCRIPTION OF BUSINESS

Cole, Inc. (the Company) was incorporated under the laws of the State of Utah on November 3, 1999. The Company was organized to engage in any lawful activity for which corporations may be organized under the Utah Revised Business Corporation Act.  On December 30, 2003 the Company changed its name to Reflect Scientific, Inc.  Reflect has two wholly owned subsidiaries, Cryometrix and Julie Martin Scientific Technology, which are described below.

Reflect Scientific

Reflect Scientific designs, develops and sells scientific equipment for the Life Science and Manufacturing industries. The Company’s business activities include the manufacture and distribution of unique laboratory consumables and disposables such as filtration and purification products, customized sample handling vials, electronic wiring assemblies, high temperature silicone, graphite and vespel/graphite sealing components for use by original equipment manufacturers (“OEM”) in the chemical analysis industries, primarily in the field of gas/liquid chromatography. 

The Company’s chemical detector products serve the analytical instrumentation sector of the Life Sciences market. These optically based chemical detection instruments provide a cost-effective, high-performance alternative for original equipment manufacturers (OEM).   One major use for these detectors is the analysis of whole blood for metabolic diseases.

Cryometrix

The Company’s Cryometrix ultra low temperature freezers have technologies that provide energy savings and other critically important benefits to cryo-storage customers in the Life Science related industries.  Ultra low temperature freezers are used in multiple industries for the storage of everything from blood to cancer vaccines.  These types of freezers are used by companies such as hospitals and biotechnology research facilities.  The adaptation of the freezer technology to refrigeration systems used on trailers (“reefers”) for transporting perishable items opens a significant new market.  Trailers can easily be retrofit with the Cryogenix unit, which provides pollutant free and more efficient operations at a cost savings compared to the diesel powered units currently used. 

Julie Martin Scientific Technology (“JMST”)

The Company manufactures and sells a line of chemical detectors which have broad application in research facilities and laboratories.  The detectors have a price advantage over competitive products, making them affordable for use in laboratories at educational institutions.  The sale of chemical detectors also generates follow on sales of consumable supplies.   

NOTE 2 -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Accounting Method

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.

b. Revenue Recognition

We sell our specialty science and environmental lab supplies through direct sales and through distributor relationships.  We sell our ultra-low temperature freezers through consultants and commission-only sales personnel.   Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps:

Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers.

Identify the performance obligations in the contract. Generally, our contracts with our laboratory supply customers do not include multiple performance obligations to be completed over a period of time. Our performance obligations generally relate to delivering specialty laboratory products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds. We do not have significant returns. We do not typically offer extended warranty or service plans. For ultra-low temperature freezers sold to customers which are built to order, generally, 50% of the value of the contract is paid by the customer prior to work beginning on manufacturing the freezer.  Upon completion of manufacturing and testing the customer will accept the unit and make payment of the remaining balance on the contract, at which time control passes to the customer and we have satisfied our performance obligation and recognize revenues.  The customer may either arrange to transport the unit with a carrier uses or ask the Company to arrange such shipment, the charges of which are the responsibility of the customer.  In some instances, a customer may, after accepting the unit, request that it be upgraded with additional hardware or software options, which is a new contract and performance obligation.

Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of December 31, 2018 contained a significant financing component.

Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our laboratory supply contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer's control at contractually stated pricing.  The freezers likewise do not have milestone or percentage of completion clauses in the contract, so revenue is only recognized when the work has been completed.

Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon shipment of goods, or, with our freezers, upon final acceptance of the unit by the customer, in accordance with the terms of each contract with the customer. We do not have significant service revenue.

A part of our customer base is made up of international customers.  The following table presents Reflect Scientific revenues disaggregated by region and product type:

		December 31, 2018				December 31, 2017
Segments		Consumer Products	Long-term Contracts	Total		Consumer Products	Long-term Contracts	Total
Domestic	$	1,119,597	--	1,119,597	$	828,109	--	828,109
International		432,388	--	432,388		237,668	--	237,668
	$	1,551,985	--	1,551,985	$	1,065,777	--	1,065,777
Components		1,113,990	--	1,113,990	$	926,424	--	926,424
Engineering services		437,995	--	437,995		139,353	--	139,353
	$	1,551,985	--	1,551,985	$	1,065,777	--	1,065,777

c. Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

d. Cash

The Company considers all deposit accounts and investment accounts with an original maturity of 90 days or less to be cash equivalents. 

e. Accounts Receivable

The Company maintains an allowance for doubtful accounts to provide for losses arising from customers’ inability to make required payments.  If there is deterioration of our customers’ credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required. The Company estimates allowance for doubtful accounts based on the aged receivable balances and historical losses.  The Company charges off uncollectible accounts when management determines there is no possibility of collecting the related receivable.The Company considers accounts receivable to be past due or delinquent based on contractual terms, which is generally net 30 days.

The Company charged $0 and $236, respectively, to bad debt expense for the years ended December 31, 2018 and 2017. As the Company has historically experienced minimal bad debts, management feels the allowance for doubtful accounts balance of $4,000 at December 31, 2018 to be an adequate reserve based on the experience seen over multiple years.

f. Fixed Assets

Fixed assets are stated at cost.  Expenditure for minor repairs, maintenance, and replacement parts which do not increase the useful lives of the assets are charged to expense as incurred.  All major additions and improvements are capitalized.  Depreciation is computed using the straight-line method.  The lives over which the fixed assets are depreciated range from 5 to 7 years, except for computer equipment, which is depreciated over a 3 year life. 

g. Inventory

Inventories are stated at the lower of cost or market value based upon the average cost inventory method.  The Company’s inventory consists of parts for scientific vial kits, refrigerant gases, components for the imaging and inspection systems which it builds, and other scientific items. An allowance is recorded when it is determined that the amount owing is at high risk.  The Company recorded $86,339 and $62,038 in additions to the inventory allowance for the years 2018 and 2017, respectively.

h. Advertising Expense

The Company follows the policy of charging the costs of advertising to expense as incurred.  The Company recognized $10,977 and $14,646 of advertising expense during the years ended December 31, 2018, and 2017, respectively.

i. Newly Issued Accounting Pronouncements

Public Law No. 115-97, known as the Tax Cuts and Jobs Act “the “Tax Act”). Enacted on December 22, 2017, reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018.  Also on December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act.  SAB 118 provides a measurement period of up to one year from the enactment date to complete the accounting.  Any adjustments during this measurement period will be included in net earnings from continuing operations as an adjustment to income tax expense in the reporting period when such adjustments are determined.  As the Company has net operating loss carryforwards which will offset tax liability for the coming year or years, no adjustments for the effect of the income tax rate change is reflected in our financial statements.

In February 2018, the Financial Standards Accounting Board (“FASB”) issued Accounting Statement Update No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”  This ASU allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for certain income tax effects stranded in AOCI as a result of the Tax Act.  The reclassification eliminates the stranded tax effects resulting from the Tax Act and is intended to improve the usefulness of information reported to financial statement users.  ASU No. 2018-02 is effective for reporting periods beginning on January 1, 2019; early adoption is permitted. The Company does not currently have amounts to be reclassified under this and therefore believes it will not have an impact on its financial statements and statements of operations.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718),” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity of financial reporting for non-employee share-based payments. Currently, the accounting requirements for non-employee and employee share-based payments are significantly different. ASU 2018-07 expands the scope of Topic 718, which currently only includes share-based payments to employees, to include share-based payments to non-employees for goods or services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, “Equity — Equity-Based Payments to Nonemployees”. The amendments to ASU 2018 - 07 are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of ASU No. 2014-09, (Topic 606), “Revenue from Contracts with Customers”. The Company is currently evaluating ASU 2018-07 and its impact on its condensed consolidated financial statements or disclosures.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company is in the process of evaluating the impact of the final rule on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” which removes Step 2 from the goodwill impairment test and replaces the qualitative assessment. Impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. Under this revised guidance, failing Step 1 will always result in a goodwill impairment. The amendments in this update should be applied prospectively for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017. The Company is evaluating the effect the implementation will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which changes lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. The standard requires a modified retrospective approach, with restatement of the prior periods presented in the year of adoption, subject to any FASB modifications. This standard will be effective for the first annual reporting period beginning after December 15, 2018. We anticipate adopting this standard on January 1, 2019. In evaluating the effect that ASU No. 2016-02 will have on our consolidated financial statements and related disclosures we believe the impact will be minimal to our ongoing consolidated statements of operations.

The Company has reviewed all other FASB-issued ASU accounting pronouncements and interpretations thereof that have effective dates during the period reported and in future periods.  The Company has carefully considered the new pronouncements that alter previous GAAP and does not believe that any new or modified principles will have a material impact on the company’s reported financial position or operations in the near term.  The applicability of any standard is subject to the formal review of the Company’s financial management and certain standards are under consideration.

j. Earnings per Share

The computation of basic earnings per share of common stock is based on the weighted average number of shares outstanding during the period.  Diluted EPS is computed by dividing net earnings by the weighted-average number of common shares and dilutive common stock equivalents during the period.  Common stock equivalents are not used in calculating dilutive EPS when their inclusion would be anti-dilutive.  At December 31, 2018 and 2017, the Company had no common stock equivalents.   

k. Shipping and Handling Fees and Costs

The Company records all shipping and handling costs as operating costs.  Freight paid on outgoing shipments in 2018 and 2017 was $47,670 and $28,355, respectively, and is recorded in general and administrative expense.

l. Income Taxes

Deferred taxes are provided on an asset and liability approach whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company’s policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense.  For the years ended December 31, 2018 and 2017, it did not recognize any interest or penalties in its Statement of Operations, nor did it have any interest or penalties accrued in its Balance Sheet at December 31, 2018 and 2017 relating to unrecognized benefits.

m. Principles of consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, which include Cryometrix (previously Cryomastor).  All subsidiaries are wholly owned.  All material intercompany accounts and transactions are eliminated in consolidation.

n. Research and development expense

The Company accounts for research and development costs in accordance with the Financial Accounting Standards Board's Accounting Standard Codification Topic 730 “Research and Development".  Under ASC 730, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred.  Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved.  Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.  The Company had $104,046 and $46,696 in research and product development for the years ended December 31, 2018 and 2017, respectively.

o. Stock-Based Compensation

The Company, in accordance with ASC 718, Compensation – Stock Compensation, records all share-based payments to employees at the grant-date fair value of the equity instruments issued. In accordance with ASC 718-10-30-9, Measurement Objective – Fair Value at Grant Date, the Company uses the closing price of the stock, as quoted by NASDAQ, on the date of the grant.  The Company believes this pricing method provides the best estimate of fair the fair value of the consideration given.  Compensation cost is recognized over the requisite service period.

The Company, in accordance with ASC 505, Compensation – Stock Compensation, establishes the value of equity instruments issued to non-employees for goods and services by using the closing price of the stock, as quoted by NASDAQ, on the date of the grant.  The Company believes this method fairly establishes the value of the goods and/or services received.

p. Intangible Assets

Intangible assets include trademarks, trade secrets, patents, customer lists and goodwill acquired through acquisition of subsidiaries.  The patents have been registered with the United States Patent and Trademarks Office.  The costs of obtaining patents are capitalized as incurred.  Intangibles, except for goodwill, are amortized over their estimated useful lives.  The Company regularly evaluates whether events or circumstances have occurred that indicate possible impairment and relies on a number of factors, including operating results, business plans, economic projections, and anticipated future cash flows. The Company uses an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value. Fair value is determined through various valuation techniques, including cost-based, market and income approaches as considered necessary. Accordingly, the Company recorded no impairment of long-lived assets during the years ended December 31, 2018 and 2017.

q. Goodwill

Goodwill represents the excess of purchase price of an acquisition over the fair value of net assets acquired. Goodwill is not amortized but instead is tested for impairment, at a reporting unit level, annually and when events and circumstances warrant an evaluation. The Company evaluates goodwill on an annual basis, as of the end of the fourth quarter, and whenever events and changes in circumstances indicate that there may be a potential impairment. In making this assessment, management relies on a number of factors, including operating results, business plans, economic projections, anticipated future cash flows, business trends and market conditions. Accordingly, the Company recorded no impairment of goodwill for the years ended December 31, 2018 and 2017.

NOTE 3   GOING CONCERN

The Company continues to accumulate significant operating losses and has an accumulated deficit of $20,300,707 at December 31, 2018.  These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Management has taken a number of actions to reduce expenses. Management is seeking additional funding through the capital markets to facilitate the settlement of the remaining debentures, as well as to provide operating capital for its operations.  However, there is no assurance that additional funding will be available on acceptable terms, if at all.

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Going Concern

12 Months Ended

Dec. 31, 2018

Notes

Going Concern

NOTE 3   GOING CONCERN

The Company continues to accumulate significant operating losses and has an accumulated deficit of $20,300,707 at December 31, 2018.  These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Management has taken a number of actions to reduce expenses. Management is seeking additional funding through the capital markets to facilitate the settlement of the remaining debentures, as well as to provide operating capital for its operations.  However, there is no assurance that additional funding will be available on acceptable terms, if at all.

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Fixed Assets

12 Months Ended

Dec. 31, 2018

Notes

Fixed Assets

NOTE 4 -    FIXED ASSETS

Fixed assets and related depreciation for the period are as follows:

		December 31, 2018		December 31, 2017
Machinery and equipment	$	142,752	$	132,002
Furniture and fixtures		2,697		2,697
Computer and office equipment		2,390		2,390
Leasehold improvements		10,164		10,164
Accumulated depreciation		(150,237)		(147,253)
Total Fixed Assets	$	7,766	$	0

Depreciation expense for the years ended December 31, 2018, and 2017, was $2,984 and $0, respectively.

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Inventories

12 Months Ended

Dec. 31, 2018

Notes

Inventories

NOTE 5 -    INVENTORIES

Inventory consisted of the following at December 31, 2018 and 2017:

		December 31, 2018		December 31, 2017
Finished goods		228,664		241,691
Inventory allowance		(86,339)		(86,339)
Total Inventory	$	142,325	$	155,352

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Notes

Commitments and Contingencies

NOTE 6 -    COMMITMENTS AND CONTINGENCIES

Operating Lease Obligations

The Company leases its office and warehouse space under a non-cancelable lease agreement accounted for as operating leases.  The Company also leases an automobile under a similar non-cancelable lease agreement, which is also accounted for as an operating lease.

Building Lease - Orem, Utah: The Company leases a manufacturing and office facility with 6,000 square feet of space.  We lease this facility at $3,480 per month on a lease with an expiration date of November 30, 2020.

Rent expense was $39,285 and $29,892 for the years ended December 31, 2018, and 2017, respectively.

Automobile Lease – The Company currently leases one vehicle with a monthly lease payment of $629 per month.  The automobile lease will expire on July 7, 2021.

Automobile lease expense was $7,548 and $6,263 for the years ended December 31, 2018, and 2017, respectively.

Minimum rental payments under the non-cancelable operating leases are as follows:

Years ending December 31,		Amount
2019		50,669
2020		48,159
2021		3,774
	$	102,602

NOTE 13 – ROYALTIES

A royalty agreement was executed with JMST as a condition of the Company’s acquisitions during 2006.  Terms of the royalty agreement are as follows:

JMST – David Carver will receive a royalty payment on gross revenues related to revenues derived from the Carver Patents or Carver Technology.  Such payments are due on revenue in excess of $500,000 derived from products under the Carver Patents or Carver Technology.  The royalty payment is 2.5% on the revenue in excess of $500,000 and is payable quarterly.  Payments are to be made in Reflect Scientific’s common stock not to exceed 500,000 shares in total. New products developed from the Carver Technology are subject to a royalty of 3% of gross revenues in excess of $100,000, with an additional 2% if gross revenues exceed $$600,000.  Royalties will also be paid in our common stock annually.  Common stock will be valued at $3.00 per share for these purposes.  Royalty payments are only due for years where there are valid Carver Patents.

As sales did not reach or exceed the triggering threshold, no royalty payments were made under the royalty agreement during 2018 and 2017.  In December 2018, management made the decision to remove detectors from their product line due to lack of demand for the product.

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Stockholders' Equity

12 Months Ended

Dec. 31, 2018

Notes

Stockholders' Equity

NOTE 7 – PREFERRED STOCK

In November 2004 the Company amended its Articles of Incorporation so as to authorize 5,000,000 shares of preferred stock. Of this total, 750,000 shares have been designated as “Series A Convertible Preferred Stock”. As of December 31, 2018 and 2017, no shares of the preferred stock are issued and outstanding.

Dividends

The holders of the Series A Preferred Stock would be entitled to dividends at the rate of 8 percent per year of the liquidation preference of $1.00 per share, payable annually, if and when declared by the board of directors.  Dividends are not cumulative and the board of directors is under no obligation to declare dividends.

Convertibility

The Series A Preferred Stock is convertible into the Company’s common stock by dividing $1.00 plus any unpaid dividends by 50% of the five-day average closing bid price of the common shares.

NOTE 8 -    COMMON STOCK TRANSACTIONS

During the years ended December 31, 2018 and 2017, the following stock transactions occurred:

·                     During 2018, the Board of Directors approved the issuance of 1,000,000 shares of restricted common stock, valued at $40,000, to the President/CEO.

During 2018, the Board of Directors approved the issuance of 200,000 shares of restricted common stock, valued at $8,000 to Directors of the Company.

During 2018, the Board of Directors approved the issuance of 81,000 shares of restricted common stock, valued at $3,240 to the CFO of the Company.

During 2018, in addition to the shares stated above, the Board of Directors approved the issuance of 1,325,000 shares of restricted common stock, valued at $53,000, to employees and 5,190,000 shares of restricted common stock, valued at $207,600, to consultants

·                     During 2017, the Board of Directors approved the issuance of 4,000,000 shares of restricted common stock, valued at $194,400, to the President/CEO.

During 2017, the Board of Directors approved the issuance of 200,000 shares of restricted common stock, valued at $9,600 to Directors of the Company.

During 2017, the Board of Directors approved the issuance of 81,000 shares of restricted common stock, valued at $3,888 to the CFO of the Company.

During 2017, the Board of Directors approved the issuance of 500,000 shares of restricted common stock, valued at $24,000, to employees and 1,130,000 shares of restricted common stock, valued at $54,240, to consultants for services rendered.

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Concentrations of Risk

12 Months Ended

Dec. 31, 2018

Notes

Concentrations of Risk

NOTE 9 -    CONCENTRATIONS OF RISK

Cash in Excess of Federally Insured Amount

While the Company, at December 31, 2018 and 2017 were below the FDIC insurance limit, at times during those years the Company had cash balances that exceed the federally insured limits of $250,000 per depositor per banking institution. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk with respect to its cash balances.

Sales and Accounts Receivable

The Company has four major customers who represent a significant portion of revenue.  These four customers represented 44% and 54% of total sales revenue for the year ended December 31, 2018 and 2017, respectively.  At December 31, 2018 and 2017, accounts receivable balances from these customers represent 41% and 64% respectively, of the total receivables.  The Company has strong relationships with each of these customers and does not believe this concentration poses a significant risk due to those long-term relationships and uniqueness of the products they purchase from the Company.  We have identified primary and secondary sources for each of the products we purchase for resale and for the raw materials we use to manufacture our products, so do not anticipate any difficulty in filling the orders placed by our customers.

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Line of Credit

12 Months Ended

Dec. 31, 2018

Notes

Line of Credit

NOTE 10 -  LINE OF CREDIT

The Company has a credit line with a commercial bank of $100,000 secured by its inventory and accounts receivable bearing a variable interest rate, which was 5.50% as of the balance sheet date, and automatically renews so long as the Company is in compliance with the loan covenants. As of December 31, 2018, there was a $9,878 drawn against that line of credit, leaving an available balance of $90,122.  The line automatically renews on April 1 of each year and the $100,000 credit amount was available at December 31, 2018. 

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Common Stock Options

12 Months Ended

Dec. 31, 2018

Notes

Common Stock Options

NOTE 11 – COMMON STOCK OPTIONS

On December 31, 2007, the Company’s Board of Directors approved an equity plan.  The equity plan known as the 2007 Equity Incentive Plan (the “Plan”) reserves up to 6,000,000 shares of the Company’s authorized common stock for issuance to officers, directors, employees and consultants under the terms of the Plan.  On December 31, 2009, the Company’s board of directors amended the Plan to authorize 12,000,000 shares.  The Plan permits the Board of Directors to issue stock options and restricted stock.  At December 31, 2017 there were no options outstanding.  The plan has a current expiration date of December 30, 2019.

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Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2018

Notes

Intangible Assets and Goodwill

NOTE 12 – INTANGIBLE ASSETS

Definite lived intangible assets are stated at cost and amortized using the straight-line method.  The remaining lives over which the intangible assets will be amortized is approximately 2 years, at which time the intangible assets will become fully amortized. 

Intangible assets and related amortization and impairment for the period are as follows:

December 31, 2018
	Cost	Accumulated Amortization			Net Book Value
Patents	$1,403,045	$(1,403,045)			$0
Customer lists	414,532	(414,532)			0
Totals	$1,817,577		$(1,817,577)	$0

December 31, 2017
	Cost	Accumulated Amortization			Net Book Value
Patents	$1,403,045	$(1,403,045)			$0
Customer lists	414,532	(414,532)			0
Totals	$1,817,577		$(1,817,577)	$0

Amortization expense for the years ended December 31, 2018, and 2017, was $0 and $0, respectively.

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Income Taxes

12 Months Ended

Dec. 31, 2018

Notes

Income Taxes

NOTE 14 – INCOME TAXES

The provision (benefit) for income taxes for the years ended December 31, 2018 and 2017 consist of the following:

	2018		2017
Federal:
Current	$	-	$	-
Deferred		-		-
State:
Current		-		-
Deferred		-		-
Total	$	-	$	-

Net deferred tax assets consist of the following components as of December 31, 2018 and 2017:

	2018		2017
Deferred tax assets (liabilities):
NOL Carryover	$	2,568,963	$	2,509,214
Stock Based Compensation		283,611		240,015
Depreciation and Amortization		(557,735)		(481,815)
Inventory Reserves		18,490		18,490
R&D Tax Credits		(1,473)		(23,323)
Debenture Interest Payable		(474,381)		(474,381)
Other Reserves		13,060		13,060
Valuation Allowance		(1,850,535)		(1,801,260)
Net deferred tax asset (liability)	$	-	$	-

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2018 and 2017 due to the following:

	2018		2017
Tax at statutory rate	$	(52,400)	$	(140,766)
Effects of:
Meals and Entertainment		(3,125)		(3,485)
Stock Based Compensation		(21,890)		(81,161)
Depreciation and Amortization		75,512		125,853
Inventory Reserve		(3,808)		(22,290)
R & D Tax Credits		(21,850)		(16,344)
Other, net		-		913
Change in Valuation Allowance		27,561	$	137,281
Total	$	-		-

At December 31, 2018, the Company had net operating loss carryforwards of approximately $7,520,180 that may be offset against future income from the year 2018 through 2038. 

No tax benefit has been reported in the December 31, 2018 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

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Related Party Transactions

12 Months Ended

Dec. 31, 2018

Notes

Related Party Transactions

NOTE 15 – RELATED PARTY TRANSACTIONS

Stock Issuances

In December 2018 the Board of Directors approved the issuance of 1,000,000 shares of restricted common stock to the President/CEO and the issuance of 281,000shares of restricted common stock to other officers and directors. These shares were for compensation. These shares were recorded at the trading price at the time of approval, for an average of 0.04 per share, resulting in $51,240 recorded as stock-based compensation expense.

In October 2017 the Board of Directors approved the issuance of 4,000,000 shares of restricted common stock to the President/CEO.  In December 2017 the Board of Directors approved the issuance of 281,000 shares of restricted common stock to officers and directors.  These shares were for compensation.  These shares were recorded at the trading price at the time of approval, for an average of $0.05 per share, resulting in $231,888 recorded as stock-based compensation expense.

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Subsequent Events

12 Months Ended

Dec. 31, 2018

Notes

Subsequent Events

NOTE 16 – SUBSEQUENT EVENTS

None.

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Organization, Consolidation and Presentation of Financial Statements (Policies)

12 Months Ended

Dec. 31, 2018

Policies

Basis of Financial Statement Presentation

NOTE 1 -    ORGANIZATION AND DESCRIPTION OF BUSINESS

Cole, Inc. (the Company) was incorporated under the laws of the State of Utah on November 3, 1999. The Company was organized to engage in any lawful activity for which corporations may be organized under the Utah Revised Business Corporation Act.  On December 30, 2003 the Company changed its name to Reflect Scientific, Inc.  Reflect has two wholly owned subsidiaries, Cryometrix and Julie Martin Scientific Technology, which are described below.

Reflect Scientific

Reflect Scientific designs, develops and sells scientific equipment for the Life Science and Manufacturing industries. The Company’s business activities include the manufacture and distribution of unique laboratory consumables and disposables such as filtration and purification products, customized sample handling vials, electronic wiring assemblies, high temperature silicone, graphite and vespel/graphite sealing components for use by original equipment manufacturers (“OEM”) in the chemical analysis industries, primarily in the field of gas/liquid chromatography. 

The Company’s chemical detector products serve the analytical instrumentation sector of the Life Sciences market. These optically based chemical detection instruments provide a cost-effective, high-performance alternative for original equipment manufacturers (OEM).   One major use for these detectors is the analysis of whole blood for metabolic diseases.

Cryometrix

The Company’s Cryometrix ultra low temperature freezers have technologies that provide energy savings and other critically important benefits to cryo-storage customers in the Life Science related industries.  Ultra low temperature freezers are used in multiple industries for the storage of everything from blood to cancer vaccines.  These types of freezers are used by companies such as hospitals and biotechnology research facilities.  The adaptation of the freezer technology to refrigeration systems used on trailers (“reefers”) for transporting perishable items opens a significant new market.  Trailers can easily be retrofit with the Cryogenix unit, which provides pollutant free and more efficient operations at a cost savings compared to the diesel powered units currently used. 

Julie Martin Scientific Technology (“JMST”)

The Company manufactures and sells a line of chemical detectors which have broad application in research facilities and laboratories.  The detectors have a price advantage over competitive products, making them affordable for use in laboratories at educational institutions.  The sale of chemical detectors also generates follow on sales of consumable supplies.   

Accounting Method

a. Accounting Method

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.

Revenue Recognition

b. Revenue Recognition

We sell our specialty science and environmental lab supplies through direct sales and through distributor relationships.  We sell our ultra-low temperature freezers through consultants and commission-only sales personnel.   Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps:

Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers.

Identify the performance obligations in the contract. Generally, our contracts with our laboratory supply customers do not include multiple performance obligations to be completed over a period of time. Our performance obligations generally relate to delivering specialty laboratory products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds. We do not have significant returns. We do not typically offer extended warranty or service plans. For ultra-low temperature freezers sold to customers which are built to order, generally, 50% of the value of the contract is paid by the customer prior to work beginning on manufacturing the freezer.  Upon completion of manufacturing and testing the customer will accept the unit and make payment of the remaining balance on the contract, at which time control passes to the customer and we have satisfied our performance obligation and recognize revenues.  The customer may either arrange to transport the unit with a carrier uses or ask the Company to arrange such shipment, the charges of which are the responsibility of the customer.  In some instances, a customer may, after accepting the unit, request that it be upgraded with additional hardware or software options, which is a new contract and performance obligation.

Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. None of our contracts as of December 31, 2018 contained a significant financing component.

Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our laboratory supply contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer's control at contractually stated pricing.  The freezers likewise do not have milestone or percentage of completion clauses in the contract, so revenue is only recognized when the work has been completed.

Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon shipment of goods, or, with our freezers, upon final acceptance of the unit by the customer, in accordance with the terms of each contract with the customer. We do not have significant service revenue.

A part of our customer base is made up of international customers.  The following table presents Reflect Scientific revenues disaggregated by region and product type:

		December 31, 2018				December 31, 2017
Segments		Consumer Products	Long-term Contracts	Total		Consumer Products	Long-term Contracts	Total
Domestic	$	1,119,597	--	1,119,597	$	828,109	--	828,109
International		432,388	--	432,388		237,668	--	237,668
	$	1,551,985	--	1,551,985	$	1,065,777	--	1,065,777
Components		1,113,990	--	1,113,990	$	926,424	--	926,424
Engineering services		437,995	--	437,995		139,353	--	139,353
	$	1,551,985	--	1,551,985	$	1,065,777	--	1,065,777

Estimates

c. Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash

d. Cash

The Company considers all deposit accounts and investment accounts with an original maturity of 90 days or less to be cash equivalents. 

Accounts Receivable

e. Accounts Receivable

The Company maintains an allowance for doubtful accounts to provide for losses arising from customers’ inability to make required payments.  If there is deterioration of our customers’ credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required. The Company estimates allowance for doubtful accounts based on the aged receivable balances and historical losses.  The Company charges off uncollectible accounts when management determines there is no possibility of collecting the related receivable.The Company considers accounts receivable to be past due or delinquent based on contractual terms, which is generally net 30 days.

The Company charged $0 and $236, respectively, to bad debt expense for the years ended December 31, 2018 and 2017. As the Company has historically experienced minimal bad debts, management feels the allowance for doubtful accounts balance of $4,000 at December 31, 2018 to be an adequate reserve based on the experience seen over multiple years.

Fixed Assets

f. Fixed Assets

Fixed assets are stated at cost.  Expenditure for minor repairs, maintenance, and replacement parts which do not increase the useful lives of the assets are charged to expense as incurred.  All major additions and improvements are capitalized.  Depreciation is computed using the straight-line method.  The lives over which the fixed assets are depreciated range from 5 to 7 years, except for computer equipment, which is depreciated over a 3 year life. 

Inventory

g. Inventory

Inventories are stated at the lower of cost or market value based upon the average cost inventory method.  The Company’s inventory consists of parts for scientific vial kits, refrigerant gases, components for the imaging and inspection systems which it builds, and other scientific items. An allowance is recorded when it is determined that the amount owing is at high risk.  The Company recorded $86,339 and $62,038 in additions to the inventory allowance for the years 2018 and 2017, respectively.

Advertising Expense

h. Advertising Expense

The Company follows the policy of charging the costs of advertising to expense as incurred.  The Company recognized $10,977 and $14,646 of advertising expense during the years ended December 31, 2018, and 2017, respectively.

Recent Accounting Pronouncements

i. Newly Issued Accounting Pronouncements

Public Law No. 115-97, known as the Tax Cuts and Jobs Act “the “Tax Act”). Enacted on December 22, 2017, reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018.  Also on December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Act.  SAB 118 provides a measurement period of up to one year from the enactment date to complete the accounting.  Any adjustments during this measurement period will be included in net earnings from continuing operations as an adjustment to income tax expense in the reporting period when such adjustments are determined.  As the Company has net operating loss carryforwards which will offset tax liability for the coming year or years, no adjustments for the effect of the income tax rate change is reflected in our financial statements.

In February 2018, the Financial Standards Accounting Board (“FASB”) issued Accounting Statement Update No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”  This ASU allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for certain income tax effects stranded in AOCI as a result of the Tax Act.  The reclassification eliminates the stranded tax effects resulting from the Tax Act and is intended to improve the usefulness of information reported to financial statement users.  ASU No. 2018-02 is effective for reporting periods beginning on January 1, 2019; early adoption is permitted. The Company does not currently have amounts to be reclassified under this and therefore believes it will not have an impact on its financial statements and statements of operations.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation — Stock Compensation (Topic 718),” (“ASU 2018-07”). ASU 2018-07 is intended to reduce cost and complexity of financial reporting for non-employee share-based payments. Currently, the accounting requirements for non-employee and employee share-based payments are significantly different. ASU 2018-07 expands the scope of Topic 718, which currently only includes share-based payments to employees, to include share-based payments to non-employees for goods or services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, “Equity — Equity-Based Payments to Nonemployees”. The amendments to ASU 2018 - 07 are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of ASU No. 2014-09, (Topic 606), “Revenue from Contracts with Customers”. The Company is currently evaluating ASU 2018-07 and its impact on its condensed consolidated financial statements or disclosures.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company is in the process of evaluating the impact of the final rule on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” which removes Step 2 from the goodwill impairment test and replaces the qualitative assessment. Impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. Under this revised guidance, failing Step 1 will always result in a goodwill impairment. The amendments in this update should be applied prospectively for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017. The Company is evaluating the effect the implementation will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which changes lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. The standard requires a modified retrospective approach, with restatement of the prior periods presented in the year of adoption, subject to any FASB modifications. This standard will be effective for the first annual reporting period beginning after December 15, 2018. We anticipate adopting this standard on January 1, 2019. In evaluating the effect that ASU No. 2016-02 will have on our consolidated financial statements and related disclosures we believe the impact will be minimal to our ongoing consolidated statements of operations.

The Company has reviewed all other FASB-issued ASU accounting pronouncements and interpretations thereof that have effective dates during the period reported and in future periods.  The Company has carefully considered the new pronouncements that alter previous GAAP and does not believe that any new or modified principles will have a material impact on the company’s reported financial position or operations in the near term.  The applicability of any standard is subject to the formal review of the Company’s financial management and certain standards are under consideration.

Earnings Per Share

j. Earnings per Share

The computation of basic earnings per share of common stock is based on the weighted average number of shares outstanding during the period.  Diluted EPS is computed by dividing net earnings by the weighted-average number of common shares and dilutive common stock equivalents during the period.  Common stock equivalents are not used in calculating dilutive EPS when their inclusion would be anti-dilutive.  At December 31, 2018 and 2017, the Company had no common stock equivalents.   

Shipping and Handling Fees and Costs

k. Shipping and Handling Fees and Costs

The Company records all shipping and handling costs as operating costs.  Freight paid on outgoing shipments in 2018 and 2017 was $47,670 and $28,355, respectively, and is recorded in general and administrative expense.

Income Taxes

l. Income Taxes

Deferred taxes are provided on an asset and liability approach whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company’s policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense.  For the years ended December 31, 2018 and 2017, it did not recognize any interest or penalties in its Statement of Operations, nor did it have any interest or penalties accrued in its Balance Sheet at December 31, 2018 and 2017 relating to unrecognized benefits.

Principles of Consolidation

m. Principles of consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, which include Cryometrix (previously Cryomastor).  All subsidiaries are wholly owned.  All material intercompany accounts and transactions are eliminated in consolidation.

Research and Development Expense

n. Research and development expense

The Company accounts for research and development costs in accordance with the Financial Accounting Standards Board's Accounting Standard Codification Topic 730 “Research and Development".  Under ASC 730, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred.  Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved.  Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.  The Company had $104,046 and $46,696 in research and product development for the years ended December 31, 2018 and 2017, respectively.

Stock Based Compensation

o. Stock-Based Compensation

The Company, in accordance with ASC 718, Compensation – Stock Compensation, records all share-based payments to employees at the grant-date fair value of the equity instruments issued. In accordance with ASC 718-10-30-9, Measurement Objective – Fair Value at Grant Date, the Company uses the closing price of the stock, as quoted by NASDAQ, on the date of the grant.  The Company believes this pricing method provides the best estimate of fair the fair value of the consideration given.  Compensation cost is recognized over the requisite service period.

The Company, in accordance with ASC 505, Compensation – Stock Compensation, establishes the value of equity instruments issued to non-employees for goods and services by using the closing price of the stock, as quoted by NASDAQ, on the date of the grant.  The Company believes this method fairly establishes the value of the goods and/or services received.

Intangible Assets

p. Intangible Assets

Intangible assets include trademarks, trade secrets, patents, customer lists and goodwill acquired through acquisition of subsidiaries.  The patents have been registered with the United States Patent and Trademarks Office.  The costs of obtaining patents are capitalized as incurred.  Intangibles, except for goodwill, are amortized over their estimated useful lives.  The Company regularly evaluates whether events or circumstances have occurred that indicate possible impairment and relies on a number of factors, including operating results, business plans, economic projections, and anticipated future cash flows. The Company uses an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value. Fair value is determined through various valuation techniques, including cost-based, market and income approaches as considered necessary. Accordingly, the Company recorded no impairment of long-lived assets during the years ended December 31, 2018 and 2017.

Reclassification of Financial Statement Accounts

q. Goodwill

Goodwill represents the excess of purchase price of an acquisition over the fair value of net assets acquired. Goodwill is not amortized but instead is tested for impairment, at a reporting unit level, annually and when events and circumstances warrant an evaluation. The Company evaluates goodwill on an annual basis, as of the end of the fourth quarter, and whenever events and changes in circumstances indicate that there may be a potential impairment. In making this assessment, management relies on a number of factors, including operating results, business plans, economic projections, anticipated future cash flows, business trends and market conditions. Accordingly, the Company recorded no impairment of goodwill for the years ended December 31, 2018 and 2017.

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Organization, Consolidation and Presentation of Financial Statements (Tables)

12 Months Ended

Dec. 31, 2018

Tables/Schedules

Schedule of Disaggregated Revenues

		December 31, 2018				December 31, 2017
Segments		Consumer Products	Long-term Contracts	Total		Consumer Products	Long-term Contracts	Total
Domestic	$	1,119,597	--	1,119,597	$	828,109	--	828,109
International		432,388	--	432,388		237,668	--	237,668
	$	1,551,985	--	1,551,985	$	1,065,777	--	1,065,777
Components		1,113,990	--	1,113,990	$	926,424	--	926,424
Engineering services		437,995	--	437,995		139,353	--	139,353
	$	1,551,985	--	1,551,985	$	1,065,777	--	1,065,777

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Fixed Assets (Tables)

12 Months Ended

Dec. 31, 2018

Tables/Schedules

Property, Plant and Equipment

		December 31, 2018		December 31, 2017
Machinery and equipment	$	142,752	$	132,002
Furniture and fixtures		2,697		2,697
Computer and office equipment		2,390		2,390
Leasehold improvements		10,164		10,164
Accumulated depreciation		(150,237)		(147,253)
Total Fixed Assets	$	7,766	$	0

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Inventories (Tables)

12 Months Ended

Dec. 31, 2018

Tables/Schedules

Inventories

		December 31, 2018		December 31, 2017
Finished goods		228,664		241,691
Inventory allowance		(86,339)		(86,339)
Total Inventory	$	142,325	$	155,352

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2018

Tables/Schedules

Schedule of Future Minimum Rental Payments for Operating Leases

Years ending December 31,		Amount
2019		50,669
2020		48,159
2021		3,774
	$	102,602

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Intangible Assets and Goodwill (Tables)

12 Months Ended

Dec. 31, 2018

Tables/Schedules

Intangible Assets

December 31, 2018
	Cost	Accumulated Amortization			Net Book Value
Patents	$1,403,045	$(1,403,045)			$0
Customer lists	414,532	(414,532)			0
Totals	$1,817,577		$(1,817,577)	$0

December 31, 2017
	Cost	Accumulated Amortization			Net Book Value
Patents	$1,403,045	$(1,403,045)			$0
Customer lists	414,532	(414,532)			0
Totals	$1,817,577		$(1,817,577)	$0

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Tables/Schedules

Schedule of Components of Income Tax Expense (Benefit)

	2018		2017
Federal:
Current	$	-	$	-
Deferred		-		-
State:
Current		-		-
Deferred		-		-
Total	$	-	$	-

Schedule of Deferred Tax Assets

	2018		2017
Deferred tax assets (liabilities):
NOL Carryover	$	2,568,963	$	2,509,214
Stock Based Compensation		283,611		240,015
Depreciation and Amortization		(557,735)		(481,815)
Inventory Reserves		18,490		18,490
R&D Tax Credits		(1,473)		(23,323)
Debenture Interest Payable		(474,381)		(474,381)
Other Reserves		13,060		13,060
Valuation Allowance		(1,850,535)		(1,801,260)
Net deferred tax asset (liability)	$	-	$	-

Schedule of Effective Income Tax Rate Reconciliation

	2018		2017
Tax at statutory rate	$	(52,400)	$	(140,766)
Effects of:
Meals and Entertainment		(3,125)		(3,485)
Stock Based Compensation		(21,890)		(81,161)
Depreciation and Amortization		75,512		125,853
Inventory Reserve		(3,808)		(22,290)
R & D Tax Credits		(21,850)		(16,344)
Other, net		-		913
Change in Valuation Allowance		27,561	$	137,281
Total	$	-		-

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Organization, Consolidation and Presentation of Financial Statements (Details)	12 Months Ended
	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Domestic revenues	$ 1,119,597	$ 828,109
International revenues	432,388	237,668
Components revenues	1,113,990	926,424
Engineering services revenues	$ 437,995	139,353
Cash Equivalents Maturity	90
Allowance for Doubtful Accounts Receivable	$ 0	236
Provision for Doubtful Accounts	$ 4,000
Property Plant And Equipment Usefule Life Minimum	5
Property Plant And Equipment Usefule Life Maximum	7
computer equipment useful life	3
Increase in inventory allowance	$ 86,339	62,038
Advertising Expense	10,977	14,646
Results of Operations, Transportation Costs	47,670	28,355
Research and development expense	$ 104,046	$ 46,696

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Going Concern (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Details
Accumulated deficit	$ 20,300,707	$ 20,300,707	$ 20,051,184

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Fixed Assets (Details) - USD ($)			12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2018	Dec. 31, 2017
Details
Machinery and Equipment, Gross	$ 142,752	$ 132,002		$ 142,752
Furniture and Fixtures, Gross	2,697	2,697		2,697
Computer And Office Equipment	2,390	2,390		2,390
Leasehold Improvements, Gross	10,164	10,164		10,164
Depreciation, Amortization and Accretion, Net	(150,237)	(147,253)
FIXED ASSETS, NET	$ 7,766	$ 0		7,766
Depreciation			$ 2,984	$ 0

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Inventories (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Details
Inventory, Finished Goods, Gross	$ 228,664	$ 241,691
Inventory Adjustments	(86,339)	(86,339)
Inventory, net	$ 142,325	$ 155,352

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Commitments and Contingencies (Details) - USD ($)	12 Months Ended		71 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Nov. 30, 2020
Details
Rent expense	$ 39,285	$ 29,892	$ 3,480
Automobile lease 1 monthly payment	629
Automobile lease expense	7,548	$ 6,263
Operating Leases, Future Minimum Payments Due, Next Twelve Months	50,669
Operating Leases, Future Minimum Payments, Due in Rolling Year Two	48,159
Operating Leases, Future Minimum Payments, Due in Rolling Year Three	3,774
Operating Leases, Future Minimum Payments Due	102,602
RevenueThreshold for Carver Royalty Payment	$ 500,000
Carver Royalty Percent	2.50%
Royalty Percent On Gross Revenues In Excess Of $100,000	3.00%
Royalty On Gross Revenues In Excess Amount	$ 100,000
Additional Royalty Percent On Gross Revenues In Excess Of $600,000	2.00%
Additional Percent Royalty On Gross Revenues In Excess Amount	$ 600,000
Carver Common Stock SharesValue Per Share	$ 3.00

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Stockholders' Equity (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Details
Preferred Stock, Shares Authorized	5,000,000	5,000,000
preferred stock shares authorized Series A	750,000
preferred Stock Dividend Rate Series A	8.00%
Preferred Stock Shares Annual Dividend Per Share Series A	$ 1.00
Preferred Stock, Conversion Basis	The Series A Preferred Stock is convertible into the Company’s common stock by dividing $1.00 plus any unpaid dividends by 50% of the five-day average closing bid price of the common shares.
total compensation shares issued	1,000,000	4,000,000
Value Of President and CEO Share Issuance	$ 40,000	$ 194,400
Director Shares Issued	200,000	200,000
Value of Director Share Issuance	$ 8,000	$ 9,600
CFO Shares Issued	81,000	81,000
Value Of CFO Share Issuance	$ 3,240	$ 3,888
Shares Issued To Employees	1,325,000	500,000
Value Of Share Issuance To Employees	$ 53,000	$ 24,000
Shares Issued To Consultants	5,190,000	1,130,000
Value Of Share Issuance To Consultants	$ 207,600	$ 54,240

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Concentrations of Risk (Details)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Details
concentration risk revenue	44.00%	54.00%
concentration risk accounts receivable	41.00%	64.00%

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Line of Credit (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Details
Proceeds from Secured Lines of Credit	$ 100,000
Accounts Payable, Interest-bearing, Interest Rate	5.50%
Net funds received from line of credit	$ 9,878	$ 0
Balance of line of credit	$ 90,122

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Common Stock Options (Details)	12 Months Ended
	Dec. 31, 2018 shares
Details
Share-based Compensation Arrangement Previous Shares Authorized	6,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	12,000,000

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Intangible Assets and Goodwill (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Details
Finite-Lived Patents, Gross	$ 1,403,045	$ 1,403,045
Accumulated Amortization Patents	(1,403,045)	(1,403,045)
Net Book Value Patents	0	0
Cost Customer Lists	414,532	414,532
Accumulated Amortization Customer Lists	(414,532)	(414,532)
Net Book Value Customer Lists	0	0
Finite-Lived Intangible Assets, Gross	1,817,577	1,817,577
Accumulated Amortization Total	(1,817,577)	(1,817,577)
Intangible assets, net	0	0	$ 0
Amortization	$ 0	$ 0

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Income Taxes (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Details
Current Federal tax	$ 0	$ 0
Deferred Federal Income Tax Expense (Benefit)	0	0
Current State tax	0	0
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability	0	0
Other Income Tax Expense (Benefit), Continuing Operations	0	0
Operating Loss Carryforwards	2,568,963	2,509,214
Deferred Tax Assets, Tax Deferred Expense, Compensation and Benefits, Share-based Compensation Cost	283,611	240,015
Deferred Tax Assets, Other	(557,735)	(481,815)
Deferred Tax Assets, Inventory	18,490	18,490
Deferred Tax Liabilities, Deferred Expense, Capitalized Research and Development Costs	(1,473)	(23,323)
Deferred Tax Assets, Tax Deferred Expense, Reserves and Accruals, Asset Retirement Obligations	(474,381)	(474,381)
Deferred Tax Assets, Tax Deferred Expense, Reserves and Accruals, Reserves	13,060	13,060
Deferred Tax Assets, Valuation Allowance	(1,850,535)	(1,801,260)
Deferred Tax Assets, Net	0	0
Tax at statutory rate	(52,400)	(140,766)
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Meals and Entertainment, Amount	(3,125)	(3,485)
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Share-based Compensation Cost, Amount	(21,890)	(81,161)
Depreciation and Amortization	75,512	125,853
Effective Income Tax Rate Reconciliation, Deduction, Other, Amount	(3,808)	(22,290)
Effective Income Tax Rate Reconciliation, Tax Credit, Other, Amount	(21,850)	(16,344)
Effective Income Tax Rate Reconciliation, Other Adjustments, Amount	0	913
SEC Schedule, 12-09, Valuation Allowances and Reserves, Period Increase (Decrease)	27,561	137,281
Total	0	$ 0
Operating Loss Carryforwards, Valuation Allowance	$ 7,520,180

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Related Party Transactions (Details) - USD ($)	1 Months Ended	12 Months Ended
	Oct. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Details
CEO Shares Issued		1,000,000
Officer and Director Shares Issued	4,000,000	281,000	281,000
Shares Issued, Price Per Share		$ 0.04	$ 0.05
Compensation share expense		$ 51,240
Stock Issued During Period, Value, Other			$ 231,888