10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

or

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT of 1934

For the transition period from __________ to __________

Commission File Number 000-31377

REFLECT SCIENTIFIC, INC.

(Exact name of registrant as specified in its charter)

Utah

87-0642556

(State or other jurisdiction of

(IRS Employer Identification No.)

incorporation or organization)

1266 South 1380 West Orem, Utah 84058

 (Address of principal executive offices) (Zip Code)

(801) 226-4100

 (Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]   No [  ]

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      [X]

Smaller reporting company   [X]

Emerging growth company   [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for 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 Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]   No [X]

Indicate by check mark whether the Registrant has submitted electronically on its corporate Web site, if any, every Interactive Data File required to be submitted 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 such files).  

Yes [X]   No [  ]

1

Applicable Only to Issuers Involved in Bankruptcy Proceedings During the Preceding Five Years:

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Not applicable.

Applicable Only to Corporate Issuers:

Indicate the number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date.

Class

Outstanding as of May 14, 2019

79,108,086 shares of $0.01 par value common stock on May 14, 2019

2

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1:	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2019 (unaudited), and December 31, 2018	5
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018 (unaudited)	7
	Condensed Consolidated Statement of Stockholders’ Equity for the
	three months ended March 31, 2019 and 2018 (unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 (unaudited)	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3:	Quantitative and Qualitative Disclosure about Market Risk	18
Item 4:	Controls and Procedures	18

PART II – OTHER INFORMATION

Item 1:	Legal Proceedings	18
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3:	Defaults Upon Senior Securities	19
Item 4:	Mine Safety Disclosure	19
Item 5:	Other Information	19
Item 6:	Exhibits	19
Signatures		21

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Part I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Reflect Scientific, Inc.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

March 31, 2019

The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.  However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made.  These financial statements should be read in conjunction with the 10-K for the period ended December 31, 2018, accompanying notes, and with the historical financial information of the Company.

4

REFLECT SCIENTIFIC, INC.

Condensed Consolidated Balance Sheets

ASSETS

		March 31, 2019 (Unaudited)		December 31, 2018
CURRENT ASSETS
Cash	$	255,481	$	220,427
Accounts receivable, net		131,702		155,543
Inventory, net		155,035		142,325
Prepaid assets		3,510		3,510
Total Current Assets		545,728		521,805
FIXED ASSETS, NET		6,771		7,766
OTHER ASSETS
Operating lease right-of-use asset		83,230		-
Goodwill		60,000		60,000
Deposits		3,100		3,100
TOTAL ASSETS	$	698,829	$	592,671

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

5

REFLECT SCIENTIFIC, INC.

Condensed Consolidated Balance Sheets (Continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY

		March 31, 2019 (Unaudited)		December 31, 2018
CURRENT LIABILITIES
Accounts payable and accrued expense	$	92,791	$	52,450
Short-term line of credit		9,582		9,878
Customer deposits		-		12,500
Operating lease liabilities – current portion		46,318
Income taxes payable		100		100
Total Current Liabilities		148,791		74,928
Operating lease liabilities – long-term		37,830		-
Total Liabilities		186,621		74,928
STOCKHOLDERS’ 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 79,108,086         issued and outstanding, respectively		791,080		791,080
Additional paid in capital		20,027,370		20,027,370
Accumulated deficit		(20,306,242)		(20,300,707)
Total Stockholders’ Equity		512,208		517,743
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	698,829	$	592,671

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

6

REFLECT SCIENTIFIC, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended March 31,
		2019		2018
REVENUES	$	326,314	$	425,681
COST OF GOODS SOLD		93,906		109,310
GROSS PROFIT		232,408		316,371
OPERATING EXPENSES
Salaries and wages		118,123		112,761
Research and development expense		25,161		14,905
General and administrative expense		93,621		89,984
Total Operating Expenses		237,744		217,650
OPERATING INCOME (LOSS)		(5,336)		98,721
OTHER EXPENSE
Total Other Expenses		199		-
NET INCOME (LOSS) BEFORE TAXES		(5,535)		98,721
Provision for income taxes		-		-
NET INCOME (LOSS)	$	(5,535)	$	98,721
NET INCOME (LOSS) PER SHARE – BASIC	$	(0.00)	$	0.00
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – BASIC AND DILUTED		79,108,086		71,312,086

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

7

REFLECT SCIENIFIC, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (Deficit)

For the Three Months Ended March 31, 2019 and 2018

For the Three-month Period Ended March 31, 2019

	Common Stock		Additional Paid-In Capital	Accumulated Deficit	Total
	Shares	Amount
Balance, December 31, 2018	79,108,086	$ 791,080	$ 20,027,370	$ (20,300,707)	$517,743
Net loss for the three month      period ended March 31, 2019				(5,535)	(5,535)
Balance, March 31, 2019	79,108,086	$ 791,080	$ 20,027,370	$ (20,306,242)	$512,208

For the Three-month Period Ended March 31, 2018

	Common Stock		Additional Paid-In Capital	Accumulated Deficit	Total
	Shares	Amount
Balance, December 31, 2017	71,312,086	$ 713,120	$ 19,793,490	$ (20,051,184)	$455,426
Net loss for the three month      period ended March 31, 2018				98,721	98,721
Balance, March 31, 2018	71,312,086	$ 713,120	$ 19,793,490	$ (19,952,463)	$554,147

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

8

REFLECT SCIENTIFIC, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the

Three Months Ended

March 31,

		2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(5,535)	$	98,721
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation		995		-
Changes in operating assets and liabilities:
Accounts receivable		23,841		(29,487)
Inventory		(12,710)		6,135
Accounts payable and accrued expenses		40,340		1,301
Operating lease right-of-use asset		11,851		-
Operating lease obligations		(10,939)		-
Customer deposits		(12,500)		(69,852)
Net Cash (used in) provided by Operating Activities		35,350		6,818
CASH FLOWS FROM INVESTING ACTIVITIES
Payments on short-term line of credit		(296)		-
Net Cash used in investing Activities		(296)		-
CASH FLOWS FROM FINANCING ACTIVITIES
Net Cash used in Financing Activities		-		-
NET CHANGE  IN CASH		35,054		6,818
CASH AT BEGINNING OF PERIOD		220,427		235,858
CASH AT END OF PERIOD	$	255,481	$	242,676

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Paid For:
Interest	$	296	$	-
Income taxes	$	-	$	-

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

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REFLECT SCIENTIFIC, INC.

Notes to the Condensed Consolidated Financial Statements

March 31, 2019

(Unaudited)

NOTE 1 -

BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to accounting principles generally accepted in the United States of America. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission.  The information furnished in the interim condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.  Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed consolidated financial statements be read in conjunction with the Company’s most recent audited consolidated financial statements and notes thereto included in its December 31, 2018 financial statements.  Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

NOTE 2 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND LINE 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 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.  

SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Reflect Scientific, Inc. and its wholly owned subsidiary, Cryometrix. Intercompany transactions and accounts have been eliminated in consolidation.

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REFLECT SCIENTIFIC, INC.

Notes to the Condensed Consolidated Financial Statements

March 31, 2019

(Unaudited)

USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.

REVENUE RECOGNITION.

 We have applied the new revenue standard to all contracts from the date of initial application.  We 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.  

A part of our customer base is made up of international customers.  The table below allocates revenue between domestic and international customers.  

			March 31,								March 31,
					2019								2018
			Consumer		Long-term						Consumer		Long-term
Segments			Products		Contract			Total			Products		Contract			Total
Domestic	$		225,157		-			225,157	$		321,389					321,389
International			101,157					101,157			104,292					104,292
	$		326,314					326,314	$		425,681					425,681
Components				253,895		-	253,895					294,031		-	294,031
Engineering         Services				72,419			72,419					131,650			131,650
		$		326,314			326,314			$		425,681			425,681

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REFLECT SCIENTIFIC, INC.

Notes to the Condensed Consolidated Financial Statements

March 31, 2019

(Unaudited)

ACCOUNTS RECEIVABLE:  Accounts receivables are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. At March 31, 2019 and December 31, 2018, the Company had accounts receivable, net of the allowance, of $131,702 and $155,543, respectively.  At March 31, 2019 and December 31, 2018 the allowance for doubtful accounts was $4,000 and $4,000, respectively.

INVENTORY:

Inventories are presented net of an allowance for obsolescence and 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 detectors and ultra-low temperature freezers which it builds and other scientific items.  At March 31, 2019, inventory was made up of $241,374 of finished goods, less an allowance for obsolescence of $86,339.  At December 31, 2018, inventory was comprised of $228,664 of finished goods, less an allowance for obsolescence of $86,339. There were no raw materials or work in progress for either period presented.

INTANGIBLE ASSETS:  Costs to obtain or develop patents are capitalized and amortized over the life of the patents. Patents are amortized from the date the Company acquires or is awarded the patent over their estimated useful lives, which range from 5 to 15 years.  An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows. We perform an impairment analysis on an annual basis.  The Company’s analysis did not indicate any impairment of intangible assets as of the impairment analysis conducted December 31, 2018.

GOODWILL: Goodwill represents the excess of the Company’s acquisition cost over the fair value of net assets of the acquisition. Goodwill is not amortized, but is tested for impairment annually, or when a triggering event occurs. As described in ACS 360, the Company has adopted the goodwill impairment analysis that includes quantitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. A fair-value-based test is applied at the overall Company level. The test compares the estimated fair value of the Company at the date of the analysis to the carrying value of its net assets. The analysis also requires various judgments and estimates, including general and macroeconomic conditions, industry and the Company’s targeted market conditions, as well as relevant entity-specific events, such as a change in the market for the Company’s products and services. After considering the qualitative factors that would indicate a need for interim impairment of goodwill and applying the two-step process described in ASC 360, management has determined that the value of Company’s assets is not more likely than not less than the carrying value of the Company including goodwill, and that no impairment charge needs be recognized during the reporting periods.

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REFLECT SCIENTIFIC, INC.

Notes to the Condensed Consolidated Financial Statements

March 31, 2019

(Unaudited)

LEASES: In February of 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2016-02 - Leases (Topic 842), which significantly amends the way companies are required to account for leases. Under the updated leasing guidance, some leases that did not have to be reported previously are now required to be presented as an asset and liability on the balance sheet. In addition, for certain leases, what was previously classified as an operating expense must now be allocated between amortization expense and interest expense. The Company adopted this update as of January 1, 2019 using the modified retrospective transition method. Prior periods have not been restated. Upon implementation, the Company recognized an initial right-of-use asset of $95,087 and lease liability of $95,087. Due to the simplistic nature of the Company's leases, no change to retained earnings was required. See Note 4 for further details.

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. 

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 March 31, 2019 and 2018, the Company had no common stock equivalents.

RECENT ACCOUNTING PRONOUNCEMENTS: In March 2019 the Financial Accounting Standards Board issued ASU No. 2019-01 “Leases”, a clarification of the guidance issued in February 2016, ASU No. 2016-02, “Leases” Topic 842.  The Company adopted this standard effective January 2019. The adoption of this standard resulted in recording right-of-use assets and lease liabilities on its balance sheet.  The adoption was made on a prospective basis and, as a result, prior period amounts were not adjusted to reflect the impact of the updated guidance.  The adoption of this new accounting guidance did not have a significant impact on our financial statements.

June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for us on January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.

13

REFLECT SCIENTIFIC, INC.

Notes to the Condensed Consolidated Financial Statements

March 31, 2019

(Unaudited)

The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position and cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its current or future earnings or operations.

NOTE 3 -   GOING CONCERN

The Company continues to accumulate significant operating losses and has an accumulated deficit of $20,306,242 at March 31, 2019.  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 -   LEASES

We adopted ASC 842 using the modified retrospective approach, which allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019.  As a result prior period presented before this adoption are not adjusted to reflect the effect of this new standard.

We have operating leases for our office and warehouse facility as well as for an automobile.  We used the lease termination dates of November 30, 2020 for the building and July 7, 2021 for the automobile to calculate right of use (“ROU”) assets and lease liabilities.  

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REFLECT SCIENTIFIC, INC.

Notes to the Condensed Consolidated Financial Statements

March 31, 2019

(Unaudited The following was included in our consolidated condensed balance sheet as of March 31, 2019:

Leases

As of March 31, 2019

Assets

ROU operating lease assets

$  83,230

Liabilities

Short-term operating lease liabilities

$  46,318

Long-term operating lease liabilities

    37,830

     Total operating lease liabilities

$  84,148

We recognize lease expense on a straight-line basis over the term of the lease.  

Three Months Ended

Lease Cost

March 31, 2019

Operating lease cost

Administrative expenses

$  11,066

Our building lease does not specify an implicit rate of interest.  Therefore, we estimate our incremental borrowing rate, which is defined as the interest rate we would pay to borrow on a collateralized basis, considering such factors as length of lease term and the risks of the economic environment in which the leased asset operates.  As of March 31, 209, the following disclosures for remaining lease term and incremental borrowing rates were applicable:

Three Months Ended

Supplemental Disclosures

March 31, 2019

Weighted average remaining lease term

1.76 years

Weighted average discount rate

  7% years

As of March 31, 2019, maturities of operating lease liabilities were the following:

Amounts under

Years ended December 31,

operating leases

Remaining 2019

$  38,028

2020

    48,160

2021

      3,774

Total lease payments

    89,962

Less imputed interest

    (5,814)

Total

$  84,148

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REFLECT SCIENTIFIC, INC.

Notes to the Condensed Consolidated Financial Statements

March 31, 2019

NOTE 5 -   SUBSEQUENT EVENTS

In accordance with ASC 855-10 management reviewed all material events through the date of this report. There are no material subsequent events to report.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward-looking statements made by or on behalf of our Company. Our Company and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this Annual Report and other filings with the Securities and Exchange Commission and in reports to our Company’s stockholders. Management believes that all statements that express expectations and projections with respect to future matters, as well as from developments beyond our Company’s control including changes in global economic conditions are forward-looking statements within the meaning of the Act. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and business performance. There can be no assurance however, that management’s expectations will necessarily come to pass. Factors that may affect forward- looking statements include a wide range of factors that could materially affect future developments and performance, including the following:

·

Changes in Company-wide strategies, which may result in changes in the types or mix of businesses in which our Company is involved or chooses to invest;

·

Changes in U.S., global or regional economic conditions;

·

Changes in U.S. and global financial and equity markets, including significant interest rate fluctuations, which may impede our Company’s access to, or increase the cost of, external financing for our operations and investments;

·

Increased competitive pressures, both domestically and internationally;

·

Legal and regulatory developments, such as regulatory actions affecting environmental activities;

·

The imposition by foreign countries of trade restrictions and changes in international tax laws or currency controls;

·

Adverse weather conditions or natural disasters, such as hurricanes and earthquakes, labor disputes, which may lead to increased costs or disruption of operations.

This list of factors that may affect future performance and the accuracy of forward-looking statements are illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

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Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited Financial Statements and accompanying notes.  Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.  The Company has adopted the new revenue recognition and lease accounting standards. The Company believes there have been no other significant changes during the three month period ended March 31, 2019, to the items disclosed as significant accounting policies in management's Notes to the Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

Plan of Operation and Business Growth

Our revenues during the three month reporting periods decreased 23% during 2019 compared to 2018 revenues, as freezer sales for the period were $59,231 lower in 2019 than 2018.

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

Concurrent with the development and commercialization of the above products, we have completed our on-line catalog and are making progress in enrolling new distributors for our consumable products.  

An analysis of operating results for the three months ended March 31, 2019 and 2018 follows.

Results of Operations

Three Months Ended March 31, 2019 and 2018

		For the three months ended March 31,
		2019		2018		Change
Revenues	$	326,314	$	425,681	$	(99,367)
Cost of goods sold		93,906		109,310		(15,404)
Gross profit		232,408		316,371		(83,963)
Operating expenses		237,744		217,650		20,094
Other expense		199		-		199
Net profit (loss)	$	(5,535)	$	98,721	$	(104,256)

Revenues decreased during the quarter ended March 31, 2019, to $326,314 from $425,681 for the quarter ended March 31, 2018, a decrease of $99,367.  The decrease results primarily from the sale of ultra-low

17

temperature freezers which generated revenue of $72,419 in 2019 compared to revenue of $131,650 in 2018. We are continuing work to increase our market penetration in the ultra-low temperature freezer market.

Cost of goods decreased in the quarter ending March 31, 2019, as compared to March 31, 2018, to $93,906 from $109,310, a decrease of $15,404. We realized a gross profit percentage of 71% for the three months ended March 31, 2019, compared to 74% for the three months ended March 31, 2018.  The gross profit percentage is dependent on the mix of product sales, which varies from quarter to quarter.  We continue to actively work to obtain more favorable pricing from our vendors in order to increase the margins realized on all product lines.  

Operating expenses increased to $237,744 in the three months ended March 31, 2019, an increase of $20,094 over the expenses of $217,650 incurred in the three-month period ended March 31, 2018.  The increase results primarily from increases in salaries, research and development, health insurance, professional fees, and advertising and commissions, offset by small increases in a number of other expense categories. While we continue to monitor and minimize operating costs, we also realize that certain levels of expenditures are required in order to commercialize the products and achieve market penetration.  

The net loss for the three-month period ended March 31, 2019 was $5,535, which compares to a net income of $98,721for the three-month period ended March 31, 2018.  Management continues to look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.

The net loss of $5,535 for the three-month period ended March 31, 2019 represents a loss of $0.00 per share.  This compares to the net income of $98,271, or gain of $0.00 per share, for the three months ended March 31, 2018.

Seasonality and Cyclicality

We do not believe our business is cyclical.

Liquidity and Capital Resources

Our cash resources at March 31, 2019, were $255,481, with accounts receivable of $131,702, net of allowance, and inventory of $155,035, net of allowance. Our working capital on March 31, 2019, was $396,937.  Working capital on December 31, 2018 was $446,877.

For the three-month period ended March 31, 2019, net cash provided by operating activities was $35,351 which compares to $6,818 net cash provided by operating activities for the three-month period ended March 31, 2018.  

Off-Balance Sheet Arrangements

None.

Item 3.  Quantitative and Qualitative Disclosure about Market Risk

18

Not required.

Item 4.  Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based upon this evaluation, our Chief Executive Officer and Principal Financial Officer concluded that information required to be disclosed is recorded, processed, summarized and reported within the specified periods, and is accumulated and communicated to management, including our Chief Executive Officer and Principal Financial Officer, to allow for timely decisions regarding required disclosure of material information required to be included in our periodic Securities and Exchange Commission reports.  Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures are not effective at that reasonable assurance level as of the end of the period covered by this report based upon our current level of transactions and staff.  However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote

(b)

Changes in Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act.  Management reviewed our internal controls over financial reporting, and there have been no changes in our internal controls over financial reporting for the three month period ended March 31, 2019 that have materially affected, or are like to affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

None; not applicable.

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None; not applicable.

Use of Proceeds of Registered Securities

None; not applicable.

19

Purchases of Equity Securities by Us and Affiliated Purchasers

During the three months ended March 31, 2019, we have not purchased any equity securities nor have any officers or directors of the Company.

ITEM 3.  Defaults Upon Senior Securities

None

ITEM 4.  Mine Safety Disclosure

Not applicable.

ITEM 5.  Other Information.

None

ITEM 6.  Exhibits

(a)

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*
14	Code of Ethics	December 31, 2003 10-K Annual Report*
21	Subsidiaries of the Company	December 31, 2006 10-K Annual Report*

20

Exhibit No.	Title of Document	Location if other than attached hereto
31.1	302 Certification of Kim Boyce
31.2	302 Certification of Keith Merrell
32	906 Certification

Exhibits

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

* Previously filed and incorporated by reference.

21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Reflect Scientific, Inc.

(Registrant)

Date:

May 15, 2019

By:  /s/ Kim Boyce

       Kim Boyce, CEO, President and Director

Date:

May 15, 2019

By:  /s/ Tom Tait

        Tom Tait, Vice President and Director

Date:

May 15, 2019

By:  /s/ Keith Merrell

        Keith Merrell, CFO, Principal Financial Officer

22

EX-31

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

     I, Kim Boyce certify that:

     1.   I have reviewed this Quarterly Report on Form 10-Q 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: 05/15/2019                           Signature:/s/Kim Boyce

                                                         Kim Boyce

                                                         Chief Executive Officer and Director

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 Quarterly Report on Form 10-Q 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: 05/15/2019                           Signature:/s/Keith Merrell

                                                          Keith Merrell

                                                          Principal Financial Officer and CFO

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 Quarterly Report of Reflect Scientific, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), We, Kim Boyce, our Chief Executive Officer and director and Keith Merrell, our Chief/Principal Financial Officer, 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 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 the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: 05/15/2019                             /s/Kim Boyce

                                                           Kim Boyce

                                                           Chief Executive Officer and Director

Dated: 05/15/2019                            /s/Keith Merrell

                                                          Keith Merrell

                                                          Principal Financial Officer and CFO

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 14, 2019
Details
Registrant Name	REFLECT SCIENTIFIC INC
Registrant CIK	0001103090
SEC Form	10-Q
Period End date	Mar. 31, 2019
Fiscal Year End	--12-31
Trading Symbol	RSCF
Tax Identification Number (TIN)	870642556
Number of common stock shares outstanding		79,108,086
Filer Category	Non-accelerated Filer
Current with reporting	Yes
Small Business	true
Emerging Growth Company	false
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Entity Incorporation, State Country Name	Utah

XML

Condensed Consolidated Balance Sheets - USD ($)	Mar. 31, 2019	Dec. 31, 2018
CURRENT ASSETS
Cash	$ 255,481	$ 220,427
Accounts receivable, net	131,702	155,543
Inventory, net	155,035	142,325
Prepaid assets	3,510	3,510
Total Current Assets	545,728	521,805
FIXED ASSETS, NET	6,771	7,766
OTHER ASSETS
Operating lease right-of-use asset	83,230	0
Goodwill	60,000	60,000
Deposits	3,100	3,100
Total Other Assets	146,330	63,100
TOTAL ASSETS	698,829	592,671
CURRENT LIABILITIES
Accounts payable and accrued expense	92,791	52,450
Short-term lines of credit	9,582	9,878
Customer deposits	0	12,500
Operating lease liabilities - current portion	46,318	0
Income taxes payable	100	100
Total Current Liabilities	148,791	74,928
Operating lease liabilities - long term	37,830	0
Total Liabilities	186,621	74,928
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 79,108,086 issued and outstanding, respectively	791,080	791,080
Additional paid in capital	20,027,370	20,027,370
Accumulated deficit	(20,306,242)	(20,300,707)
Total Stockholders' Equity	512,208	517,743
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 698,829	$ 592,671

XML

Condensed Consolidated Balance Sheets - Parenthetical - $ / shares	Mar. 31, 2019	Dec. 31, 2018
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	79,108,086
Common Stock, Shares, Issued	79,108,086	79,108,086

XML

Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Details
REVENUES	$ 326,314	$ 425,681
COST OF GOODS SOLD	93,906	109,310
GROSS PROFIT	232,408	316,371
OPERATING EXPENSES
Salaries and wages	118,123	112,761
Research and development expense	25,161	14,905
General and administrative expense	93,621	89,984
Total Operating Expenses	237,744	217,650
OPERATING INCOME (LOSS)	(5,336)	98,721
OTHER EXPENSE
Total Other Expenses	199	0
NET INCOME (LOSS) BEFORE TAXES	(5,535)	98,721
Provision for income taxes	0	0
NET INCOME (LOSS)	$ (5,535)	$ 98,721
NET INCOME (LOSS) PER SHARE - BASIC	$ (0.00)	$ 0.00
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED	79,108,086	71,312,086

XML

Consolidated Statements of Stockholders' Equity - USD ($)	Total	Common Stock	Additional Paid-in Capital	Retained Earnings
Balance, December 31, 2017 at Dec. 31, 2017	$ 455,426	$ 713,120	$ 19,793,490	$ (20,051,184)
Balance, December 31, 2017 at Dec. 31, 2017		71,312,086
Net income (loss)	98,721			98,721
Common Stock, Shares, Outstanding, Ending Balance at Mar. 31, 2018		71,312,086
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Mar. 31, 2018	554,147	$ 713,120	19,793,490	(19,952,463)
Balance, December 31, 2017 at Dec. 31, 2018	$ 517,743	$ 791,080	20,027,370	(20,300,707)
Balance, December 31, 2017 at Dec. 31, 2018	79,108,086	79,108,086
Net income (loss)	$ (5,535)			(5,535)
Common Stock, Shares, Outstanding, Ending Balance at Mar. 31, 2019	79,108,086	79,108,086
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Mar. 31, 2019	$ 512,208	$ 791,080	$ 20,027,370	$ (20,306,242)

XML

Condensed Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ (5,535)	$ 98,721
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	995	0
Accounts receivable	23,841	(29,487)
Inventory	(12,710)	6,135
Accounts payable and accrued expenses	40,340	1,301
Operating lease right-of-use asset	11,851	0
Operating lease obligations	(10,939)	0
Customer deposits	(12,500)	(69,852)
Net Cash (used in) provided by Operating Activities	35,350	6,818
CASH FLOWS FROM INVESTING ACTIVITIES
Payments on short-term line of credit	(296)	0
Net Cash used in investing Activities	(296)	0
CASH FLOWS FROM FINANCING ACTIVITIES
Net Cash used in Financing Activities	0	0
NET CHANGE IN CASH	35,054	6,818
CASH AT BEGINNING OF PERIOD	220,427	235,858
CASH AT END OF PERIOD	255,481	242,676
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest	296	0
Income taxes	$ 0	$ 0

XML

Organization, Consolidation and Presentation of Financial Statements

3 Months Ended

Mar. 31, 2019

Notes

Organization, Consolidation and Presentation of Financial Statements

NOTE 1 -   BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to accounting principles generally accepted in the United States of America. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission.  The information furnished in the interim condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.  Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed consolidated financial statements be read in conjunction with the Company’s most recent audited consolidated financial statements and notes thereto included in its December 31, 2018 financial statements.  Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

NOTE 2 -   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND LINE 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 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. 

SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Reflect Scientific, Inc. and its wholly owned subsidiary, Cryometrix. Intercompany transactions and accounts have been eliminated in consolidation.

USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.

REVENUE RECOGNITION.

We have applied the new revenue standard to all contracts from the date of initial application.  We 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. 

A part of our customer base is made up of international customers.  The table below allocates revenue between domestic and international customers. 

		March 31, 2019				March 31, 2018
Segments		Consumer Products	Long-term Contracts	Total		Consumer Products	Long-term Contracts	Total
Domestic	$	225,157	--	225,157	$	321,389	--	321,389
International		101,157	--	101,157		104,292	--	104,292
	$	326,314	--	326,314	$	425,681	--	425,681
Components		253,895	--	253,895	$	294,031	--	294,031
Engineering services		72,419	--	72,419		131,650	--	131,650
	$	326,314	--	326,314	$	425,681	--	425,681

ACCOUNTS RECEIVABLE:  Accounts receivables are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. At March 31, 2019 and December 31, 2018, the Company had accounts receivable, net of the allowance, of $131,702 and $155,543, respectively.  At March 31, 2019 and December 31, 2018 the allowance for doubtful accounts was $4,000 and $4,000, respectively.

INVENTORY: Inventories are presented net of an allowance for obsolescence and 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 detectors and ultra-low temperature freezers which it builds and other scientific items.  At March 31, 2019, inventory was made up of $241,374 of finished goods, less an allowance for obsolescence of $86,339.  At December 31, 2018, inventory was comprised of $228,664 of finished goods, less an allowance for obsolescence of $86,339.  There were no raw materials or work in progress for either period presented.

INTANGIBLE ASSETS:  Costs to obtain or develop patents are capitalized and amortized over the life of the patents. Patents are amortized from the date the Company acquires or is awarded the patent over their estimated useful lives, which range from 5 to 15 years.  An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows. We perform an impairment analysis on an annual basis.  The Company’s analysis did not indicate any impairment of intangible assets as of the impairment analysis conducted December 31, 2018.

GOODWILL: Goodwill represents the excess of the Company’s acquisition cost over the fair value of net assets of the acquisition. Goodwill is not amortized, but is tested for impairment annually, or when a triggering event occurs. As described in ACS 360, the Company has adopted the goodwill impairment analysis that includes quantitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. A fair-value-based test is applied at the overall Company level. The test compares the estimated fair value of the Company at the date of the analysis to the carrying value of its net assets. The analysis also requires various judgments and estimates, including general and macroeconomic conditions, industry and the Company’s targeted market conditions, as well as relevant entity-specific events, such as a change in the market for the Company’s products and services. After considering the qualitative factors that would indicate a need for interim impairment of goodwill and applying the two-step process described in ASC 360, management has determined that the value of Company’s assets is not more likely than not less than the carrying value of the Company including goodwill, and that no impairment charge needs be recognized during the reporting periods.

LEASES: In February of 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2016-02 - Leases (Topic 842), which significantly amends the way companies are required to account for leases. Under the updated leasing guidance, some leases that did not have to be reported previously are now required to be presented as an asset and liability on the balance sheet. In addition, for certain leases, what was previously classified as an operating expense must now be allocated between amortization expense and interest expense. The Company adopted this update as of January 1, 2019 using the modified retrospective transition method. Prior periods have not been restated. Upon implementation, the Company recognized an initial right-of-use asset of $95,087 and lease liability of $95,087. Due to the simplistic nature of the Company's leases, no change to retained earnings was required. See Note 4 for further details.

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. 

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 March 31, 2019 and 2018, the Company had no common stock equivalents.

RECENT ACCOUNTING PRONOUNCEMENTS:   In March 2019 the Financial Accounting Standards Board issued ASU No. 2019-01 “Leases”, a clarification of the guidance issued in February 2016, ASU No. 2016-02, “Leases” Topic 842.  The Company adopted this standard effective January 2019. The adoption of this standard resulted in recording right-of-use assets and lease liabilities on its balance sheet.  The adoption was made on a prospective basis and, as a result, prior period amounts were not adjusted to reflect the impact of the updated guidance.  The adoption of this new accounting guidance did not have a significant impact on our financial statements.

June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for us on January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.

The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position and cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its current or future earnings or operations.

XML

Going Concern

3 Months Ended

Mar. 31, 2019

Notes

Going Concern

NOTE 3 – GOING CONCERN

The Company continues to accumulate significant operating losses and has an accumulated deficit of $20,306,242 at March 31, 2019.  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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LEASES

3 Months Ended

Mar. 31, 2019

Notes

LEASES

NOTE 4 -      LEASES

We adopted ASC 842 using the modified retrospective approach, which allows us not to restate our comparative periods prior to the adoption of the standard on January 1, 2019.  As a result prior period presented before this adoption are not adjusted to reflect the effect of this new standard.

We have operating leases for our office and warehouse facility as well as for an automobile.  We used the lease termination dates of November 30, 2020 for the building and July 7, 2021 for the automobile to calculate right of use (“ROU”) assets and lease liabilities. 

The following was included in our consolidated condensed balance sheet as of March 31, 2019:

Leases	As of March 31, 2019
Assets
ROU operating lease assets	$	83,230
Liabilities
Short-term operating lease liabilities	$	46,318
Long-term operating lease liabilities		37,830
Total operating lease liabilities	$	84,148

We recognize lease expense on a straight-line basis over the term of the lease. 

Lease Cost	Three Months Ended March 31, 2019
Operating lease cost  Administrative expenses	$	11,066

Our building lease does not specify an implicit rate of interest.  Therefore, we estimate our incremental borrowing rate, which is defined as the interest rate we would pay to borrow on a collateralized basis, considering such factors as length of lease term and the risks of the economic environment in which the leased asset operates.  As of March 31, 209, the following disclosures for remaining lease term and incremental borrowing rates were applicable:

Supplemental Disclosures	Three Months Ended March 31, 2019
Weighted average remaining lease term	1.76 years
Weighted average discount rate	7% years

As of March 31, 2019, maturities of operating lease liabilities were the following:

Years ended December 31,	Amounts under operating leases
Remaining 2019	$	38,028
2020		48,160
2021		3,774
Total lease payments		89,962
Less imputed interest		(5,814)
Total	$	84,148

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Subsequent Events

3 Months Ended

Mar. 31, 2019

Notes

Subsequent Events

NOTE 5 – SUBSEQUENT EVENTS

In accordance with ASC 855-10 management reviewed all material events through the date of this report.  There are no material subsequent events to report.

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Organization, Consolidation and Presentation of Financial Statements (Policies)

3 Months Ended

Mar. 31, 2019

Policies

PRINCIPLES OF CONSOLIDATION

PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Reflect Scientific, Inc. and its wholly owned subsidiary, Cryometrix. Intercompany transactions and accounts have been eliminated in consolidation.

Estimates

USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.

Revenue Recognition Accounting

REVENUE RECOGNITION.

We have applied the new revenue standard to all contracts from the date of initial application.  We 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. 

A part of our customer base is made up of international customers.  The table below allocates revenue between domestic and international customers. 

		March 31, 2019				March 31, 2018
Segments		Consumer Products	Long-term Contracts	Total		Consumer Products	Long-term Contracts	Total
Domestic	$	225,157	--	225,157	$	321,389	--	321,389
International		101,157	--	101,157		104,292	--	104,292
	$	326,314	--	326,314	$	425,681	--	425,681
Components		253,895	--	253,895	$	294,031	--	294,031
Engineering services		72,419	--	72,419		131,650	--	131,650
	$	326,314	--	326,314	$	425,681	--	425,681

Accounts Receivable

ACCOUNTS RECEIVABLE:  Accounts receivables are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. At March 31, 2019 and December 31, 2018, the Company had accounts receivable, net of the allowance, of $131,702 and $155,543, respectively.  At March 31, 2019 and December 31, 2018 the allowance for doubtful accounts was $4,000 and $4,000, respectively.

Inventory

INVENTORY: Inventories are presented net of an allowance for obsolescence and 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 detectors and ultra-low temperature freezers which it builds and other scientific items.  At March 31, 2019, inventory was made up of $241,374 of finished goods, less an allowance for obsolescence of $86,339.  At December 31, 2018, inventory was comprised of $228,664 of finished goods, less an allowance for obsolescence of $86,339.  There were no raw materials or work in progress for either period presented.

Intangible Assets

INTANGIBLE ASSETS:  Costs to obtain or develop patents are capitalized and amortized over the life of the patents. Patents are amortized from the date the Company acquires or is awarded the patent over their estimated useful lives, which range from 5 to 15 years.  An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows. We perform an impairment analysis on an annual basis.  The Company’s analysis did not indicate any impairment of intangible assets as of the impairment analysis conducted December 31, 2018.

GOODWILL: Goodwill represents the excess of the Company’s acquisition cost over the fair value of net assets of the acquisition. Goodwill is not amortized, but is tested for impairment annually, or when a triggering event occurs. As described in ACS 360, the Company has adopted the goodwill impairment analysis that includes quantitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. A fair-value-based test is applied at the overall Company level. The test compares the estimated fair value of the Company at the date of the analysis to the carrying value of its net assets. The analysis also requires various judgments and estimates, including general and macroeconomic conditions, industry and the Company’s targeted market conditions, as well as relevant entity-specific events, such as a change in the market for the Company’s products and services. After considering the qualitative factors that would indicate a need for interim impairment of goodwill and applying the two-step process described in ASC 360, management has determined that the value of Company’s assets is not more likely than not less than the carrying value of the Company including goodwill, and that no impairment charge needs be recognized during the reporting periods.

LEASES

LEASES: In February of 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2016-02 - Leases (Topic 842), which significantly amends the way companies are required to account for leases. Under the updated leasing guidance, some leases that did not have to be reported previously are now required to be presented as an asset and liability on the balance sheet. In addition, for certain leases, what was previously classified as an operating expense must now be allocated between amortization expense and interest expense. The Company adopted this update as of January 1, 2019 using the modified retrospective transition method. Prior periods have not been restated. Upon implementation, the Company recognized an initial right-of-use asset of $95,087 and lease liability of $95,087. Due to the simplistic nature of the Company's leases, no change to retained earnings was required. See Note 4 for further details.

Research and Development Expense

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. 

Earnings Per Share

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 March 31, 2019 and 2018, the Company had no common stock equivalents.

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS:   In March 2019 the Financial Accounting Standards Board issued ASU No. 2019-01 “Leases”, a clarification of the guidance issued in February 2016, ASU No. 2016-02, “Leases” Topic 842.  The Company adopted this standard effective January 2019. The adoption of this standard resulted in recording right-of-use assets and lease liabilities on its balance sheet.  The adoption was made on a prospective basis and, as a result, prior period amounts were not adjusted to reflect the impact of the updated guidance.  The adoption of this new accounting guidance did not have a significant impact on our financial statements.

June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This standard became effective for us on January 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements.

The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position and cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its current or future earnings or operations.

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Organization, Consolidation and Presentation of Financial Statements (Tables)

3 Months Ended

Mar. 31, 2019

Tables/Schedules

Disaggregation of Revenue

		March 31, 2019				March 31, 2018
Segments		Consumer Products	Long-term Contracts	Total		Consumer Products	Long-term Contracts	Total
Domestic	$	225,157	--	225,157	$	321,389	--	321,389
International		101,157	--	101,157		104,292	--	104,292
	$	326,314	--	326,314	$	425,681	--	425,681
Components		253,895	--	253,895	$	294,031	--	294,031
Engineering services		72,419	--	72,419		131,650	--	131,650
	$	326,314	--	326,314	$	425,681	--	425,681

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LEASES (Tables)

3 Months Ended

Mar. 31, 2019

Tables/Schedules

Lessee, Operating Lease, Disclosure

Leases	As of March 31, 2019
Assets
ROU operating lease assets	$	83,230
Liabilities
Short-term operating lease liabilities	$	46,318
Long-term operating lease liabilities		37,830
Total operating lease liabilities	$	84,148

Lease, Cost

Lease Cost	Three Months Ended March 31, 2019
Operating lease cost  Administrative expenses	$	11,066

Lessee, Operating Lease, Liability, Maturity

Years ended December 31,	Amounts under operating leases
Remaining 2019	$	38,028
2020		48,160
2021		3,774
Total lease payments		89,962
Less imputed interest		(5,814)
Total	$	84,148

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Organization, Consolidation and Presentation of Financial Statements (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Domestic revenues	$ 225,157	$ 321,389
International revenues	101,157	104,292
REVENUES	326,314	425,681
Components revenues	253,895	294,031
Engineering services revenues	72,419	$ 131,650
Accounts receivable, net	131,702		$ 155,543
Allowance for Doubtful Accounts Receivable	4,000		4,000
Inventory, Gross	241,374		228,664
Inventory Adjustments	86,339		$ 86,339
Initial operating lease liability	$ 95,087

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Going Concern (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Details
Accumulated deficit	$ 20,306,242	$ 20,300,707

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LEASES (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Details
Operating lease right-of-use asset	$ 83,230	$ 0
Operating lease liabilities - current portion	46,318	0
Operating lease liabilities - long term	37,830	$ 0
Operating Lease, Liability	84,148
Operating Lease, Cost	$ 11,066
Operating Lease, Weighted Average Remaining Lease Term	1 year 9 months 4 days
Operating Lease, Weighted Average Discount Rate, Percent	7.00%
Lessee, Operating Lease, Liability, Payments, Remainder of Fiscal Year	$ 38,028
Lessee, Operating Lease, Liability, Payments, Due Year Two	48,160
Lessee, Operating Lease, Liability, Payments, Due Year Three	3,774
Lessee, Operating Lease, Liability, Payments, Due	89,962
Finance Lease, Interest Payment on Liability	$ (5,814)