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

REFLECT SCIENTIFIC, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

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

REFLECT SCIENTIFIC, INC.

Notes to the Condensed Consolidated Financial Statements

SeptemberJune 30, 20172021

(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, 20162020 financial statements. Operating results for the three and ninesix months ended SeptemberJune 30, 20172021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2021.

NOTE 2 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND LINE OF BUSINESS:

Cole,Reflect Scientific, Inc. (the Company) was incorporated under the laws of the State of Utah on November 3, 1999.1999 as Cole, Inc. 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.

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.

SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION:The accompanying consolidated financial statements include the accounts of Reflect Scientific, Inc. and its wholly owned subsidiaries, Cryometrix and Julie Martin Scientific Technology.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.

REVENUE RECOGNITION:  Revenue is only recognized on product sales onceWe have applied the product has been shippednew 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, persuasive evidencein accordance with the terms of an agreement exists,each contract with the pricecustomer.

A part of our customer base is fixed or determinable,made up of international customers. The table below allocates revenue between domestic and collectability is reasonably assured.  The Company sells its products in both the US and internationally through direct sales and independent distributors.  international customers.

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 SeptemberJune 30, 20172021 and December 31, 2016,2020, the Company had accounts receivable, net of the allowance, of $206,000$206,999 and $73,424,$340,427, respectively. At SeptemberJune 30, 20172021 and December 31, 20162020, 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 SeptemberJune 30, 2017,2021 and December 31, 2020, the Company had inventory was made upconsisting of $254,258 ofraw materials and finished goods, less annet of allowance, of $524,081 and $438,606, respectively. Of the total raw materials represented $6,425 at June 30, 2021 and $10,767 at December 31, 2020. At June 30, 2021 and December 31, 2020, the allowance for obsolescence of $22,652.  At December 31, 2016, inventory was comprised of $249,619 of finished goods, less an allowance for obsolescence of $22,652.  There were no raw materials or work in progress for either period presented.

$106,044 and $106,044, respectively.

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, 2016.

2020. As of June 30, 2021 and December 31, 2020, all of the intangible assets were fully amortized.

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 two step 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: The Company, in accordance with ASC 842, accounts for leases as right-of-use assets (“ROU”) and lease liabilities on the balance sheet. The Company elected not to separate lease and non-lease components, but to treat as single lease costs. 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. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised.

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.

EARNINGSNET INCOME (LOSS) PER SHARE: The computation of basic earningsprofit and loss 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 SeptemberJune 30, 20172021 and 2016,2020, the Company had no common stock equivalents.

RECENT ACCOUNTING PRONOUNCEMENTS: In May 2017, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-09, "Stock Compensation - Scope of Modification Accounting". This ASU requires all modifications to be accounted for as a modification unless the fair value, vesting conditions and classification of the award as equity or liability are the same as the classification of the original award immediately before the original award is modified. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017 and for interim periods therein. The Company does not believe this ASU will have a material impact on its consolidated financial position, results of operation or cash flows.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2016-02, “Leases.”  This ASU requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to current accounting treatment.  This ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases.  For public business entities, this ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein.  Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial

statements.  The Company is currently evaluating the impact of this ASU on its financial statements and disclosures.

In August 2015, the ASB issued ASU 2015-14, Revenue from Contracts with Customer (Topic 606): Deferral of the Effective Date. This ASU defers the effective date of ASU 2014-09, Revenue from Contracts with Customer (Topic 606) for all entities by one year. As a result, all entities will be required to apply the provisions of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently assessing the adoption date and impact the guidance in this ASU will have, if any, on our consolidated results of operations, cash flows, or financial position.

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- LEASES

The Company continues to accumulate significantWe have operating lossesleases for our office and has an accumulated deficit of $19,579,229 at September 30, 2017.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  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,warehouse facility as well as for an automobile. We used the lease termination dates of November 30, 2023 for the building and July 7, 2021 for the automobile to provide operating capitalcalculate right of use (“ROU”) assets and lease liabilities.

The following was included in our consolidated condensed balance sheet as of June 30, 2021:

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

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 June 30, 2021, the following disclosures for its operations.  However, there is no assuranceremaining lease term and incremental borrowing rates were applicable:

NOTE 4 - 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 June 30, 2021 and December 31, 2020, the Company had inventory consisting of finished goods and raw materials, net of allowance, of $524,081 and $438,606, respectively. At June 30, 2021 and December 31, 2020, the allowance for obsolescence was $106,044 and $106,044, respectively.

NOTE 5 - NOTE PAYABLE

On April 5, 2020, we received approval from our bank Chase Bank for the Paycheck Protection Program Loan (“PPP”). The terms of the loan were for 24 months at 0.98% per annum. The Company received notification that additional funding will be availablethe PPP loan was fully forgiven by the Small Business Administration on acceptable terms, if at all.February 7, 2021, both as to principal and interest, resulting in a $111,265 gain.

NOTE 4 –6 - 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.Reflect Scientific, Inc., a Utah corporation (the “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 AnnualQuarterly Report and other filings with the Securities and Exchange Commission (the “SEC”) and in reports to our Company’s stockholders. Management believes that all statements that express expectations and projections with respect to future matters, as well as from developments beyond our Company’s control including changes in global economic conditions are forward-looking statements within the meaning of the Act. These statements are made on the basis of management’s views and assumptions, as

of the time the statements are made, regarding future events and business performance. There can be no assurance however, that management’s expectations will necessarily come to pass. Factors that may affect forward- looking statements include a wide range of factors that could materially affect future developments and performance, including the following:

·

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

·

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

·

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

·

Increased competitive pressures, both domestically and internationally;

·

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

·

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

·

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

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

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited Financial Statements and accompanying notes.  Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.  The Company has adopted the new revenue recognition and lease accounting standards. The Company believes there have been no other significant changes during the nine monthsix-month period ended SeptemberJune 30, 2017,2021, to the items disclosed as significant accounting policies in management's Notes to the Financial Statements in the Company's Annual ReportRegistration Statement on Form 10-K for10 filed with the year ended December 31, 2016.SEC on March 30, 2021, and amendments thereto.

Plan of Operation and Business Growth

Our revenues during the three month reporting periods increased 52% during 2017 compared to 2016 revenues.  

Our efforts continue to be focused on increasing the sales of our life science consumables and detectors 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.

We also continue to focus on the expansion of our detector.  We believe that the enhanced functionality ofare receiving considerable interest in our latest detector design, coupled with its low cost, provides us withproduct introduction, which is an ultra-cold chiller used in the manufacture of CBD oil. This unit improves the efficiency of the manufacturing process and enables the production of a competitive edge over products currently being soldhigher purity in that specialized market.the CBD oil produced.

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 and nine months ended SeptemberJune 30, 20172021 and 2020 follows.

Results of Operations

Three Months Ended SeptemberJune 30, 20172021 and 20162020

Revenues increased during the quarterthree-month period ended SeptemberJune 30, 2017,2021, to $325,870$707,133 from $214,404$502,906 for the quarterthree-month period ended SeptemberJune 30, 2016,2020, an increase of $111,466.$204,227. The increase results primarily fromis attributable to the saleincreased sales of ultra-low temperature freezers which generated revenue of $106,400 in 2017 but no revenue in 2016. and chillers. We are continuing work to increase our market penetration in the ultra-low temperature freezer market.market and in the ultra-cold chiller.

Cost of goods increased in the quarter ending SeptemberJune 30, 2017,2021, as compared to SeptemberJune 30, 2016,2020, to $84,636$235,179 from $74,581,$122,538, an increase of $10,055. The small cost of goods increase, in comparison to the increase in revenue, is attributable to the sale of ultra-low temperature freezers, which carry higher margins than the specialty laboratory products.$112,641. We realized a gross profit percentage of 74%67% for the three months ended SeptemberJune 30, 2017,2021, compared to 65%76% for the three months ended SeptemberJune 30, 2016.2020. The gross profit percentage is dependent on the mix of product sales, which varies from quarter to quarter. The increased sale of freezers and chillers during 2021 period resulted in the lower margins. We continue to actively work to obtain more favorable pricing from our vendors in order to increase the margins realized on all product lines.

Operating expenses decreased to $182,177 inwere $301,173 for the three months ended SeptemberJune 30, 2017,2021, a decrease of $7,511$104,638 over the expenses of $189,688$405,811 incurred in the three monththree-month period ended SeptemberJune 30, 2016.2020. The decrease results primarily from the $57,316 decrease in research and development costs and a $66,003 reduction is attributable to decreases in licenses, bank feessalaries and auto expenses,wages, offset by small increases in a number of other expense categories.higher general and administrative expenses. 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 profitResearch and development expenses for the three months ended June 30, 2021 were $19,456, a decrease of $57,316 in expenses for the same period in 2020, as the development work on the ultra-cold CBD oil chiller was minimized.

Salaries and wages for the three months ended June 30, 2021 were reduced by $66,003 as compared to the expense for the three month period ended SeptemberJune 30, 2017 was $59,057, an increase2020. The termination of $108,977 fromtwo employees resulted in the $49,920 losslower expense level.

Net income for the three monththree-month period ended SeptemberJune 30, 2016.2021 was $170,781, which compares to a net loss of $25,454 for the three-month period ended June 30, 2020. Management continues to

look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.

The net profitincome of $59,057$170,781 for the three monththree-month period ended SeptemberJune 30, 20172021 represents a profitincome of $0.00 per share. This compares to thea net loss of $49,920,$25,454, or $(0.00)loss of $0.00 per share, for the three months ended SeptemberJune 30, 2016.2020.

NineSix Months Ended SeptemberJune 30, 20172021 and 20162020

Revenues decreased during the nine monthsix-month period ended SeptemberJune 30, 2017,2021, to $880,072$1,269,495 from $975,761$1,486,714 for the nine monthsix-month period ended SeptemberJune 30, 2016,2020, a decrease of $95,489.$217,219. The decrease results primarily fromis attributable to the sale of ultra-low temperature freezers which generated revenue of $170,253additional chillers shipped in 2017 compared to $231,340 in 2016.2020. We are continuing work to increase our market penetration in the ultra-low temperature freezer market.market and in the ultra-cold chiller.

Due to lower sales during the reporting period, costCost of goods decreased in the nine month periodsix months ending SeptemberJune 30, 2017,2021, as compared to SeptemberJune 30, 2016,2020, to $266,328$378,974 from $286,946,$593,169, a decrease of $20,618. The change results from lower ultra-low temperature freezer sales, which carry higher margins than the specialty lab products.$214,195. We realized a gross profit percentage of 70% for the ninesix months ended SeptemberJune 30, 2017,2021, compared to 71%60% for the ninesix months ended SeptemberJune 30, 2016.2020. The gross profit percentage is dependent on the mix of product sales, which varies from quarter to quarter. Work has been done to reduce the component and assembly costs of the freezers and chillers. We continue to actively

work to obtain more favorable pricing from our vendors in order to increase the margins realized on all product lines.

Operating expenses decreased to $543,978 inwere $583,237 for the ninesix months ended SeptemberJune 30, 2017,2021, a decrease of $76,733$170,035 over the expenses of $620,751$753,272 incurred in the nine monthsix-month period ended SeptemberJune 30, 2016.2020. The reduction wasdecrease results primarily from the result of lower expenditures for$161,703 decrease in research and development of $27,047, promotion expense of commission expense of $6,783, licenses of $11,031costs and promotion expense of $3,313.a $46,190 decrease in salaries and wages. 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 profitResearch and development expenses for the ninesix months ended June 30, 2021 were $28,153, a decrease of $161,703 in expenses for the same period in 2020, as the development work on the ultra-cold CBD oil chiller was minimized.

Operating expenses were also reduced due to lower salaries and wages in the six month period ended SeptemberJune 30, 2017 was $69,766, an increase of $2,0022021 as compared to 2020. The $46,190 reduction resulted from the $67,764 profitreduction of two full-time employees.

Net income for the nine monthsix-month period ended SeptemberJune 30, 2016.2021 was $418,549, which compares to net income of $140,141 for the six-month period ended June 30, 2020. Management continues to look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.

The net profitincome of $69,766$418,549 for the nine monthsix-month period ended SeptemberJune 30, 20172021 represents a profitincome of $0.00 per share. This compares to the net profitincome of $67,764,$140,141, or income of $0.00 per share, for the ninesix months ended SeptemberJune 30, 2016.2020.

Seasonality and Cyclicality

We do not believe our business is cyclical.

Liquidity and Capital Resources