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

REFLECT SCIENTIFIC, INC.

Condensed Consolidated Balance Sheets (Continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY

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

REFLECT SCIENTIFIC, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

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

REFLECT SCIENIFIC, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

For the Three and SixNine Months Ended JuneSeptember 30, 2021 and 2020

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

REFLECT SCIENIFIC, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

For the Three and Nine Months Ended September 30, 2020

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

JuneSeptember 30, 2021

(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, 2020 financial statements. Operating results for the three and sixnine months ended JuneSeptember 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND LINE OF BUSINESS:

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

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.

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 JuneSeptember 30, 2021 and December 31, 2020, the Company had accounts receivable, net of the allowance, of $206,999$147,688 and $340,427, respectively. At JuneSeptember 30, 2021 and December 31, 2020, 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 JuneSeptember 30, 2021 and December 31, 2020, the Company had inventory consisting of raw materials and finished goods, net of allowance, of $524,081$585,057 and $438,606, respectively. Of the total raw materials represented $6,425$5,353 at JuneSeptember 30, 2021 and $10,767 at December 31, 2020. At JuneSeptember 30, 2021 and December 31, 2020, the allowance for obsolescence was $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, 2020. As of JuneSeptember 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 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 - 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.

NET INCOME (LOSS) PER SHARE: The computation of basic profit 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 JuneSeptember 30, 2021 and 2020, the Company had no common stock equivalents.

RECENT ACCOUNTING PRONOUNCEMENTS: The Company has reviewed all 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 - LEASES

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, 2023 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 JuneSeptember 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 JuneSeptember 30, 2021, the following disclosures for remaining 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 JuneSeptember 30, 2021 and December 31, 2020, the Company had inventory consisting of finished goods, and raw materials, net of allowance, of $524,081$585,057 and $438,606, respectively. At JuneSeptember 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 the PPP loan was fully forgiven by the Small Business Administration on February 7, 2021, both as to principal and interest, resulting in a $111,265 gain.

NOTE 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 Reflect Scientific, Inc., a Utah corporation (the “Company”).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 QuarterlyAnnual 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:

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 six-monthnine-month period ended JuneSeptember 30, 2021, to the items disclosed as significant accounting policies in management's Notes to the Financial Statements in the Company's Registration Statement on Form 10 filed withfor the SEC on March 30, 2021, and amendments thereto.year ended December 31, 2020.

Plan of Operation and Business Growth

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 are receiving considerable interest in our latest product 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 higher purity in 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 months ended JuneSeptember 30, 2021 and 2020 follows.

Results of Operations

Three Months Ended JuneSeptember 30, 2021 and 2020

Revenues increased during the three-month period ended JuneSeptember 30, 2021, to $707,133$716,145 from $502,906$610,085 for the three-month period ended JuneSeptember 30, 2020, an increase of $204,227.$106,060. The increase is attributable to the increased sales of ultra-low temperature freezers and chillers. We are continuing work to increase our market penetration in the ultra-low temperature freezer market and in the ultra-cold chiller.

Cost of goods increaseddecreased in the quarter ending JuneSeptember 30, 2021, as compared to JuneSeptember 30, 2020, to $235,179$242,343 from $122,538,$2252,112, an increasedecrease of $112,641.$(9,769). We realized a gross profit percentage of 67%66% for the three months ended JuneSeptember 30, 2021, compared to 76%59% for the three months ended JuneSeptember 30, 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 lowerslightly higher 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 were $301,173$313,913 for the three months ended JuneSeptember 30, 2021, a decreaseincrease of $104,638$160,128 over the expenses of $405,811$153,785 incurred in the three-month period ended JuneSeptember 30, 2020. The decrease results primarily from the $57,316$16,790 decrease in research and development costs and a $66,003$68,996 reduction in salaries and wages and a $74,392 decrease in 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.

Research and development expenses for the three months ended September 30, 2021 were $17,544, an increase of $754 in expenses for the same period in 2020, as the development work on the ultra-cold CBD oil chiller was escalated.

Salaries and wages for the three months ended September 30, 2021 were reduced by $74,342 as compared to the expense for the three month period ended September 30, 2020. The termination of two employees resulted in the lower expense level.

Net income for the three-month period ended September 30, 2021 was $159,889, a decrease of $44,299 from the $204,188 for the three-month period ended September 30, 2020. Management continues to look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.

The net income of $159,889 for the three-month period ended September 30, 2021 represents income of $0.00 per share. This compares to net income of $204,188, or $0.00 per share, for the three months ended September 30, 2020.

Nine Months Ended September 30, 2021 and 2020

Revenues decreased during the nine-month period ended September 30, 2021, to $1,985,640 from $2,096,799 for the nine-month period ended September 30, 2020, a decrease of $111,159. The decrease is attributable to the additional chillers shipped in 2020 as the backlog of orders resulting from delays in receiving component parts were assembled and shipped. We are continuing work to increase our market penetration in the ultra-low temperature freezer market and in the ultra-cold chiller.

Cost of goods decreased in the nine months ended September 30, 2021, as compared to September 30, 2020, to $621,317 from $845,281, a decrease of $223,964. We realized a gross profit percentage of 69% for the nine months ended September 30, 2021, compared to 58% for the nine months ended September 30, 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 were $897,150 for the nine months ended September 30, 2021, a decrease of $9,907 over the expenses of $907,057 incurred in the nine-month period ended September 30, 2020. The decrease results primarily from the $144,913 decrease in research and development costs and a $22,806 decrease in salaries and wages, offset in part by highera $112,200 increase in 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.

Research and development expenses for the threenine months ended JuneSeptember 30, 2021 were $19,456,$45,697, 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 June 30, 2020. The termination of two employees resulted in the lower expense level.