Reflect Scientific, Inc.: Form 10-Q for the period ended Mar 31, 2013

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.

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 believes there have been no significant changes during the three month period ended March 31, 2013, 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, 2012.

Plan of Operation and Business Growth

Our focus over the coming months will be to increase the sales of our life science consumables and detectors while, at the same time, continuing to work on the commercialization of our liquid nitrogen refrigeration products. Of those liquid nitrogen refrigeration products, the refrigerated trailer, known as a

“reefer”, is receiving highest priority. We have our first manufactured unit operational and are currently operating it and collecting data as to its efficiency and reliability.

We also continue to focus on the expansion of our detector line and developing alliances with contract manufacturers for our ultra-low temperature freezers and reefer units. Our new detector unit has received very positive reviews. We believe that its enhanced functionality, coupled with its low cost, will provide us with a competitive edge over products currently being sold in that specialized market.

Concurrent with the development and commercialization of the above products, we have completed our on-line catalog and are making progress in identifying new distributors for our consumable products. It is expected that new distribution partners will reverse the sales decline in our consumable products.

Our revenues during the reporting period decreased during 2013 compared to 2012 revenues. A slow-down in European sales, coupled with the discontinuance of some product lines offered by one of our major distributors are the major reason for the declining revenue. We do not expect this trend to continue. We are currently working to bring on new distributors who will carry our entire line of specialty laboratory products. While some of our products are relatively new to the marketplace and we expect the demand for those to grow as customers become more familiar them, there are a number of our product lines which have are well established and have strong, consistent demand. With the additional of new distribution channels we believe that sales will increase over the remainder of the year.

Results of Operations

Three Months Ended March 31, 2013 and 2012

Revenues decreased during the quarter ended March 31, 2013, to $268,694 from $325,017 for the quarter ended March 31, 2012, a decrease of $56,323. All of the revenues were generated from our specialized laboratory supplies and detector sales, as we work to continue to refine and commercialize the ultra low temperature freezer technologies. We completed our catalog web site and have distributed our catalog to a number or potential new distributors. We are currently working to bring on additional distributors to expand the distribution channels for our products. As additional distributors come on we anticipate that revenues for the remaining reporting periods of 2013 will increase over those reported for this three month period.

With decreased sales during the reporting period, cost of goods decreased in the quarter ending March 31, 2013, as compared to March 31, 2012 to $141,691 from $172,095, a decrease of $30,404. The gross profit percentage remained at 47% for the three months ended March 31, 2013, compared to 47% for the three months ended March 31, 2012. 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 our product lines.

As a result of our continued focus on operating expenses we realized a reduction of operating expenses in the current period. This reduction is the result of cost reduction efforts implemented by management and an ongoing quest to gain additional operating efficiencies. Operating expenses for the three months ended March 31, 2013 were $213,683; this represents a decrease of $65,241 from the $278,924 in operating expenses recorded for the three month period ended March 31, 2012. The decrease results primarily from reductions in salaries, payroll taxes, licensing, and lower depreciation and amortization charges, offset in part by an increase in consulting fees and research and development costs. Operating expenses for the remaining reporting periods in 2013 are expected to remain close to the expense levels shown for the period of this report.

The net loss for the three month period ended March 31, 2013 was $111,152, a $148,141 improvement from the $259,293 loss for the three month period ended March 31, 2012. Management continues to look for opportunities to improve gross margins and reduce ongoing operating expenses in order to achieve profitability.

The net loss for the three months ended March 31, 2013 was $0.01 per share. The net loss for the three months ended March 31, 2012 was also $0.01 per share.

Seasonality and Cyclicality

We do not believe our business is cyclical.

Liquidity and Capital Resources

Our cash resources at March 31, 2013, were $190,590, with accounts receivable of $120,505 and inventory of $351,980. To date we have relied on revenues and sales of equity and debt securities for our cash resources. Our working capital deficit on March 31, 2013, was $514,712, due primarily to the $650,000 in outstanding debentures and $442,125 in accrued interest on those debentures. Working capital on December 31, 2012 was a deficit of $414,835. Management is working to obtain financing to enable it to retire the remaining outstanding debentures and provide the capital needed to commercialize the low temperature freezer and refrigeration technology. There can be no assurance that funds will be available, or that terms of available funds will be acceptable to the Company. The inability of the Company to obtain funding at acceptable terms could negatively impact its ability to execute its business plan.

For the three month period ended March 31, 2013, net cash used for operating activities was $71,443 which compares to $119,970 of net cash used for operating activities for the three month period ended March 31, 2012.

Off-Balance Sheet Arrangements

We lease office and warehouse space under a non-cancelable operating lease in Utah. Future minimum lease payments under the operating lease at March 31, 2013 are $62,500 for that facility. In addition, we have automobile leases with future minimum lease payments of $3,930.

At March 31, 2013, the remaining outstanding convertible debentures in default were $650,000, including penalties. The debentures bear an 18% interest rate. The Company accrued an additional $22,500 in interest during the quarter ended March 31, 2013. The total accrued interest on this remaining debenture was $442,125 as of March 31, 2013. Assuming the debentures were converted, 1,000,000 shares of restricted common stock would be issued.

(a)

Management’s Report on Internal Control Over Financial Reporting.

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 effective to a reasonable assurance level of achieving such objectives. 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.

There were no changes in our internal control over financial reporting during the period covered by this Quarterly Report.