Reflect Scientific, Inc.: Form 10-Q for the period ended Mar 31, 2022

Special Note Regarding ForwardLooking 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 other significant changes during the three-month period ended March 31, 2022, to the items disclosed as significant accounting policies in management's Notes to the Financial Statements in the Company's Form 10 for the year ended December 31, 2021.

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 March 31, 2022 and 2021 follows.

Results of Operations

Three Months Ended March 31, 2022 and 2021

16

Revenues increased during the three-month period ended March 31, 2022, to $753,576 from $562,362 for the three-month period ended March 31, 2021, an increase of $191,214. The increase in revenue is primarily attributable to a $167,865 increase in the sale of freezers and chillers. Cost of goods increased in the quarter ending March 31, 2022, as compared to March 31, 2021, to $234,289 from $143,795, an increase of $90,494. We realized a gross profit percentage of 69% for the three months ended March 31, 2022, compared to 74% for the three months ended March 31, 2021. 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 the 2022 period was offset slightly by higher costs, resulting in the slightly 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 were $312,782 for the three months ended March 31, 2022, an increase of $30,718 over the expenses of $282,064 incurred in the three-month period ended March 31, 2021. The increase results from a $33,675 increase in salaries and wages, as we have hired additional personnel to meet the demand for freezers and chillers, and a $16,628 increase in research and development costs, offset in part by a $19,585 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 March 31, 2022 were $25,325, an increase of $16,628 in expenses for the same period in 2021, as enhancements to the ultra-cold CBD oil chiller continue to be made.

Salaries and wages for the three months ended March 31, 2022 were $170,279, an increase of $33,675 as compared to the expense for the three month period ended March 31, 2021. Additional personnel have been hired in order to enable the company to meet the sales demand for our chillers and freezers.

General and administrative expenses for the three months ended March 31, 2022 were $117,178, a $19,585 decrease from the $136,763 for the same period in 2021. The lower expense level was not the result of significant savings in any one expense category but is, rather, the cumulative result of small savings in numerous expenses.

Net income for the three-month period ended March 31, 2022 was $206,506, a $41,263 decrease from the $282,064 net income for the three-month period ended March 31, 2021. Management continues to look for opportunities to increase sales, improve gross margins and control ongoing operating expenses.

The net income of $206,506 for the three-month period ended March 31, 2022 represents income of $0.00 per share. This compares to net income of $282,064, or $0.00 per share, for the three months ended March 31, 2021.

Seasonality and Cyclicality

We do not believe our business is cyclical.

Liquidity and Capital Resources

Our cash resources at March 31, 2022, were $1,579,533, with accounts receivable of $233,329, net of allowance, and inventory of $695,607, net of allowance. Our working capital on March 31, 2022, was $2,281,502. Working capital on December 31, 2021 was $2,063,516.

For the three-month period ended March 31, 2022, net cash provided by operating activities was $105,609, which is a decrease of $158,664 over the $264,273 net cash provided by operating activities for the three-month period ended March 31, 2021.

Off-Balance Sheet Arrangements

None.

(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, 2022 that have materially affected, or are like to affect, our internal controls over financial reporting.