-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TdCvZkiWsrSpJl2wCL/XLwtV2iAcq15RSTc6HnezWhyFMBDgKNBymqC3SAAepkkp IR3ZKgQkBl9sT5+kf0V1xg== 0001023175-06-000128.txt : 20060509 0001023175-06-000128.hdr.sgml : 20060509 20060509161026 ACCESSION NUMBER: 0001023175-06-000128 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060509 DATE AS OF CHANGE: 20060509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEXPOINT SENSOR SYSTEMS INC CENTRAL INDEX KEY: 0000925660 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 870620425 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24368 FILM NUMBER: 06821149 BUSINESS ADDRESS: STREET 1: 47 EAST 7200 SOUTH STREET 2: SUITE 204 CITY: MIDVALE STATE: UT ZIP: 84047 BUSINESS PHONE: 8015685111 MAIL ADDRESS: STREET 1: 47 EAST 7200 SOUTH STREET 2: SUITE 204 CITY: MIDVALE STATE: UT ZIP: 84047 FORMER COMPANY: FORMER CONFORMED NAME: MICROPOINT INC DATE OF NAME CHANGE: 19980424 FORMER COMPANY: FORMER CONFORMED NAME: NANOTECH CORP DATE OF NAME CHANGE: 19940620 10QSB 1 flexpoint10qsb.txt QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED MARCH 31, 2006 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended March 31, 2006 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: No. 0-24368 FLEXPOINT SENSOR SYSTEMS, INC. (Name of small business issuer in its charter) Delaware 87-0620425 (State of incorporation) (I.R.S. Employer Identification No.) 106 West Business Park Drive, Draper, Utah 84020 (Address of principal executive offices) (Zip code) Issuer's telephone number: 801-568-5111 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of May 1, 2006, Flexpoint Sensor Systems, Inc. had a total of 22,992,887 shares of common stock issued and outstanding. Transitional small business disclosure format: Yes [ ] No [X] TABLE OF CONTENTS PART I: FINANCIAL INFORMATION Item 1. Financial Statements...............................................2 Index to Financial Statements.....................................3 Item 2. Management's Discussion and Analysis or Plan of Operation.........12 Item 3. Controls and Procedures...........................................17 PART II: OTHER INFORMATION Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.......17 Item 6. Exhibits..........................................................18 Signatures................................................................19 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The financial information set forth below with respect to our condensed consolidated financial position as of March 31, 2006, the condensed consolidated statements of operations for the three month periods ended March 31, 2006 and 2005, and the condensed consolidated statements of cash flows and stockholders' equity for the three month period ended March 31, 2006 is unaudited. This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the three month period ended March 31, 2006, are not necessarily indicative of results to be expected for any subsequent period. 2 FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage Company) Index to Financial Statements Page Condensed Consolidated Balance Sheets (Unaudited) March 31, 2006 and December 31, 2005.....................................................4 Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2006 and 2005, and for the Cumulative period from February 24, 2004, (Date of Emergence from Bankruptcy) through March 31, 2006........................................5 Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the period from February 24, 2004 (Date of Emergence from Bankruptcy) through December 31, 2004, for the year ended December 31, 2005 and for the Three Months Ended March 31, 2006 .......................6 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2006 and 2005, and for the Cumulative period from February 24, 2004, (Date of Emergence from Bankruptcy) through March 31, 2006....................................................7 Notes to Condensed Consolidated Financial Statements....................8-11 3 FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage Company) CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, December 31, 2006 2005 - --------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 1,563,239 $ 1,964,487 Prepaid expenses 25,056 34,661 - --------------------------------------------------------------------------- Total Current Assets 1,588,295 1,999,148 Long-Term deposits 6,500 6,500 Property and Equipment, net of accumulated depreciation of $246,632 and $205,640 1,199,674 1,238,404 Patents and Proprietary Technology, net of accumulated amortization of $302,909 and $264,667 1,665,441 1,703,683 Goodwill 5,356,414 5,356,414 - --------------------------------------------------------------------------- Total Assets $ 9,816,324 $ 10,304,149 =========================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 45,242 $ 41,737 Accrued liabilities 54,839 43,325 - --------------------------------------------------------------------------- Total Current Liabilities 100,081 85,062 - --------------------------------------------------------------------------- Stockholders' Equity Preferred stock - $0.001 par value; 1,000,000 shares authorized; no shares issued or outstanding - - Common stock - $0.001 par value; 100,000,000 shares authorized; 22,992,887 shares issued and outstanding 22,992 22,992 Additional paid-in capital 13,777,275 13,777,276 Warrants and options outstanding 2,752,818 2,699,565 Deficit accumulated during the development stage (6,836,842) (6,280,746) - --------------------------------------------------------------------------- Total Stockholders' Equity 9,716,244 10,219,087 - --------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $ 9,816,324 $ 10,304,149 ============================================================================ The accompanying notes are an integral part of these condensed consolidated financial statements. 4
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage Company) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Cumulative Period from February 24, 2004 (Date of Emergence) For the Three Months From Bankruptcy) Ended March 31, through 2006 2005 March 31, 2006 - ------------------------------------------------------------------------------------ Design, Contract and Testing Revenue $ 742 $ 16,547 $ 358,770 - ------------------------------------------------------------------------------------ Operating Costs and Expenses Amortization of patents and proprietary technology (38,242) (37,461) (262,433) Cost of revenue (433) (82,179) (94,730) Administrative and marketing expense (423,410) (262,471) (4,822,927) Research and development expense (106,981) - (586,396) - ------------------------------------------------------------------------------------ Total Operating Costs and Expenses (569,066) (382,111) (5,766,486) - ------------------------------------------------------------------------------------ Other Income and Expenses Interest expense - (6,122) (1,576,054) Interest income 11,256 4,518 70,800 Sublease rent income 972 972 4,860 Gain (loss) on forgiveness of debt - - 71,268 - ------------------------------------------------------------------------------------ Net Other Income (Expense) 12,228 (632) (1,429,126) - ------------------------------------------------------------------------------------ Net Loss $ (556,096) $ (366,196) $ (6,836,842) ==================================================================================== Basic and Diluted Loss Per Share $ (0.02) $ (0.02) ==================================================================================== Basic and Diluted Weighted-Average Common Shares Outstanding 22,992,887 21,408,554 ==================================================================================== The accompanying notes are an integral part of these condensed consolidated financial statements. 5
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage Company) CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM FEBRUARY 24, 2004 (DATE OF EMERGENCE FROM BANKRUPTCY) THROUGH DECEMBER 31, 2004, FOR THE YEAR ENDED DECEMBER 31, 2005, AND FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED) Deficit Accumulated Common Stock Additional Warrants During the Total ------------------------- Paid-in and Options Development Stockholders' Shares Amount Capital Outstanding Stage Equity - -------------------------------------------------------------------------------------------------------- Balance-February 24, 2004 (Date of Emergence from Bankruptcy) 14,098,202 $ 14,098 $ 4,952,166 $ - $ - $ 4,966,264 Beneficial debt conversion option - - 1,500,000 - - 1,500,000 Conversion of note payable, March 31 and May 19, 2004, $.50 per share 3,000,000 3,000 1,497,000 - - 1,500,000 Issuance for consulting services, March 3 2004, $1.15 per share 100,000 100 114,580 - - 114,680 Stock based compensation from 650,000 warrants issued on March 3, 2004 for consulting services - - - 731,328 - 731,328 Issuance for acquisition of equipment and proprietary technology from Flexpoint Holdings LLC, a company controlled by a stockholder, March 31, 2004, $ 1.21 per share 1,600,000 1,600 1,929,709 - - 1,931,309 Issuance for compensation November 24, 2004, $1.48 per share 1,200,000 1,200 1,774,800 - - 1,776,000 Net loss - - - - (4,510,726) (4,510,726) - ---------------------------------------------------------------------------------------------------------- Balance-December 31, 2004 19,998,202 19,998 11,768,255 731,328 (4,510,726) 8,008,855 Issuance of common stock at $ .77 per share and 2,826,335 warrants at $0.61 per warrant for cash net of $347,294 cash offering costs and 140,000 common shares and 140,000 warrants, January through March 2005 2,976,335 2,976 1,977,294 1,926,937 - 3,907,207 Issuance of 30,000 warrants at $1.38 per warrant for services rendered July 2005 - - - 41,300 - 41,300 Issuance of common stock at $ 1.73 per share, as compensation to director of company for services rendered, August 2005 18,350 18 31,727 - - 31,745 Net loss - - - - (1,770,020) (1,770,020) - ---------------------------------------------------------------------------------------------------------- Balance - December 31, 2005 22,992,887 22,992 13,777,276 2,699,565 (6,280,746) 10,219,087 Stock-based compensation to employees from stock options - - - 53,253 - 53,253 Net loss - - - - (556,096) (556,096) - ---------------------------------------------------------------------------------------------------------- Balance - March 31, 2006 22,992,887 22,992 13,777,276 2,752,818 (6,836,842) 9,716,244 ========================================================================================================== The accompanying notes are an integral part of these consolidated financial statements. 6
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage Company) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Cumulative Period from February 24, 2004 For the Three For the Three (Date of Emergence) Months Ended Months Ended From Bankruptcy) March 31, March 31, through 2006 2005 March 31, 2006 - ------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net loss $ (556,096) $ (366,196) $ (6,836,842) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 40,992 38,129 246,632 Amortization of patents and proprietary technology 38,242 37,461 302,909 Issuance of common stock and warrants for services - - 2,695,053 Expenses paid by increase in convertible note payable - - 60,000 Amortization of discount on note payable - - 1,556,666 Stock-based compensation to employees 53,253 - 53,253 Changes in operating assets and liabilities: Accounts receivable - (6,646) - Accounts payable 4,792 (43,030) (161,577) Accrued liabilities 11,514 33,544 52,347 Deferred revenue - - (343,750) Prepaid expenses 9,605 - (25,056) Deposits - - (6,500) - -------------------------------------------------------------------------------------------------------- Net Cash Used in Operating Activities (397,698) (306,738) (2,406,865) - -------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities: Payments for the purchase of equipment (2,262) (31,792) (197,574) Payments for patents - (2,977) (43,626) Payment for acquisition of equipment and proprietary technology from Flexpoint Holdings, LLC - - (265,000) - -------------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (2,262) (34,769) (506,200) - -------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Net proceeds from issuance of common stock and warrants - 3,907,207 3,907,207 Principal payments on notes payable - related parties - (384,768) (460,300) Proceeds from notes payable - related parties - - 445,300 Proceeds from borrowings under convertible note payable - - 583,334 - -------------------------------------------------------------------------------------------------------- Net Cash Provided By Financing Activities - 3,522,439 4,475,541 - -------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents (399,960) 3,180,932 1,562,476 Cash and Cash Equivalents at Beginning of Period 1,964,487 54,358 2,051 - -------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Period $ 1,564,527 $ 3,235,290 $ 1,564,527 ======================================================================================================== Supplemental Cash flow Information: Cash paid for interest $ - $ 10,634 $ 16,888 The accompanying notes are an integral part of these condensed consolidated financial statements. 7
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Condensed Interim Financial Statements - The accompanying unaudited condensed consolidated financial statements include the accounts of Flexpoint Sensor Systems, Inc. and its subsidiaries (the "Company"). These financial statements are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the most recent annual consolidated financial statements of Flexpoint Sensor Systems, Inc. and subsidiaries for the years ended December 31, 2005, included in the Company's Form 10-KSB filed with the Securities and Exchange Commission on March 15, 2006. In particular, The Company's significant accounting principles were presented as Note 1 to the Consolidated Financial Statements in that report. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the full year ending December 31, 2006. Nature of Operations - The Company is located in Salt Lake City, Utah and is a development stage company engaged principally in designing, engineering, and manufacturing sensor technology and equipment using flexible potentiometer technology. The Company is in the development stage as planned operations have not commenced. Development stage activities primarily include acquiring equipment and technology, organizing activities, obtaining financing and seeking manufacturing contracts. At March 31, 2006, the Company had not entered into any manufacturing agreements except as discussed in Note 4. Even though the Company is making strides forward with its business plan, it is likely that significant progress may not occur within the next four to six months. Accordingly, the Company may not realize significant revenues or become profitable within the next twelve months which would require additional financing to fund its long-term cash needs. The Company may be required to rely on debt financing, loans from related parties, and private placements of common stock for additional funding. Valuation of Long-lived Assets - The carrying values of the Company's long-lived assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that they may not be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the carrying value over the projected discounted cash flows. As a result of management's assessment of the recoverability of long-lived assets at March 31, 2006, no impairment was recognized at that date. Research and Development - Research and development costs are recognized as expense during the period incurred until the conceptual formulation, design, and testing of a process is completed and the process has been determined to be commercially viable. Stock Based Compensation - In December 2004, the FASB issued Statement No. 123 (Revised 2004), "Share-Based Payment" ("SFAS No.123R"). SFAS No. 123R supersedes APB 25 and requires the recognition of the cost of employee services received in exchange for stock options and awards of equity instruments based on the grant-date fair value of such options and awards, over the period they vest. Under APB 25, no compensation was recorded in earnings for the Company's stock-based options granted under the 2005 Stock Incentive Plan (the "Plan"). The pro forma effects on net income and earnings per share for the awards issued under the Plan were instead disclosed in a footnote to the financial statements. Under SFAS No. 123R, all share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense in earnings over the requisite service period. On January 1, 2006, the 8 FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Company adopted the provisions of SFAS No. 123R, for its share-based compensations plans and began recognizing the unvested portion of employee compensation from stock options and awards equal to the unamortized grant-date fair value over the remaining vesting period. Furthermore, compensation costs will also be recognized for any awards issued, modified, repurchased, or canceled after January 1, 2006. Basic and Diluted Loss Per Share - Basic and diluted loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and common equivalents outstanding during the period. At March 31, 2006, there were warrants to purchase 4,306,335 shares of common stock. These warrants were not included in the computation of diluted loss per share as their effect would have been anti-dilutive, thereby decreasing loss per common share. NOTE 2 - COMMON STOCK Private Placement of Common Stock and Warrants - From January 25, 2005 through March 31, 2005, the Company issued 2,836,335 shares of common stock and warrants to purchase 2,836,335 shares of common stock at $3.00 per share from October 1, 2005 through September 30, 2007 in a private placement offering. The Company realized proceeds of $3,907,207, net of $347,294 of cash offering costs. As part of this private placement, the Company also issued the placement agent 140,000 shares of common stock and 140,000 warrants exercisable at $3.00 per share for the agent's services in connection with the offering. The fair value of the warrants issued was $4,047,816 as estimated by the Company using the Black-Scholes pricing model with the following assumptions: risk free interest rate of 4.58%; volatility of 200%; estimated life of two years; and dividend yield of 0%. The net proceeds were allocated to the shares of common stock and the warrants based upon their relative fair values and resulted in allocating $1,980,271 to the shares of common stock and $1,926,937 to the warrants. An investor may not exercise their warrants if the exercise of the warrant would cause the investor to own more than 4.99% of the then issued and outstanding common stock of the Company. If the closing bid price of the Company's common stock is greater than $4.00 per share for five consecutive trading days after October 1, 2005, the Company may call the warrants, in whole or in part, for no consideration, which would require the investor to either exercise the warrants within fifteen trading days or forfeit the warrants. Compensation to Board Members - On August 25, 2005, the company issued to a Director 18,350 shares of restricted common stock for director services valued at $31,745 or $1.73 per share, the quoted market value of the stock on the day of this transaction. NOTE 3 - STOCK OPTION PLANS On August 25, 2005, the Board of Directors of the Company approved and adopted the 2005 Stock Incentive Plan (the Plan). The Plan became effective upon its adoption by the Board and will continue in effect for ten years, unless terminated. This plan was approved by the stockholders of the Company on November 22, 2005. Under the Plan, the exercise price for all options issued will not be less than the average quoted closing market price of the Company's trading common stock for the thirty day period immediately preceding the grant date plus a premium of ten percent. The maximum aggregate number of shares that may be awarded under the plan is 2,500,000. The Company utilized the Black-Scholes model for calculating the fair value pro forma disclosures under SFAS No. 123 and will continue to use this model, which is an acceptable valuation approach under SFAS No. 123R. This model requires the input of subjective assumptions, including the expected price 9 FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) volatility of the underlying stock. Projected data related to the expected volatility and expected life of stock options is based upon historical and other information, and notably, the Company's common stock has limited trading history. Changes in these subjective assumptions can materially affect the fair value of the estimate, and therefore, the existing valuation models do not provide a precise measure of the fair value of the Company's employee stock options. On August 25, 2005 the Company granted options to employees to purchase an aggregate 1,159,000 shares of common stock at an exercise price of $1.91 per share. The options vest over three years on the employee's employment anniversary. The Company used the following assumptions in estimating the fair value of the options issued August 25, 2005: market value at time of issuance - $1.73; expected holding period - 8 years; risk-free interest rate - 4.18%; dividend yield - 0%; expected volatility - 200%; estimated forfeiture percentage - 10%. Using these assumptions, the options granted have a weighted average fair value of $1.72 per share. On February 27, 2006 the Company granted options to employees to purchase an aggregate 75,000 shares of common stock at an exercise price of $2.07 per share. The options vest over three years on the employee's employment anniversary. The Company used the following assumptions in estimating the fair value of the options issued February 27, 2006: market value at time of issuance - $2.00; expected holding period - 7 years; risk-free interest rate - 4.26%; dividend yield - 0%; expected volatility - 200%; estimated forfeiture percentage - 10%. Using these assumptions, the options granted have a weighted average fair value of $1.99 per share. During the period ended March 31, 2006, the Company recognized $53,253 of stock-based compensation expense. Information about all employee options outstanding is as follows: Weighted average exercise For the Period Ending March 31, 2006 Shares price ----------------------------------------------------------- Outstanding at beginning of year 1,159,000 $ 1.91 Granted Jan - March 2006 75,000 2.07 ----------------------------------------------------------- Outstanding at end of period 1,234,000 $ 1.92 =========================================================== A summary of employee options outstanding and employee options exercisable under the Company's plan is set forth below: Outstanding Exercisable -------------------------------------- ------------------- Weighted- Average Weighted- Weighted- Number of Remaining Average Number of Average Range of Options Contractual Exercise Options Exercise Exercise Prices Outstanding Life Price Exercisable Price - --------------------------------------------------------------------------- $1.91 - $2.07 1,234,000 9.44 $ 1.92 274,000 $ 1.91 - --------------------------------------------------------------------------- 10 FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 4 - RELATED PARTY MANUFACTURING CONTRACT In September 2005 the Company entered into a manufacturing agreement with R&D Products, LLC, a Utah limited liability company, doing business in Midvale, Utah. For the purpose of this contract, management considers R&D Products to be a Related Party because a controlling member of R&D Products, LLC is also a non-controlling interest shareholder of Flexpoint Sensor Systems, Inc. R&D Products has developed a mattress with multiple air chambers that use Bend Sensors(r) and the Company has agreed to manufacture the Bend Sensors(r) for the mattresses. The initial order is for 300,000 Bend Sensors(r) to be used to begin manufacture of 10,000 mattresses. The realization of the manufacturing and sales of the Bend Sensors(r) is dependent upon R&D Products selling either their bed directly or licensing their technology to a third party. There are no guarantees that R&D will make such sales in such quantities to meet the demands of this contract. NOTE 5 - PATENT PROTECTION PROCEEDINGS In January 2006, the Company filed a complaint in the United States District Court for the District of Utah in Salt Lake City against Michael W. Wallace for possible Patent encroachment. 11 In this report references to "Flexpoint Sensor," "we," "us," and "our" refer to Flexpoint Sensor Systems, Inc. and its subsidiary. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS The Securities and Exchange Commission ("SEC") encourages companies to disclose forward-looking information so that investors can better understand future prospects and make informed investment decisions. This report contains these types of statements. Words such as "may," "will," "expect," "believe," "anticipate," "estimate," "project," or "continue" or comparable terminology used in connection with any discussion of future operating results or financial performance identify forward-looking statements. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. All forward-looking statements reflect our present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS EXECUTIVE OVERVIEW We are a development stage company engaged principally in designing, engineering and manufacturing Bend Sensor(R)technology and equipment. Our planned operations have not commenced and our activities primarily include acquiring equipment and technology, organizing activities, obtaining financing and seeking manufacturing contracts. During the past quarter we have concentrated our development efforts with our customers. Negotiations for potential automotive applications using our Bend Sensors(R) technology are in process, but we have not yet entered into a major contract for the sale of our automotive products. We are also continuing to develop new products that we may sell or license to an industrial control company. Finalizing a major contract with a customer remains our greatest challenge. We must continue to obtain funding to operate and expand our operations so that we can deliver our product to the market. Management believes that even though we are making positive strides forward with our business plan, it is likely that significant progress may not occur for the next four to six months. Accordingly, we cannot guarantee that we will realize significant revenues or that we will become profitable within the next twelve months. LIQUIDITY AND CAPITAL RESOURCES Our revenues are not to a level to support our operations. Our revenues are primarily from design, contract and testing services. For the quarter ended March 31, 2006 ("2006 first quarter") net cash used by operating activities was $397,698 compared to $306,738 for the quarter ended March 31, 2005 ("2005 first quarter"). For the past twelve months we have relied on proceeds from a private offering to satisfy our cash shortfalls. We conducted the private offering during the first quarter of 2005 to raise funds for operations. We realized net proceeds of $3,907,207 from our private placement and as a result we had $1,563,239 in cash and cash equivalents at March 31, 2006. In this private placement we issued an aggregate of 2,836,335 units to purchasers and 140,000 units were issued to the placement agent. Each unit consisted of one share and one warrant to purchase one share at an exercise price of $3.00. If all of the warrants issued in the private placement are exercised, then we may realize an additional $8,929,005, based on an exercise price of $3.00 per warrant. Except for the "call" provision, the warrant holders have total discretion as to when or if the warrants are exercised. The "call" provision requires that if the closing bid price of our common stock is greater than $4.00 per share for five consecutive trading days after October 1, 2005 and during the exercise term of the warrant, then we have the right to call the warrant in whole or in part, forcing the investor to exercise the warrant within fifteen trading days or the warrant is forfeited. We cannot guarantee that the price of our common stock will reach $4.00 and, in that case, 12 the warrant holders will determine when and if the warrants are exercised. Management believes that our current cash burn rate is $150,000 per month and that the remaining proceeds from the private placement will fund our operations for at least the next six months. We will require additional financing to fund our long-term cash needs and we may be required to rely on debt financing, loans from related parties, and private placements of our common stock for additional funding. However, we cannot assure you that we will be able to obtain financing, or that sources of financing, if any, will continue to be available, and if available, that they will be on terms favorable to us. We intend to use revenue and our cash to purchase and install equipment and develop our ISO/TS-16949 certified facility. As we enter into new technology agreements in the future, we must ensure that those agreements provide adequate funding for any pre-production research and development and manufacturing costs. If we are successful in establishing agreements with adequate initial funding, management believes that our operations for the long term will be funded by revenues, licensing fees and royalties related to these agreements. However, we have formalized only a few additional agreements during the past year and there can be no assurance that agreements will come to fruition in the future or that a desired technological application can be brought to market. COMMITMENTS AND CONTINGENCIES Our principal commitments consist of total current liabilities of $100,081 at March 31, 2006 and our operating lease. The operating lease has average monthly payments of $8,718, including common area maintenance and a 2% annual increase. The total future minimum payments under this lease as of December 31, 2005 were $395,889. Our total current liabilities include accounts payable of $45,242 related to normal operating expenses, including health insurance, utilities, production supplies and travel expense; also expenses for professional fees regarding audit fees and legal fees related to the defense of patent rights. Accrued liabilities at March 31, 2006 were $54,839 and were related to payroll tax liabilities, accrued audit and tax expenses, accrued lease expense and accrued PTO. In January 2006 we initiated a legal action for patent encroachment and we anticipate that this legal action will result in legal costs of approximately $100,000. We will divert a portion of our financial resources to continue this legal matter. OFF-BALANCE SHEET ARRANGEMENTS None. CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements 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 consolidated financial statements and accompanying notes. Estimates of particular significance in our financial statements include goodwill and the annual tests for impairment of goodwill and valuing stock option compensation. We annually test goodwill for impairment or when a triggering event occurs. Impairment is indicated if undiscounted cash flows are less then the carrying value of the assets. The amount of impairment is measured using a discounted-cash-flows model considering future revenues, operating costs and risk-adjusted discount rate and other factors. We performed a goodwill impairment test during 2005 and concluded there was no impairment of goodwill. We account for stock options under Statement of Financial Accounting Standards No. 123(R), effective January 1, 2006. Statement 123(R) requires that recognition of the cost of employee services received in exchange for stock options and awards of equity instruments be based on the grant-date fair value of such options and awards, over the period they vest. 13 The fair value of the options we have granted is estimated at the date of grant using the Black-Scholes American option-pricing model. Option pricing models require the input of highly sensitive assumptions, including expected stock volatility. Also, our stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate. Management believes the best input assumptions available were used to value the options and that the resulting option values are reasonable. During the 2006 first quarter we recognized $53,253 of stock-based compensation expense for our stock options. RESULTS OF OPERATIONS The following discussions are based on the consolidated operations of Flexpoint Sensor and its subsidiary, Sensitron, and should be read in conjunction with our unaudited financial statements the three month periods ended March 31, 2006 and 2005. These financial statements are included in this report at Part I, Item 1, above. SUMMARY OPERATING RESULTS -------------------------- Quarter ended Quarter ended March 31, 2006 March 31, 2005 --------------- -------------- Revenue $ 742 $ 16,547 Total operating costs and expenses (569,066) (382,111) Net other income (expense) 12,228 (632) Net profit (loss) (556,096) (366,196) Basic and diluted loss per share $ (0.02) $ (0.02) Revenue from research and development engineering contracts is recognized as the services are provided and accepted by the customer. Revenue from contracts to license technology to others is deferred until all conditions under the contract are met and then the sale is recognized as licensing royalty revenue over the remaining term of the contract. Revenue from the sale of a product is recorded at the time of shipment to the customer. For the 2006 and 2005 first quarters our revenue was primarily from design, contract and testing services. The decrease in revenue for the 2006 first quarter is a result of decrease in revenue from design engineering work. Total operating costs and expenses increased for the 2006 first quarter compared to the 2005 first quarter primarily as a result of increases in administrative and marketing expenses related to litigation fees and expense for share-based option compensation according to SFAS No. 123(R). In addition, we recorded research and development expense of $106,981 primarily related to a change in account methodology to directly expense research and development costs rather than include them in general administrative expense. Cost of revenue for the 2006 first quarter decreased to $433 compared to $82,179 for the 2005 first quarter because research and development costs were allocated to cost of revenue in 2005, but were expensed separately as research and development expense in 2006. Total other income for the 2006 and 2005 first quarters was primarily the result of interest income related to interest on the proceeds of the private placement offering which were deposited in a savings account. Total other expense of $632 for the 2005 first quarter was primarily the result of interest expense of $6,122 related to loans. As a result of the above, we recorded a net loss for both the 2006 and 2005 first quarters. 14 SUMMARY BALANCE SHEET INFORMATION The chart below presents a summary of our balance sheets at March 31, 2006 and December 31, 2005. March 31, 2006 December 31, 2005 -------------- ----------------- Cash and cash equivalents $ 1,563,239 $ 1,964,487 Total current assets 1,588,295 1,999,148 Total assets 9,816,324 10,304,149 Total current liabilities 100,081 85,062 Deficit accumulated during (6,836,842) (6,280,746) the development stage Total stockholders equity $ 9,716, 244 $ 10,219,087 Cash and cash equivalents decreased at March 31, 2006 compared to December 31, 2005 because we had minimal revenue in the 2006 first quarter to provide cash. Until our revenue increases, our cash will continue to decrease. Our non-current assets decreased at March 31, 2006 due to adjustments for depreciation and amortization. These assets include property and equipment valued at $1,199,674, patents and proprietary technology of $1,665,441, goodwill of $5,356,414, and deposits of $6,500. Total current liabilities increased at March 31, 2006 primarily as a result of increases in accounts payable and accrued liabilities. Factors Affecting Future Performance We have a history of losses and may never become profitable. We are unable to fund our day-to-day operations from revenues and the lack of revenues for continued growth may cause us to delay our business plans. For the 2006 first quarter, we incurred a net loss of $556,096 and had negative cash flows from operating activities of $397,698. We anticipate proceeds from our private placement in March of 2005 will fund our operations for at least the next six months; however, we anticipate that revenues will not increase until late 2006 or early 2007. In addition, if we decide to expand our business activities outside the automotive market in 2006, we anticipate needing more than approximately $1,000,000 in additional funding. We may not have adequate experience to successfully manage anticipated growth. In January 2005 we restructured our management team and brought in an experienced group of executive level management personnel to direct the growth of our business operations. However, we may not be equipped to successfully manage any future periods of rapid growth or expansion, which could be expected to place a significant strain on our managerial, operating, financial and other resources. Our future performance will depend, in part, on our ability to manage growth effectively, which will require us to: .. improve existing and implement new financial controls and systems, management information systems, operating, administrative, financial and accounting systems and controls, .. maintain close coordination between engineering, programming, accounting, finance, marketing, sales and operations, and .. attracting and retaining additional qualified technical and marketing personnel. 15 There is intense competition for management, technical and marketing personnel in our business. The loss of the services of any of our key employees or our failure to attract and retain additional key employees could have a material adverse effect on our ability to continue as a going concern. We may not have adequate manufacturing capacity to meet anticipated manufacturing contracts. Based on projected orders under anticipated agreements, we will need to complete a second production line and have it installed and approved in 2006. The second manufacturing line is expected to result in increased manufacturing capacity and manufacturing efficiencies. We have completed installation of our first production line and are in the process of qualifying our own manufacturing facility for ISO/TS-16949 certification. However, we cannot assure you that we will satisfy ISO/TS-16949 qualification or that the production lines will produce product in the volumes required or that the production lines will satisfy the requirements of our customers. Our success is dependent on our intellectual property rights which are difficult to protect. Our future success depends on our ability to protect our intellectual property. We use a combination of patents and other intellectual property arrangements to protect our intellectual property. There can be no assurance that the protection provided by our patents will be broad enough to prevent competitors from introducing similar products or that our patents, if challenged, will be upheld by courts of any jurisdiction. Patent infringement litigation, either to enforce our patents or defend ourselves from infringement suits, will be expensive and could divert our resources from other planned uses. Patent applications filed in foreign countries and patents in these countries are subject to laws and procedures that differ from those in the U.S. and may not be as favorable to us. We also attempt to protect our confidential information through the use of confidentiality agreements and by limiting access to our facilities. There can be no assurance that our program of patents, confidentiality agreements and restricted access to our facilities will be sufficient to protect our confidential information from competitors. Research and development may result in problems which may become insurmountable to full implementation of production. Customers request that we create prototypes and perform pre-production research and development. As a result, we are exposed to the risk that we may find problems in our designs that are insurmountable to fulfill production. In that event, we will be unable to recover the costs of the pre-production research and development. However, we are currently unaware of any insurmountable problems with ongoing research and development that may prevent further development of an application. Our products must satisfy governmental regulations in order to be marketable During the past several years, the automotive industry has been subject to increased government safety regulation. Among other things, proposed regulations from the National Highway Transportation and Safety Administration would require automakers to incorporate advanced air bag technology into vehicles beginning in 2005 with the phase in to be completed by 2008. Our products may not meet the proposed National Highway Transportation and Safety Administration standards or the standards may be modified. These proposals call for upgraded air bag system performance tests for passenger cars and light trucks. The new testing requirements are intended to improve the safety of infants, children and out-of-position adults, and maximize the protection of properly seated adults. The National Highway Transportation and Safety Administration tests are similar to conditions that we have already been using to test our Seat Mat System and we believe that our Seat Mat System will meet the standards as proposed. In addition, automakers may react to these proposals and the uncertainty surrounding these proposals by curtailing or deferring investments in new technology, including our Bend Sensor(R) technology, until final regulatory action is taken. We cannot predict what impact, if any, these proposals or reforms might have on our financial condition and results of operations. 16 Because we are significantly smaller than the majority of our competitors, we may lack the financial resources needed to capture increased market share. The market for sensor devices is extremely competitive, and we expect that competition will intensify in the future. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressures we face will not materially adversely affect our business, operating results or financial condition. Our primary competitors in the air bag market are International Electronics and Engineering, Siemens, Robert Bosch GmbH, Denso, Inc., Breed Technologies, TRW Automotive, Delphi Corporation, Autoliv Inc., Takata and Temic. We believe that none of our competitors have a product that is superior to our Bend Sensor(R) technology at this time. However, many of our competitors and potential competitors have substantially greater financial, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition and more established relationships than we do. These competitors may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and devote substantially more resources to developing new products and markets than we can. Ongoing industry consolidation among worldwide automotive parts suppliers and financial difficulties of U.S.auto makers may limit the market potential for our products. In the automotive parts industry, there is a trend of consolidation through business combinations and acquisitions of complementary technologies among worldwide suppliers as these suppliers seek to build stronger customer relationships with automobile manufacturers. Automobile manufacturers look to Tier 1 suppliers (major suppliers) to provide fully engineered systems and pre-assembled combinations of components rather than individual components. This trend of consolidation of suppliers may result in fewer Tier 1 suppliers and thus limit the marketing opportunities for our Bend Sensor(R) technology. In addition, in recent months large U.S. auto makers have announced plans to close plants and reduce their work force, some Tier 1 suppliers are in bankruptcy or in financial difficulty, and two automobile manufacturers have reported increased financial difficulties. These industry trends may limit the market for our products. ITEM 3. CONTROLS AND PROCEDURES We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated and communicated to our executive officers to allow timely decisions regarding required disclosure. Our Chief Executive Officer and our Chairman of the Board who acts in the capacity of our principal financial officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were effective. Also, these executive officers determined that there were no changes made in our internal controls over financial reporting during the first quarter of 2006 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. PART II - OTHER INFORMATION ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS On February 27, 2006 we authorized the issuance of options to purchase 75,000 shares of common stock to Ryan C. Willard. The options were granted under our 2005 Stock Incentive Plan, have an exercise price of $2.07 and vest in 25,000 increments over a three year period. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) of the Securities Act. 17 ITEM 6. EXHIBITS Part I Exhibits No. Description. - ---- ----------- 31.1 Chief Executive Officer Certification 31.2 Principal Financial Officer Certification 32.1 Section 1350 Certification Part II Exhibits No. Description. - ---- ------------ 2.1 Order Confirming Plan, dated February 24, 2004 (Incorporated by reference to exhibit 2.1 for Form 8-K filed March 5, 2004) 2.2 Debtor's Plan of Reorganization, dated January 14, 2004 (Incorporated by reference to exhibit 2.2 for Form 8-K filed March 5, 2004) 2.3 Asset Purchase Agreement between Flexpoint Sensor and Flexpoint Holdings, LLC, dated March 31, 2004 (Incorporated by reference to exhibit 2.3 of Form 10-QSB, filed May 3, 2004) 3.1 Certificate of Incorporation of Nanotech Corporation (Incorporated by reference to exhibit 3.1 of Form 10-SB registration statement, filed June 17,1994.) 3.2 Certificate of Amendment to Certificate of Incorporation of Nanotech Corporation (Incorporated by reference to exhibit 3.1 of Form 8-K, filed April 9, 1998) 3.3 Certificate of Amendment to Certificate of Incorporation of Micropoint Inc. (Incorporated by reference to exhibit 3.3 of Form 10-QSB, filed May 3, 2004) 3.4 Restated bylaws of Flexpoint Sensor (Incorporated by reference to exhibit 3.4 of Form 10-QSB, filed May 3, 2004) 4.1 Common stock purchase warrant of Investors Stock Daily, Inc., dated July 26, 2005 (Incorporated by reference to exhibit 4.1 to Form 10-KSB filed March 15, 2006) 10.1 Credit Line Agreement between Flexpoint Sensor and Broad Investment Partners, LLC, dated January 14, 2004 (Incorporated by reference to exhibit 10.1 for Form 8-K filed March 5, 2004) 10.2 Lease Agreement between Flexpoint Sensor and F.G.B.P., L.L.C., dated July 12, 2004 (Incorporated by reference to exhibit 10.2 of Form 10-QSB, filed November 15, 2004, as amended) 10.3 Consulting Agreement between Flexpoint Sensor and Summit Resource Group, dated March 3, 2004 (Incorporated by reference to exhibit 10.3 of Form 10-QSB, filed May 3, 2004) 10.4 Manufacturing Agreement between Flexpoint Sensor and R&D Products, Inc., dated September 28, 2005 (Incorporated by reference to exhibit 10.1 of Form 8-K, filed October 3, 2005) 20.1 Flexpoint Sensor Systems, Inc. 2005 Stock Incentive Plan (Incorporated by reference to Schedule 14A, filed October 27, 2005) 20.2 Audit Committee Charter (Incorporated by reference to Schedule 14A, filed October 27, 2005) 21.1 Subsidiaries of Flexpoint Sensor Systems, Inc. (Incorporated by reference to exhibit 21.1 to Form 10-KSB filed March 15, 2006) 18 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, who are duly authorized. FLEXPOINT SENSOR SYSTEMS, INC. /s/ Clark M. Mower Date: May 9, 2005 _______________________________________ Clark M. Mower President, Chief Executive Officer and Director /s/ John A. Sindt Date: May 9, 2005 _______________________________________ John A. Sindt Chairman of the Board Principal Financial and Accounting Officer /s/ B. Fred Atkinson, Jr. Date: May 9, 2005 _______________________________________ B. Fred Atkinson, Jr. Secretary/Treasurer and Comptroller 19 EX-31.1 2 flexpoint311.txt CHIEF EXECUTIVE OFFICER CERTIFICATION Exhibit 31.1 CHIEF EXECUTIVE OFFICER CERTIFICATION I, Clark M. Mower, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Flexpoint Sensor Systems, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this quarterly 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 small business issuer as of, and for, the periods presented in this report. 4. The small business issuer'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)) for the small business issuer 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 small business issuer, 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) Evaluated the effectiveness of the small business issuer'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 (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent function): (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 small business issuer'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 small business issuer's internal control over financial reporting. /s/ Clark M. Mower Date: May 9, 2005 ____________________________________ Clark M. Mower Chief Executive Officer EX-31.2 3 flexpoint312.txt PRINCIPAL FINANCIAL OFFICER CERTIFICATION Exhibit 31.2 PRINCIPAL FINANCIAL OFFICER CERTIFICATION I, John A. Sindt, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Flexpoint Sensor Systems, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this quarterly 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 small business issuer as of, and for, the periods presented in this report. 4. The small business issuer'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)) for the small business issuer 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 small business issuer, 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) Evaluated the effectiveness of the small business issuer'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 (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent function): (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 small business issuer'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 small business issuer's internal control over financial reporting. /s/ John A. Sindt Date: May 9, 2005 ____________________________________ John A. Sindt Principal Financial Officer EX-32.1 4 flexpoint321.txt SECTION 1350 CERTIFICATION Exhibit 32.1 Flexpoint Sensor Systems, Inc. CERTIFICATION OF PERIODIC REPORT Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350 The undersigned executive officers of Flexpoint Sensor Systems, Inc. (the "Company") certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: a. the quarterly report on Form 10-QSB of the Company for the quarter ended March 31, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and b. the information contained in the Form 10-QSB fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Clark M. Mower Date: May 9, 2005 ____________________________________ Clark M. Mower Chief Executive Officer /s/ John A. Sindt Date: May 9, 2005 ____________________________________ John A. Sindt Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----