FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2000
Commission File Number 0-24368
FLEXPOINT SENSOR SYSTEMS, INC.
(Formerly Micropoint, Inc.)
(Exact name of small business issuer as identified in its charter)
Delaware 87-0620425
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6906 South 300 West, Midvale, Utah 84047
(Address of principal executive offices)
(Zip Code)
(801) 568-5111
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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.
X Yes No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of May 8, 2000: 19,414,129
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
2000 1999
-------------- --------------
ASSETS
Current Assets
Cash $ 370,586 $ 134,642
Trade accounts receivable, net of
allowance for doubtful accounts of
$2,595 (unaudited) and $3,000 129,333 36,656
Inventory 145,801 174,750
Prepaid expenses 68,891 29,323
Unamortized loan costs 928,603 -
-------------- --------------
Total Current Assets 1,643,293 375,371
-------------- --------------
Property and Equipment 3,557,817 3,403,651
Less accumulated depreciation (965,994) (847,172)
-------------- --------------
Net Property and Equipment 2,591,823 2,556,479
-------------- --------------
Deposits 49,549 54,549
Patents, net of accumulated
amortization of $63,260 (unaudited)
and $59,418 117,591 119,921
Goodwill, net of accumulated
amortization of $107,822 (unaudited )
and $101 11,980 17,970
-------------- --------------
Total Assets $ 4,414,236 $ 3,124,290
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable, net of unamortized
discount of $336,079 (unaudited) and
$112,826 $ 2,929,539 $ 1,047,174
Notes payable - related parties 55,000 -
Capital lease obligation - current portion 5,907 -
Trade accounts payable 710,331 956,206
Accrued liabilities 333,620 539,056
-------------- --------------
Total Current Liabilities 4,034,397 2,542,436
-------------- --------------
Long-Term Liabilities
Capital lease obligation 17,095 -
Note payable 96,396 -
-------------- --------------
Total Long-Term Liabilities 113,491 -
Stockholders' Equity
Preferred stock $0.001 par value;
1,000,000 shares authorized;
4,500 shares designated Series
A Convertible Preferred; $875
stated value per share; 1,695 (unaudited)
and 2,438 shares issued and outstanding;
liquidation preference $ 1,483,125
(unaudited)and $2,133,250 1,475,175 2,125,175
Common stock $0.001 par value; 100,000,000
shares authorized; 19,228,415 (unaudited) and
19,077,310 shares issued and outstanding 19,414 19,077
Additional paid-in capital 17,454,109 13,615,677
Deficit accumulated during the
development stage (18,575,639) (15,041,600)
Unearned compensation (106,711) (136,475)
-------------- --------------
Total Stockholders' Equity 266,348 581,854
-------------- --------------
Total Liabilities and Stockholders' Equity $ 4,414,236 $ 3,124,290
=============== ==============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Period
January 5, 1995
(Date of Inception)
March 31, Through
2000 1999 March 31, 2000
-------------- -------------- --------------
Sales $ 148,206 $ 121,757 $ 4,212,164
Cost of goods sold 15,109 845 1,900,094
-------------- -------------- --------------
Gross Profit 133,097 120,912 2,312,070
General and
administrative
expenses 803,488 674,063 8,662,088
Research and
development 713,764 670,079 7,357,629
-------------- -------------- --------------
Loss From Operations (1,384,155) (1,223,230) (13,707,647)
Interest expense (81,066) - (346,496)
Interest from
amortization of debt
discount and loan
costs (2,074,324) - (3,741,260)
Interest income 5,506 11,845 64,405
Other income
(expense), net - 686 (151,090)
-------------- -------------- --------------
Net Loss (3,534,039) (1,210,699) (17,882,088)
Preferred dividends - - 693,551
-------------- -------------- --------------
Loss applicable to
common shareholders $(3,534,039) $ (1,210,699) $ (18,575,639)
============== ============== ==============
Basic and diluted loss
per common share $ (0.18) $ (0.07) $ (1.47)
============== ============== ==============
Weighted average number
of common shares used
in per share
calculation 19,187,172 17,262,234 12,648,610
============== ============== ==============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
Deficit
Accumulated
Additional During the
Preferred Stock Common Stock Paid-in Unearned Stockholders Total
Shares Amount Shares Amount Capital Stage Compensation Equity
------ ---------- ---------- ------- ----------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1999 2,438 $2,125,175 19,077,310 $19,077 $13,615,677 $(15,041,600) $ (136,475) $ 581,854
Issuance of warrants in
connection with notes
payable (unaudited) - - - - 2,337,009 - - 2,337,009
Beneficial conversion
feature of convertible
promissory notes
(unaudited) - - - - 637,173 - - 637,173
Conversion of 8%
convertible promissory
notes into common stock,
$1.70 per share
(unaudited) - - 120,588 121 204,879 - - 205,000
Conversion of preferred
stock into common stock (743) (650,000) 185,714 186 649,814 - - -
Amortization of unearned
compensation (unaudited) - - - - - - 29,764 29,764
Exercise of stock options
for cash, $0.16 to $4.00
per share (unaudited) - - 30,517 30 9,557 - - 9,587
Net loss (unaudited) - - - - - (3,534,039) - (3,534,039)
------ ---------- ---------- ------- ----------- ------------- ------------ -----------
Balance - March 31, 2000
(Unaudited) 1,695 $1,475,175 19,414,129 $19,414 $17,454,109 $(18,575,639) $ (106,711) $ 266,348
====== ========== =========== ======= =========== ============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
January 5, 1995
For the Three Months Ended (Date of Inception)
March 31, Through
2000 1999 March 31, 2000
-------------- -------------- ------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (3,534,039) $ (1,210,699) $ (17,882,088)
Adjustments to reconcile net loss to
net cash used by operating activities:
Gain on sale of available-for-sale
securities - - (21,225)
Loss on sale of assets - - 9,227
Depreciation and amortization 128,654 84,958 1,149,412
Amortization of debt discount 1,641,003 - 3,198,139
Amortization of loan costs 433,321 - 433,321
Issuance of warrants for interest - - 109,800
Compensation paid with stock options 29,764 51,539 308,489
Compensation paid by grant of warrants - - 185,000
Issuance of common stock to
settle lawsuit - - 175,000
Exercise of warrants in exchange
for services - - 22,523
Stock issued for services 222,727
Allowance for doubtful accounts (405) - 154,162
Changes in operating assets and
liabilities:
Accounts receivable (92,272) 241,615 (147,454)
Inventory 28,870 (63,831) (145,880)
Accounts payable (245,875) 76,934 531,517
Accrued liabilities (205,436) 349,721 264,636
Deferred revenue - - (6,163)
Other assets (21,297) 171,736 (311,119)
-------------- -------------- --------------
Net Cash Used In Operating Activities (1,837,712) (298,027) (11,749,976)
-------------- -------------- --------------
Cash Flows From Investing Activities
Payments to Flexpoint prior to
acquisition - - (268,413)
Cash paid to acquire Tamco - - (25,000)
Proceeds from sale of available-for-sale
securities - - 455,082
Net cash received in Nanotech
acquisition - - 1,492,907
Payments received from related
parties - - 34,661
Collection of receivable from
escrow agent - - 64,825
Payments to purchase equipment - (1,448,098) (2,913,355)
Proceeds from sale of
equipment - - 22,682
Issuance of note receivable (12,507)
Payments received on note receivable 12,505
Payments for patents (1,512) (16,100) (144,826)
-------------- -------------- --------------
Net Cash Provided By (Used In)
Investing Activities (1,512) (1,464,198) (1,281,439)
-------------- -------------- --------------
Cash Flows From Financing Activities
Proceeds from issuance of preferred
stock - - 460,738
Proceeds from issuance of common stock 9,587 633,025 6,164,699
Cash payments to officers to
repurchase stock - - (50,000)
Proceeds from issuance of warrants 1,107,009 - 2,372,909
Proceeds from beneficial conversion
feature related to convertible
promissory notes 637,173 - 1,041,235
Cash paid for offering costs (123,020)
Cash paid for loan costs (131,924) - (136,924)
Collection of receivables from
issuance of common stock - 1,573,750 1,963,750
Proceeds from borrowings 601,744 - 1,610,743
Principal payments of debt (203,421) - (952,172)
Borrowings from Nanotech prior to
acquisition - - 1,000,000
Proceeds from related party notes 55,000 - 115,200
Principal payments of related
party notes - - (65,165)
-------------- -------------- ------------------
Net Cash Provided By
Financing Activities 2,075,168 2,194,328 13,402,001
-------------- -------------- ------------------
Net Change In Cash 235,994 551,281 370,586
Cash - Beginning of Period 134,642 106,494
-------------- -------------- ------------------
Cash- End of Period $ 370,586 $ 657,775 $ 370,586
============== ============== =================-
Supplemental cash flow information and non-cash investing and financing activities
Note 2
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
<PAGE>
NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Through April 1998, the Company operated through Sensitron, Inc. a Utah
Corporation, at which time it changed its name to Micropoint, Inc. In June
1999 the name was changed to Flexpoint Sensor Systems, Inc.
Principles of Consolidation The accompanying consolidated financial
statements include the accounts of Flexpoint Sensor Systems, Inc. (Flexpoint)
and its wholly owned subsidiaries. The operations of acquired entities have
been included from the dated of their acquisitions. Intercompany Transactions
and accounts have been eliminated in consolidation.
Nature of Operations The Company is a development stage enterprise engaged
principally in designing, engineering, and manufacturing sensor technology and
equipment using flexible potentiometer technology. Flexpoint, Inc. entered
into a Purchase and Supply Agreement (the "Supply Agreement") with Delphi
Automotive Systems ("Delphi") in June 1998. Under the terms of the Supply
Agreement, the Company will supply its proprietary sensor mats to Delphi for
integration into a weight based suppression system as a critical part of a
smart air bag system. The Supply Agreement provides that such sensor mats will
be exclusively supplied to General Motors, through Delphi, by the Company
through 2002. The Company is looking to the Supply Agreement to provide the
bulk of its revenues in the immediate future. . The information regarding the
Supply Agreement is forward looking information. Such forward looking
information is subject to many risks and uncertainties, including the fact
that Delphi is not obligated under the terms of the Supply Agreement to
purchase any minimum number of sensor mats and there can be no assurance that
the Supply Agreement will result in any material amount of sales.
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 in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Interim Financial Statements The accompanying condensed consolidated
financial statements are unaudited. In the opinion of management, all
necessary adjustments (which include only normal recurring adjustments) have
been made to present fairly the financial position, results of operations and
cash flows for the periods presented. The financial statements have been
condensed and do not contain all of the significant accounting policies and
disclosure required by generally accepted accounting principles. Accordingly,
these condensed financial statements should be read in conjunction with the
annual financial statements included in the annual report on Form 10-KSB dated
December 31, 1999. The results of operations for the three months ended March
31, 2000 are not necessarily indicative of the operating results which will
occur for the remainder of 2000.
Business Condition The accompanying financial statements have been prepared
in conformity with generally accepted accounting principles, which
contemplates continuation of Flexpoint as a going concern. However, Flexpoint
has suffered losses from operations and has had negative cash flows from
operating activities during the three months ended March 31, 2000 and
cumulative from inception through March 31, 2000, which conditions raise
substantial doubt about Flexpoint's ability to continue as a going concern.
Flexpoint's continued existence is dependent upon its ability to obtain
additional financing. Management's plans include obtaining the remainder of
the $5,000,000 under the Securities Purchase Agreement in exchange for
convertible promissory notes and warrants and to obtain additional financing
through issuance of debt or equity securities. The Company is negotiating with
other possible financing sources. However, no agreements have been reached
and there is no assurance that additional financing will be realized.
Advertising Costs During the periods ended March 31, 2000 and 1999,
Flexpoint incurred $8,540 and $4,214, respectively, of advertising costs.
Flexpoint follows the policy of expensing these advertising costs at the time
the advertising services are rendered.
Basic and Diluted Loss Per Share Basic loss per common share is computed by
dividing net loss by the number of common shares outstanding during the
period. Diluted loss per share is calculated to give effect to stock warrants
and options using the treasury stock method and convertible preferred stock
and convertible notes payable using the if-converted method. Stock warrants
and options, convertible preferred stock, and convertible notes payable are
not included in diluted loss per share during loss periods when those
potentially issuable common shares would decrease the loss per share. The
effects of 12,319,255 and 7,463,291 potentially issuable common shares at
March 31, 2000 and 1999, respectively, were excluded from the calculation of
diluted loss per share as they would have decreased loss per share.
Depreciation of Property and Equipment Depreciation expense for the periods
ended March 31, 2000 and 1999 was $118,822 and $75,368, respectively.
Other Assets Patent costs capitalized as of March 31, 2000 were $180,851 of
which $80,737 related to patents being amortized. Amortization expense from
patents for the periods ended March 31, 2000 and 1999 was $3,842 and $3,600,
respectively.
Goodwill associated with the acquisition of Tamco is being amortized over five
years using the straight-line method. Amortization expense from goodwill for
the periods ended March 31, 2000 and 1999 was $5,990 and $5,990,
respectively.
NOTE 2 CASH FLOW INFORMATION
Supplemental Cash Flow Information Cash payments for interest were $148,974
and $0 for the periods ended March 31, 2000 and 1999, respectively.
Noncash Investing and Financing Activities During the three months ended
March 31, 2000, the Company issued warrants to purchase 500,000 shares of
common stock as a fee for extending the due date of a $1,000,000 note payable.
Also during the period, the Company acquired equipment totaling $167,437 for a
note payable of $144,435 and a capital lease of $23,002. In addition, $205,000
of convertible notes payable were converted into 120,588 shares of common
stock.
The Company measures compensation under stock-based options and plans using
the intrinsic value method prescribed in Accounting Principles Opinion 25,
Accounting for Stock Issued to Employees, and related interpretations, for
stock options granted to employees, and determines compensation cost under
options granted to non-employees based upon the fair value of the options at
the grant dates consistent with Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation.
During the quarter, the Company granted options to new employees which are
exercisable at $4.00 per share. The intrinsic value of these options was
$168,125 and is being recognized over the period the options vest. .
Amortization of the deferred compensation of $29,744 was recognized during the
three months ending March 31, 2000. Had compensation cost for the Plan been
determined based upon the fair value of the options at the grant dates
consistent with the alternative method of SFAS No. 123, Accounting for Stock
Based Compensation, the Company would have recognized approximately $38,072 in
non-cash compensation.
NOTE 3 NOTES PAYABLE
Notes payable consisted of the following:
March 31, December 31,
2000 1999
------------ ------------
$2,000,000 Convertible debenture payable,
due March 1, 2001, interest accrues at 8%,
net of unamortized discount of $307,966 based
on imputed interest at 2357% $1,692,034 $ -
$61,000 Convertible debentures payable,
due June 30, 2000, interest accrues at 8%,
net of unamortized discount of $28,113 based
on imputed interest at 257% 32,887 -
Note payable to a vendor, due February 10,
2003, interest accrues at 10% 141,014 -
Note payable to shareholder, due June 18,
2000, interest accrues at 20% 100,000 100,000
$1,000,000 Note payable to a shareholder,
due February 10, 2000, original interest
rate of 14%, interest of $70,000 was to be
prepaid, the Company defaulted by not
prepaying the interest, default interest
rate of 28%, default interest of $56,611
has been accrued, net of discount of $0 and
$112,826, respectively, based on imputed
interest at 1407% 1,000,000 887,174
Note payable to a shareholder, due July 15,
1999, monthly interest accrues at 10%, the
note is in default, additional interest
totaling $59,877 has been accrued since
default 60,000 60,000
Total Notes Payable 3,025,935 1,047,174
Less: Current portion 2,929,539 1,047,174
Long-Term Notes Payable $ 96,396 $ -
Notes payable to related parties consisted of the following:
March 31, December 31,
2000 1999
------------ ------------
Note payable to a company owned by a
director, due upon demand, The note has
subsequently been paid without interest $ 30,000 $ -
Note payable to an employee, due upon
demand, no stated interest rate 25,000 -
Total Notes Payable to Related Parties $ 55,000 $ -
On November 20, 1998, Flexpoint obtained a $50,000 credit facility from a bank
which is available through January 15, 2001. The credit facility is evidenced
by a promissory note dated November 20, 1998. The bank issued a $50,000
irrevocable standby letter of credit in connection with the execution of a
real estate lease for manufacturing facilities. No amounts have been drawn
under the note payable or letter of credit. The promissory note and letter of
credit were secured by $50,000 of cash on deposit with the bank at December
31, 1999. In addition to the cash on deposit with the bank, a commitment fee
of 1% of the unused portion of the amount of the credit facility is due
annually. During 2000, the credit facility and the cash on deposit with the
bank were reduced to $40,000.
During the three months ended March 31, 2000, the Company issued 8%
convertible promissory notes, of which a portion were converted into common
stock.
On March 22, 2000, the Company issued warrants to purchase 500,000 shares of
common stock at $2.50 through August 10, 2004 to a note holder as a fee for
extending the due date of a $1,000,000 note payable from February 10, 2000 to
August 10, 2000. The fair value of the warrants was $1,230,000 as computed
using the Black-Scholes option pricing model with the following assumptions:
divided yield of 0%, volatility of 121.1%, risk-free interest rate of 6.6% and
estimated life of four years. The loan extension fee has been accounted for as
unamortized loan costs and is being amortized over the six-month period ending
August 10, 2000. Interest expense resulting from amortization of these loan
costs was $332,983 during the three months ended March 31, 2000.
On March 3, 2000, the Company entered into a Securities Purchase Agreement
whereby the Company may receive up to $5,000,000 in exchange for convertible
promissory notes and warrants. On March 3, 2000, the Company received
$1,800,000 net of related costs of $200,000. The lender has agreed to provide
an additional $1,000,000 at $500,000 per month and has granted the Company the
option to receive the remaining $2,000,000 at the rate of $500,000 per month.
The initial note is due March 1, 2001 with interest at 8% payable quarterly.
If the Company's stock price falls below $1.00 for five consecutive days, the
principal balance will become redeemable at the option of the lender. The
redemption amount is equal to 125% of the outstanding principal plus accrued
interest. The purchaser of the debenture is not obligated to purchase the
remaining $3 million in debentures if the Company is in default or has
breached any of its obligations under the agreement or the average of the
closing bid price for the Company's common stock is less than or equal to
$1.00.
The promissory notes are convertible into common stock at a conversion price
of 80% of the lower of (a) the average of the three lowest closing bid prices
for the common stock during the 15 trading days preceding the date of the
purchase agreement or (b) the average of the three lowest closing bid prices
for the common stock during the 15 trading days preceding conversion, subject
to a maximum conversion price of $3.00 per share and a minimum conversion
price of $1.00 per share. Up to 33% of the aggregate principal and accrued
interest is convertible from March 3, 2000, an additional 33% is convertible
from April 2, 2000 and the remaining portion is convertible from May 2, 2000.
The notes are convertible through March 1, 2001. If the stock price on the due
date of the note is greater than $2.00, the lender is required to convert all
outstanding notes into common stock.
In connection with the issuance of the promissory note on March 3, 2000, the
Company also issued 1,283,697 warrants to purchase common stock at $2.08 per
share through March 3, 2004. The net proceeds were allocated between the
promissory note and the warrants based upon their relative fair values. The
estimated fair value of the warrants of $2,053,915 was determined using the
Black-Scholes option pricing model with the following assumptions: dividend
yield of 0%, volatility of 121%, risk-free interest rate of 6.6% and estimated
life of four years. The warrants were allocated $892,970 of the net proceeds.
Of the remaining $869,530 net proceeds, $526,529 were allocated to the
beneficial conversion feature of the promissory note, and $460,172 were
allocated to the promissory notes, before $117,171 of loan costs.
The resulting $1,539,828 discount on the promissory note is based on imputed
interest at 2357%. The discount and the loan costs are being amortized
through the date the notes are convertible and resulted in amortization
expense of $1,325,201 during the three months ended March 31, 2000.
The Company issued a note payable dated January 17, 2000 to an individual.
The note was for $100,000 with an interest rate of 14%. The note was paid in
March 2000. As additional consideration, the Company issued warrants to
purchase 100,000 shares of common stock at $1.80 per share. The warrant is
exercisable through January 17, 2002. The loan is secured by certain
equipment. The proceeds from the loan were allocated to the warrants based
upon their fair value. The resulting discount to the note of $100,000 was
recognized and amortized during the period ended March 31, 2000.
During the three months ending March 31, 2000 the company borrowed $55,000
from affiliated shareholders. These are demand notes which bear 0% interest.
NOTE 4 STOCKHOLDERS' EQUITY
Convertible debt and Series C warrants to purchase common stock were issued as
a unit in an offering in February 2000. The offering resulted in the issuance
of warrants to purchase 79,412 shares of common stock at $2.25 per share and
$135,000 of notes payable which were convertible into common stock at $1.70
per share. The net proceeds were allocated between the promissory note and
the warrants based upon their relative fair values. The estimated fair value
of the warrants of $144,677 was determined using the Black Scholes option
pricing model with the following assumptions: dividend yield of 0%, volatility
of 119%, risk-free interest rate of 6.7% and estimated life of three years.
The warrants were allocated $69,812 of the net proceeds. Of the remaining
$65,188 net proceeds, $58,846 were allocated to the beneficial conversion
feature for the promissory note, and $6,342 were allocated to the promissory
notes. The resulting discount to the notes payable was amortized immediately
as the notes were convertible upon issuance and resulted in $128,658 of
interest expense. The notes payable were converted into 79,412 shares of
common stock in February 2000.
Convertible debt and Series D warrants to purchase common stock were issued as
a unit in an offering in February and March 2000. The offering resulted in
the issuance of warrants to purchase 77,058 shares of common stock at $2.25
per share and $131,000 of notes payable which were convertible into common
stock at $1.70 per share. The net proceeds were allocated between the
promissory note and the warrants based upon their relative fair values. The
estimated fair value of the warrants of $78,887 was determined using the Black
Scholes option pricing model with the following assumptions: dividend yield of
0%, volatility of 121%, risk-free interest rate of 6.6% and estimated life of
three years. The warrants were allocated $43,972 of the net proceeds. Of the
remaining $87,028 net proceeds, $51,798 were allocated to the beneficial
conversion feature for the promissory note, and $35,230 were allocated to the
promissory notes. The resulting discount to the notes payable is being
amortized through the dated the notes are convertible and resulted in interest
expense of $67,657 during the period ended March 31, 2000. The remaining
unconverted notes are convertible through June 30, 2000.
In March 2000, 743 shares of convertible preferred stock were converted into
185,714 shares of common stock.
NOTE 5 STOCK PURCHASE WARRANTS
During the period ended March 31, 2000, warrants to purchase 1,504,285 shares
of common stock were issued as part of financing transactions. In addition,
warrants to purchase 500,000 shares of common stock were issued to extend the
terms of a note payable.
NOTE 6 PRODUCTS AND SERVICES
Flexpoint's only business relates to sales of electronic sensors and related
engineering. It produces sensors for sale to customers in the toy and
automotive industries. The components of sales for the three months ended
March 31, 2000 and 1999 were as follows:
March 31, December 31,
2000 1999
------------ ------------
Products
Sales of sensors $ 48,678 $ (7,762)
Licensing royalty
Tooling and dies 15,702 8,623
------------ ------------
Total Products 64,380 861
Engineering Services 83,826 120,896
------------ ------------
Total Sales $ 148,206 $ 121,757
============ ============
NOTE 7 COMMITMENTS AND CONTINGENCIES
Capital Leases During the period ended March 31, 2000, the Company entered a
capital lease for certain equipment. Property and equipment under capital
lease as of March 31, 2000 is as follows:
Machinery and equipment $ 23,002
Accumulated depreciation (2,684)
----------
Net Machinery and Equipment $ 20,318
==========
Subsequent to March 31, 2000, the Company entered an additional capital lease
for equipment. Future minimum lease payments for both leases as of March 31,
2000 are as follows:
Year Ending December 31,
2000 $ 18,554
2001 26,346
2002 26,346
2003 15,453
2004 14,463
Thereafter 3,616
----------
104,778
Less amount representing executory costs 6,602
----------
Net minimum lease payments 98,176
Less amount representing interest 34,390
----------
Present value 63,786
Less current portion 9,145
----------
Long-Term Capital Lease Obligation $ 54,641
==========
Operating Leases Flexpoint is obligated under operating lease agreements for
its facilities and office space. Flexpoint has an option to renew one lease
for an additional three year period. Flexpoint is also required under the
terms of the lease to maintain a letter of credit with a federally insured
bank in the amount of $50,000. The letter of credit has been issued by a bank
to the lessor and is secured by $50,000 of cash on deposit with the bank. If
Flexpoint falls into default under the lease, the lessor may drawn upon the
letter of credit. The letter of credit is to be reduced by $10,000 per year.
The unused balance of the letter of credit as of March 31, 2000 was $40,000.
Future minimum lease payments under operating leases at March 31, 2000 are as
follows:
Year Ending December 31:
2000 $ 282,924
2001 309,850
2002 249,900
2003 249,900
Total $ 1,092,574
Lease expense for the periods ended March 31, 2000 and 1999 was $94,830 and
$80,970, respectively.
In February of 1998, an unrelated third party filed suit against Flexpoint
alleging it provided investment banking and financial advisory services
pursuant to an agreement with Flexpoint. The plaintiff claimed to have
sustained damages for breach of contract and seeks damages in the amount of
6.5% of financing obtained from an equity investor, plus the issuance of a
warrant to purchase a 2% equity interest in Flexpoint at a price of $5.00 per
share. In addition, the plaintiff sought punitive damages of $5,000,000.
Flexpoint answered the complaint in March 1998. As of December 31, 1999,
Management believed, after consulting with legal counsel, that there is only
a remote possibility that Flexpoint will be subject to a punitive damage award
under the suit. Flexpoint has accrued a liability of $75,000 relating to this
action in its financial statements at March 31, 2000 and December 31, 1999.
On May 1, 2000, the court granted summary judgement in favor of Flexpoint and
dismissed the claims with prejudice.
[The Remainder of This Page Is Intentionally Left Blank]
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the consolidated
results of operations and financial condition of Flexpoint Sensor Systems,
Inc. The discussion should be read in conjunction with the condensed
consolidated financial statements, related notes and Management's Discussion
and Analysis or Plan of Operation for the year ended December 31, 1999.
Wherever in this discussion the term "Company" is used, it should be
understood to refer to Flexpoint Sensor Systems, Inc. and its wholly owned
subsidiary, Sensitron, Inc. ("Sensitron"), a Utah corporation, and Sensitron's
wholly owned subsidiaries, Flexpoint, Inc. and Technology and Machine Company,
Inc. ("Tamco"), on a consolidated basis, except where the context clearly
indicates to the contrary. The business operations of the Company are
conducted through Flexpoint, Inc. and Tamco.
Overview
The Company is in the development stage and since inception, has incurred
losses from operations. As of March 31, 2000, the Company had cumulative
losses totaling $18,575,639. The Company is primarily engaged in the sensor
business and is currently marketing its patented Bend Sensor technology.
Sensing devices can be used to measure or sense changes that occur when a
sensor is bent. Sensors typically trigger an electronic device when the sensor
is activated. The worldwide market for sensing devices has grown significantly
as a result of better technology and new applications for sensing technology.
This growth has resulted in a corresponding increase in demand for high
performance sensing products. The Company believes this worldwide market
growth will continue.
Financial Position
The Company had $370,586 in cash as of March 31, 2000. This represented an
increase of $235,944 from December 31, 1999. Working capital (deficit) as of
March 31, 2000 decreased to $(2,391,104) as compared to working capital of
$(2,167,065) at December 31, 1999. The decrease is largely due to the Company
spending more money than it is currently generating from operating activities.
This has been offset by working capital provided by financing activities
primarily consisting of the issuance of warrants.
Operations for the Three Months Ended March 31, 2000 and 1999
During the three months ended March 31, 2000, the Company had revenues of
$148,206 comprised of $83,826 in engineering fees and the balance of $64,380
in product sales; compared with revenues of $121,757 for the comparable period
from the prior year, comprised primarily of engineering fees.
Substantially all of the Company's revenues were generated under a Purchase
and Supply Agreement (the "Supply Agreement") between the Company and Delphi
Automotive Systems ("Delphi") that was executed in June 1998. The Company
expects to derive a substantial portion of its future income from the sale of
its Sensor Mat System to Delphi. Under the Supply Agreement, Delphi may
purchase sensor mats incorporating the Bend Sensor technology into a "smart"
air bag system being developed for General Motors. The Company currently has
one production line in place. This line has produced over 15,000 pre-
production seat sensors. The Company believes all known technical and
manufacturing issues have been properly identified and resolutions are being
implemented. The Company does not anticipate that manufacturing will begin
until the second half of 2000 or early 2001. There can be no assurance that
General Motors and Delphi will acquire the Sensor Mat Systems under the Supply
Agreement, that additional technical and manufacturing difficulties will not
arise, that production will be in the amounts anticipated, or that
manufacturing will begin when anticipated or at all.
There are several toys for the 2000 Christmas season designed to use the
Bend Sensor. The Company is also seeking opportunities to supply the
electronic assembly, including the sensor, to increase sales potential. Due to
the seasonality of the toy industry, the Company currently has no agreements
relating to the manufacture of sensors in the toy market and there can be no
assurance that the Company will successfully enter into toy related agreements
in the future. The Company expect that revenues from toy sales, if any, will
be substantially greater in the second half of any given year.
Product supply arrangements, like those discussed above, create certain
risks for the company, including (I) reliance from sales of products on other
parties, and therefore reliance on the other parties' marketing ability,
marketing plans and credit-worthiness; (ii) if the Company products are
marketed under other parties' labels, goodwill associated with use of the
products may inure to the benefit of the other parties rather than to the
Company; (iii) the Company may have only limited protection from changes in
manufacturing costs and raw materials costs; and (iv) if the Company is
reliant on other parties for all or substantially all of its sales, the
Company may be limited in its ability to negotiate with other parties upon any
renewals of their agreements.
General and administrative expenses for the three months ended March 31,
2000 were $803,488 compared with $674,063 for the comparable period from the
prior year. The increase in expenditures between the periods resulted
primarily from increase in depreciation expense as a result of the prior
year's acquisition of additional equipment and leasehold improvements in
anticipation of production under the Supply Agreement and the increase in real
property lease payments. During the quarter the Company also paid $54,750 to
outside consultants to assist in securing long term financing.
Research and development expenses for the three months ended March 31, 2000
were $713,764 compared with $670,079 for the comparable period from the prior
year. The increase in expenditures between the periods resulted primarily from
increases in research and development spending relating to the Supply
Agreement.
Interest expense from amortization debt discount and loan costs for the
three months ended March 31, 2000 was $2,074,324 compared with no such expense
for the comparable period from the prior year. The interest expense of debt
discount related to the Company's issuance of convertible notes and warrants.
The proceeds of the loans were allocated to the warrants based on the fair
market value of the warrants. The resulting discounts are amortized over the
period through which the notes are convertible. At March 31, 2000, the Company
had unamortized debt discount of $336,079.
The Company has also entered into arrangements whereby the Company expects
to be borrowing between an additional $1 and $3 million. The loans are
expected to be unsecured, but as additional consideration for the loans, the
Company will be issuing warrants to the lender. See " Liquidity and Capital
Resources." This is expected to result in the Company incurring substantial
additional interest expense relating to debt discount during 2000.
Net interest and other income, excluding interest expense of debt discount,
was $(75,560) for the three months ended March 31, 2000 and $12,531 for the
comparable period from the prior year. The net interest and other income
relates mainly to interest earned on funds on deposit. As funds on deposit
have decrease and borrowing has increase, the Company has incurred increased
interest costs and decreased interest income.
Liquidity and Capital Resources
To date, the Company has financed its operations principally through
private placements of debt and equity securities and sales. The Company
generated $13,402,001 in net proceeds through financing activities from
inception through March 31, 2000 and it received $2,075,168 in net proceeds
from financing activities during the three months ended March 31 in 2000. The
Company used net cash in operating activities of $11,749,976 from inception
through March 31, 2000 and the Company used $1,837,712 in operating activities
during the three months ended March 31 in 2000. As of March 31, 2000, the
Company's total liabilities were $4,147,888, net of unamortized discount of
$336,079. The Company had a working capital (deficit) as of March 31, 2000 of
$(2,391,104).
On March 3, 2000, the Company closed on a financing of up to $5,000,000
pursuant to a Securities Purchase Agreement, dated March 3, 2000. Under the
terms of the financing, Aspen Capital Resources, Inc. initially provided the
Company with proceeds of $2,000,000, less a ten percent placement fee and
other offering and registration costs of Aspen Capital Resources, Inc. and the
Company of approximately $37,000, in exchange for an 8% convertible debenture
in the principal amount of $2,000,000 and Series 2000-A Warrants exercisable
for 1,283,697 shares of its common stock for a four year period as further
described below. Under the Securities Purchase Agreement and subject to
certain contingencies, Aspen Capital Resources, Inc. made additional
investments of $500,000 each in April and May 2000 for which the Company
received 8% convertible debentures totaling $1,000,000 and warrants to
purchase 652,050 shares of common stock, and has agreed to make additional
investments of $500,000 each in June, July, August and September 2000. The
additional investments will be reduced by a ten percent placement fee and
certain offering costs. The terms of the subsequent investments provide that
Aspen Capital Resources, Inc. will receive a convertible debenture in the
principal amount of the funds invested plus Series 2000-A Warrants. The
convertible debentures are convertible into common stock at a conversion price
that varies depending on the market price of the Company securities. The
exercise price of the Series 2000-A Warrants varies depending on the market
price of its securities. The sale of the convertible debentures through May 5,
2000 will result in its recognizing amortization of debt discount in the
approximate amount of $2,386,709.
The estimated relative fair value of the Series 2000-A Warrants that are to
be issued through June 2000 is estimated to be approximately $1,600,000. This
amount is estimated due to the holders option to convert at the lower of the
fifteen trading days at closing or the fifteen days prior to conversion.
The Company have committed to spend $282,924 in lease payment for its
physical facilities during the remainder of year 2000 and $309,850, $249,900
and $249,900 in physical facilities lease payments for the years 2001 through
2003, respectively. In connection therewith, the Company contracted for
certain improvements to it's physical facilities. As of May 5, 2000, the
Company does not have material commitments for capital expenditures. At March
31, 2000, the Company also had short term loan obligations in the principal
amounts of $3,320,618. Loans in the principal amount of approximately
$1,000,000 are secured by the assets of the Company. These loans bear interest
at various rates between zero percent per annum and twenty percent per annum.
This does not include short term loan obligations in the principal amount of
$3,000,000 that will be incurred between April and September 2000 under the
Securities Purchase Agreement.
As of March 31, 2000, the Company had outstanding stock options and
warrants to acquire approximately 10,512,272 shares of common stock. The
exercise of all the outstanding stock options and warrants would result in an
equity infusion to the Company of approximately $16,376,000. This does not
include Series 2000-A Warrants that will be issued after March 2000 under the
Securities Purchase Agreement. The exercise price of the Series 2000-A
Warrants varies depending on the market price of the Company securities. As a
result, the amount of total equity infusion upon exercise of these warrants is
an approximation and may differ materially from the amount described. There is
no assurance that any of these options or warrants will be exercised.
As of March 31, 2000, the Company had outstanding convertible debentures in
the principal amount of approximately $2,061,000 that are convertible into
shares of common stock. This does not include convertible debentures that will
be issued after March 2000 under the Securities Purchase Agreement. The
conversion price of the convertible debentures varies depending on the market
price of the Company securities. As a result, the number of shares of common
stock issuable upon conversion of these notes is an approximation and may
differ materially from the amount described. There is no assurance that any of
these notes will be converted.
The Company's working capital and other capital requirements for the
foreseeable future will vary based upon a number of factors, including the
costs to expand facilities, complete development and bring products under
development to market, the level of sales and marketing for its products and
the amounts owed on debt that is not converted. The Company believes that
existing funds, funds received under the Securities Purchase Agreement and
funds generated from sales will be sufficient to support its operations
through September 2000. The Company may not have sufficient funds to pay off
its current liabilities after September 2000. At a minimum, in 2000 the
Company will need to raise approximately $3,000,000 in additional funding to
support its operations during 2000 and in 2001 the Company needs to raise
substantial additional funding to fully execute its business plan assuming
revenues from the Supply Agreement as currently projected.
The Company is working to obtain additional funding from several sources,
but the Company has no firm commitments for funding and there can be no
assurance that additional funding will be available to the Company on
commercially reasonable terms or in the necessary amounts. Any inability to
obtain additional financing in the amounts described above will have a
material adverse effect on the Company, including possibly requiring the
Company to cease its operations.
Year 2000
The Company had developed plans to address the possible exposures related
to the impact on its computer systems in the Year 2000. Since entering the
Year 2000, the Company has not experienced any major disruptions to its
business nor is the Company aware of any significant Year 2000 related
disruptions impacting its customers and suppliers. Furthermore, the Company
did not experience any material impact on business at calendar year end. The
Company will continue to monitor its critical systems over the next several
months but does not anticipate any significant impacts due to Year 2000
exposures from its internal systems as well as from the activities of its
suppliers and customers.
Forward-Looking Statements
When used in this Form 10-QSB, in the Company's filings with the SEC, in
its press releases or other public or stockholder communications, or in oral
statements made with the approval of its authorized executive officer, the
words or phrases "would be," "will allow," "intends to," "will likely result,"
"are expected to," "will continue," "is anticipated," "estimate," "project,"
or similar expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on its beliefs and the assumptions the Company made
using information currently available to us.
The Company caution readers not to place undue reliance on any forward-
looking statements, which speak only as of the date made, are based on certain
assumptions and expectations which may or may not be valid or actually occur,
and which involve various risks and uncertainties, including but not limited
to risk of product demand, market acceptance, economic conditions, competitive
products and pricing, difficulties in product development, commercialization,
and technology, and other risks. Furthermore, manufacturing delays may result
from product redesigns or otherwise. In addition, sales and other revenues may
not commence as anticipated due to delays or otherwise and sales may not reach
the levels anticipated. As a result, its actual results for future periods
could differ materially from those anticipated or projected.
Unless otherwise required by applicable law, the Company does not
undertake, and specifically disclaims any obligation, to update any forward-
looking statements to reflect occurrences, developments, unanticipated events
or circumstances after the date of such statement.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
On February 13, 1998, Private Equity Partners LLC filed a lawsuit against
Sensitron, in the Third Judicial District Court in Salt Lake County, Utah.
Private Equity Partners LLC alleged, among other things, that Sensitron owed
Private Equity Partners LLC investment banking fees and warrants with respect
to an agreement, and that Sensitron's refusal to pay these fees constitutes
fraud. The suit seeks to obtain investment banking fees equal to 6.5% of all
money raised by Sensitron, warrants to purchase 2% of Sensitron's equity,
punitive damages of $5,000,000 and other relief. Both Private Equity Partners
LLC and Sensitron filed Cross-Motions for Summary Judgment. The court took the
Cross-Motions for Summary Judgment under advisement and in March 1999 denied
both motions. The parties resubmitted their cross motions for summary
judgment. These cross motions were argued on May 1, 2000 and the district
court denied Private Equity Partners LLC's Motion for Summary Judgment and
granted Sensitron's Motion for Summary Judgment dismissing Private Equity
Partners LLC's lawsuit. Private Equity Partners LLC may appeal the court's
dismissal.
Item 2. Changes in Securities.
During February the Company issued Convertible debt and Series C warrants
to purchase common stock which were issued as a unit in an offering in
February 2000. The offering resulted in the issuance of warrants to purchase
79,412 shares of common stock at $2.25 per share and $135,000 of notes payable
which were convertible into common stock at $1.70 per share. The net proceeds
were allocated between the promissory note and the warrants based upon their
relative fair values. The estimated fair value of the warrants of $144,677
was determined using the Black Scholes option pricing model with the following
assumptions: dividend yield of 0%, volatility of 119%, risk-free interest rate
of 6.7% and estimated life of three years. The warrants were allocated
$69,812 of the net proceeds. Of the remaining $65,188 net proceeds, $58,846
were allocated to the beneficial conversion feature of the promissory note,
and $6,342 were allocated to the promissory notes. The resulting discount to
the notes payable was amortized immediately as the notes were convertible upon
issuance and resulted in $128,658 of interest expense. The notes payable were
converted into 79,412 shares of common stock in February 2000.
During February and March the Company issued Convertible debt and Series D
warrants to purchase common stock which were issued as a unit in an offering
in February and March 2000. The offering resulted in the issuance of warrants
to purchase 77,058 shares of common stock at $2.25 per share and $131,000 of
notes payable which are convertible into common stock at $1.70 per share. The
net proceeds were allocated between the promissory note and the warrants based
upon their relative fair values. The estimated fair value of the warrants of
$78,887 was determined using the Black Scholes option pricing model with the
following assumptions: dividend yield of 0%, volatility of 121%, risk-free
interest rate of 6.6% and estimated life of three years. The warrants were
allocated $43,972 of the net proceeds. Of the remaining $87,028 net proceeds,
$51,798 were allocated to the beneficial conversion feature of the promissory
note, and $35,230 were allocated to the promissory notes. The resulting
discount is being amortized through the dates the notes are convertible and
resulted in interest expense of $67,657 during the period ended March 31,
2000. The remaining unconverted notes are convertible through June 30, 2000.
In February 2000, the Company defaulted on a note payable to an investor in
the principal amount of $1,000,000 by not making payment on February 10, 2000,
the maturity date. The Company was also in default of the prepaid interest
provision of the note. The investor offered to extend the note for an
additional six months and waive any default interest for consideration of
warrants exercisable for 500,000 shares of common stock with an exercise price
of $2.15. In order to extend the maturity of the note, the investor also
required a prepayment of interest, plus attorney fees, in the total amount of
$141,920. Management accepted the offer to extend the note for six months by
effectively issuing the warrants and making payment of the interest on March
27, 2000. This transaction was exempt from registration under Rule 506 of
Regulation D, Section 4(2) of the Securities Act of 1933 and Section 4(6) of
the Securities Act of 1933. The Company did not use an underwriter in
connection with this transaction.
On March 3, 2000, the Company entered into a Securities Purchase Agreement
whereby the Company may receive up to $5,000,000 in exchange for convertible
promissory notes and warrants. On March 3, 2000, the Company received
$1,800,000 net of related costs of $200,000. The lender has agreed to provide
an additional $1,000,000 at $500,000 per month and has granted the Company the
option to receive the remaining $2,000,000 at the rate of $500,000 per month.
The initial note is due March 1, 2001 with interest at 8% payable quarterly.
If the Company's stock price falls below $1.00 for five consecutive days, the
principal balance will become redeemable at the option of the lender. The
redemption amount is equal to 125% of the outstanding principal plus accrued
interest. The purchaser of the debenture is not obligated to purchase the
remaining $3 million in debentures if the Company is in default or has
breached any of its obligations under the agreement or the average of the
closing bid price for the Company's common stock is less than or equal to
$1.00.
The promissory notes are convertible into common stock at a conversion
price of 80% of the lower of (a) the average of the three lowest closing bid
prices for the common stock during the 15 trading days preceding the date of
the purchase agreement or (b) the average of the three lowest closing bid
prices for the common stock during the 15 trading days preceding conversion,
subject to a maximum conversion price of $3.00 per share and a minimum
conversion price of $1.00 per share. Up to 33% of the aggregate principal and
accrued interest is convertible from March 3, 2000, an additional 33% is
convertible from April 2, 2000 and the remaining portion is convertible from
May 2, 2000. The notes are convertible through March 1, 2001. If the stock
price on the due date of the note is greater than $2.00, the lender is
required to convert all outstanding notes into common stock. The Company is
currently seeking registration of the underlying common stock in connection
with the Securities Purchase Agreement. There are substantial penalties if the
Company fails to register the resale of the common stock in a timely manner.
In connection with the issuance of the promissory note on March 3, 2000,
the Company also issued 1,283,697 warrants to purchase common stock at $2.08
per share through March 3, 2004. The net proceeds were allocated between the
promissory note and the warrants based upon their relative fair values. The
estimated fair value of the warrants of $2,053,915 was determined using the
Black Scholes option pricing model with the following assumptions: dividend
yield of 0%, volatility of 121%, risk-free interest rate of 6.6% and estimated
life of four years. The warrants were allocated $892,970 of the net proceeds.
Of the remaining $869,530 net proceeds, $526,529 were allocated to the
beneficial conversion feature of the promissory note, and $460,172 were
allocated to the promissory notes, before $117,171 of loan costs.
The Company issued a note payable dated January 17, 2000 to an individual.
The note was for $100,000 with an interest rate of 14%. The note was paid in
March 2000. As additional consideration, the Company issued warrants to
purchase 100,000 shares of common stock at $1.80 per share. The warrant is
exercisable through January 17, 2002. The loan is secured by certain
equipment. The proceeds from the loan were allocated to the warrants based
upon their fair value. The resulting discount to the note of $100,000 was
recognized and amortized during the period ended March 31, 2000.
In March 2000, stock options to acquire 30,329 shares of common stock were
exercised at strike prices of between $.16 and $.39 per shares. These options
exercises were exempt from registration under Rule 506 of Regulation D,
Section 4(2) of the Securities Act and Section 4(6) of the Securities Act. The
Company did not use an underwriter in connection with this transaction.
The Company is currently seeking registration of the underlying common
stock in connection with the Security Purchase Agreement. There are
substantial penalties if the Company fails to registrar the resale of the
common stock in a timely manner. In March 2000, 743 shares of convertible
preferred stock were converted into 185,714 shares of common stock.
Item 3. Defaults Upon Senior Securities.
In February 2000, the Company defaulted on a note payable to an investor in
the principal amount of $1,000,000 by not making payment on February 10, 2000,
the maturity date. The Company was also in default of the prepaid interest
provision of the note. The investor offered to extend the note for an
additional six months and waive any default interest for consideration of
500,000 warrants with an exercise price of $2.15. In order to extend the
maturity of the note, the investor also required a prepayment of interest,
plus attorney fees, in the total amount of $141,920. Management accepted the
offer to extend the note for six months by effectively issuing the warrants
and making payment of the interest on March 27, 2000. The note is not
currently in default.
Item 4. Submission of Matters to Vote of Security holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
2.1 Agreement and Plan of Reorganization (Schedules are omitted)
(Incorporated by referenced to Exhibit 2.1 of the Company's Current
Report on Form 8-K, dated April 9, 1998).
3(i).1 Restated Certificate of Incorporation of Flexpoint Sensor Systems,
Inc. (Incorporated by reference to Exhibit 3(i).1 of the Company's
Quarterly Report on Form 10-QSB, dated September 30, 1998).
3(i).2 Amended Certificate of Incorporation of Flexpoint Sensor Systems, Inc.
(Incorporated by reference to Exhibit 3(I).2 of the Company's
Quarterly Report on Form 10-QSB, dated June 30, 1999).
3(i).3 Certificate of Designation of Series A Convertible Preferred Stock of
Flexpoint Sensor Systems, Inc. (Incorporated by reference to Exhibit
3(i).3 of the Company's Quarterly Report on Form 10-QSB, dated June
30, 1999).
3(i).4 Articles of Incorporation of Sensitron, Inc. (Incorporated by
referenced to Exhibit 3(i).3 of the Company's Annual Report on Form
10-KSB, dated March 31, 1998).
3(i).5 Articles of Incorporation of Flexpoint, Inc. (Incorporated by
referenced to Exhibit 3(i).4 of the Company's Annual Report on Form
10-KSB, dated March 31, 1998).
3(i).6 Articles of Incorporation of Technology and Machine Company, Inc.
(Incorporated by referenced to Exhibit 3(i).5 of the Company's Annual
Report on Form 10-KSB, dated March 31, 1998).
3(ii).1 Restated and Amended Bylaws of Flexpoint Sensor Systems, Inc.
(Incorporated by reference to Exhibit 3(ii).1 of the Company's
Quarterly Report on Form 10-QSB, dated September 30, 1998).3(ii).2
Bylaws of Sensitron, Inc. (Incorporated by referenced to Exhibit
3(ii).2 of the Company's Annual Report on Form 10-KSB, dated March 31,
1998).
3(ii).3 Bylaws of Flexpoint, Inc. (Incorporated by referenced to Exhibit
3(ii).3 of the Company's Annual Report on Form 10-KSB, dated March 31,
1998).
3(ii).4 Bylaws of Technology and Machine Company, Inc. (Incorporated by
referenced to Exhibit 3(ii).4 of the Company's Annual Report on Form
10-KSB, dated March 31, 1998).
10.1 Employment Agreement with Douglas M. Odom (Incorporated by reference
to Exhibit 10.1 of the Company's current report on Form 8-K, dated
April 9, 1998).
10.2 Lease Agreement between 72nd South Associates and the Company
(Incorporated by reference to Exhibit 10.2 of the Company's current
report on Form 8-K, dated April 9, 1998).
10.3 Agreement between Ohio Art and the Company (certain portions of the
agreement were omitted from the exhibit pursuant to a grant of
confidential treatment) (Incorporated by reference to Exhibit 10.3 of
the Company's current report on Form 8-K, dated April 9, 1998).
10.4 Purchase and Supply Agreement by and among Flexpoint, Inc. and Delphi
Automotive Systems (certain portions of the agreement were omitted
from the exhibit pursuant to a grant of confidential treatment)
(Incorporated by reference to Exhibit 10.4 to the Company's annual
report on Form 10-KSB, dated December 31, 1998).
10.5 Industrial Space Lease between Prudential Insurance Company of America
and Flexpoint, Inc. (Incorporated by reference to Exhibit 10.5 to the
Company's annual report on Form 10-KSB, dated December 31, 1998).
10.6 Securities Purchase Agreement with Aspen Capital Resources, LLC,
(Incorporated by reference to Exhibit 10.1 of our Current Report on
Form 8-K, dated March 16, 2000).
10.7 Promissory secured promissory note in favor of Jerry and Vicki Moyes
Family Trust, dated August 10, 1999 (Incorporated by reference to
Exhibit 10.7 of our Annual Report on Form 10-KSB, dated December 31,
1999).
10.8 Security Agreement with Jerry and Vicki Moyes Family Trust, dated
August 10, 1999 (Incorporated by reference to Exhibit 10.8 of our
Annual Report on Form 10-KSB, dated December 31, 1999).
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: 5/12/00 FLEXPOINT, INC.
By /s/ Douglas M. Odom
--------------------
Douglas M. Odom
President, Chief Executive Officer, Director
Date: 5/12/00 By /s/ Thomas N. Strong
---------------------
Thomas N. Strong
Chief Accounting Officer
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 370,586
<SECURITIES> 0
<RECEIVABLES> 131,928
<ALLOWANCES> 2,595
<INVENTORY> 145,880
<CURRENT-ASSETS> 1,643,293
<PP&E> 3,557,817
<DEPRECIATION> 965,994
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0
1,475,175
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<CGS> 15,109
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<INTEREST-EXPENSE> 2,155,390
<INCOME-PRETAX> (3,534,039)
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<CHANGES> 0
<NET-INCOME> (3,534,039)
<EPS-BASIC> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
