FLEXPOINT SENSOR SYSTEMS INC, SB-2, 2000-05-12

FLEXPOINT SENSOR SYSTEMS INC
SB-2, 2000-05-12
MEASURING & CONTROLLING DEVICES, NEC

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As filed with the Securities and Exchange Commission on May 12, 2000.
Registration Statement No. _____________

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM SB-2
Registration Statement Under
the Securities Act of 1933Flexpoint Sensor Systems, Inc.
(Exact name of registrant as specified in its charter)

Delaware 3829 87-0620425
(State or other jurisdiction (Primary Standard (IRS Employer
of incorporation or Industrial Identification No.)
organization) Classification
Code No.)

6906 South 300 West, Midvale, Utah 84047 (801) 568-5111
(Address and telephone number of principal executive offices)
Eric L. Robinson
Blackburn & Stoll, LC
77 West Second South, Suite 400
Salt Lake City, UT 84101 (801) 521-7900
(Name, address and telephone number of agent for service)

Approximate date of proposed sale to the public: As soon as practicable
from time to time after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box.

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>

Proposed Proposed
Maximum Maximum Amount
Securities Common Shares Offering Aggregate Registration
Registered To Be Registered Per Unit(1) Offering Price(1) Fee
- -------------- ----------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
Common Stock(2) 3,760,000 $ 2.33(3) $ 8,760,800 $ 2,313
Common Stock(4) 2,246,697 $ 2.33(3) $ 5,234,804 $ 1,382
Total $ 3,695

</TABLE>

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

<PAGE>

(footnotes continued from previous page)

(1) Estimated solely for the purpose of determining the registration fee.
The registrant will receive no proceeds from the sale of these shares.

(2) Shares of common stock issuable by the registrant from time to time upon
conversion of outstanding debentures.

(3) Represents the average of the bid and asked prices of the common stock
on the OTC Bulletin Board on May 5, 2000. Fees were calculated under Rule
457(c) under the Securities Act of 1933.

(4) Shares of common stock issuable by the registrant from time to time upon
exercise of outstanding warrants.

<PAGE>
Prospectus

Flexpoint Sensor Systems, Inc.

6,006,697 Shares

Common Stock

This prospectus relates to 6,006,697 shares of common stock of Flexpoint
Sensor Systems, Inc. that may be sold from time to time by Aspen Capital
Resources, Inc. We are not selling any shares in the offering. We will not
receive any proceeds from sales by Aspen Capital Resources, Inc.

Our common stock is quoted in the over-the-counter market in what is
commonly referred to as the OTC Bulletin Board under the trading symbol FLXP.
On May 5, 2000, the last reported sale price for the common stock on the OTC
Bulletin Board was $2.34 per share.

Our executive offices and telephone number are:

6906 South 300 West
Midvale, Utah 84047
(801) 568-5111

Investing in shares of our stock involves significant risks. Our "Risk
Factors" begin on page 2.
_______________

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is
a criminal offense.

_______________

The date of this Prospectus is May __, 2000

<PAGE>

Risk Factors

You should consider carefully the following risk factors and other
information in this prospectus before investing in our common stock.

Our future success is dependent on our arrangements with Delphi Automotive
Systems.

In June 1998, we entered into a Purchase and Supply Agreement with Delphi
Automotive Systems ("Delphi"). Under the agreement we are to supply our sensor
mats and related software ("Sensor Mat System") to Delphi for integration into
a weight based suppression system that is part of a smart air bag system. The
Sensor Mat System will be supplied to General Motors, through Delphi. Our
Sensor Mat System is in the final stages of development. You should consider
the following in assessing the value of the Purchase and Supply Agreement and
our Sensor Mat System:

* Delphi is not obligated under the agreement to purchase any minimum
number of sensor mats.
* Delphi may terminate the agreement at any time.
* We are looking to our arrangements with Delphi to provide most of our
revenues in the next two years.
* There is no guarantee that the agreement will result in a material amount
of sales.
* Sales are not expected to begin until late 2000 or early 2001.
* If technical or manufacturing difficulties arise it may delay
production.
* We have only limited protection from changes in manufacturing costs and
raw materials costs.
* Delphi is free to develop or market products that compete with our Sensor
Mat System.

As a result, there can be no assurance that our arrangements with Delphi will
prove profitable. If our arrangements with Delphi are unsuccessful it may
result in the discontinuance of our business due to lack of revenues.

We have a history of losses and may never become profitable.

We have incurred total losses of approximately $18,575,639 from January 5,
1995 through March 31, 2000. All quarters have had operating losses. We may
not be profitable in the future.

We do not have sufficient funding to pay current creditors.

We have current liabilities, including loan obligations secured by our
equipment, that exceed our current assets. We will need to raise funds to pay
our current liabilities. We have no contractual arrangements to provide
necessary funding and there is no assurance that we will obtain funding or
that if funding is obtained that it will be on favorable terms. If we do not
obtain funding, as needed, lien holders may foreclose on our equipment and it
would be unlikely that we could continue our business without our equipment
and without the capacity to pay our creditors.

We do not have sufficient funding to execute our business plan.

Due to our arrangements with Delphi, we intend to expand our operations in
2000. We estimate that we will need to raise at lease $3,000,000 in additional
funding to fully execute our business plan. This funding is needed to complete
one additional production line to fulfill our anticipated manufacturing
obligations under the Purchase and Supply Agreement. If we decide to expand
our business activities outside the seat sensor market in 2000, we anticipate
needing more than $3,000,000 in additional funding. We may be unsuccessful in
obtaining additional funding or funding may only be available on terms that
our disadvantageous to us. If

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<PAGE>

we are unsuccessful in raising additional funds, it will negatively impact our
ability to fulfill our obligations under the Purchase and Supply Agreement and
it may result in the discontinuance of our business due to lack of funding.

If our sales do not develop as projected it will be difficult to reduce
expenditures in the short term.

A significant portion of our expenses will be fixed in advance based in
large part on future manufacturing and sales forecasts. If our forecasts are
below expectations, any shortfall may be magnified by our inability to adjust
spending to compensate for the shortfall. Therefore, a shortfall in
manufacturing and sales revenues in actual as compared to estimated volumes
would have an immediate adverse effect on our business, financial condition
and operating results. In addition, we plan to increase operating expenses to
fund additional sales and marketing, general and administrative activities and
infrastructure. To the extent that these expenses are not accompanied by an
increase in revenues, it may result in the discontinuance of our business due
to lack of funding.

Sales of a substantial number of shares currently available for future
sale may adversely affect market prices.

As of May 5, 2000, we had 19,414,129 shares of common stock outstanding
and had authorized up to approximately 15,971,305 shares of common stock upon
conversion of convertible preferred stock, convertible debt, and upon exercise
of warrants and options. Assuming the conversion of all of these securities
into common stock we would have approximately 35,385,434 shares of common
stock outstanding. Of said shares after conversion, approximately 22,938,102
are subject to resale restrictions and approximately 12,447,323 could be
immediately resold pursuant to this prospectus or pursuant to Rule 144. Sales
of substantial amounts of common stock in the public market could adversely
affect prevailing market prices.

The number of shares to be received upon conversion of convertible
debentures in the principal amount of $3,500,000 fluctuates based on market
price so the number of shares of common stock issuable upon conversion of
these debentures is an approximation and may differ materially from the amount
described.

Our Sensor Mat System may not be accepted by the automotive market.

Our use of our Sensor Mat System is untested in smart airbags and it has
not been used to control airbag deflection in automobiles offered for sale to
the public. Our Sensor Mat System may not be accepted by the market or
automobile manufacturers or may not function as anticipated. The acceptance of
our Sensor Mat System will depend in large part on our ability, directly or
through marketing partners, to demonstrate the operational advantages, safety,
efficacy, and cost-effectiveness of our sensors in comparison with competing
sensors. There can be no assurance that our Sensor Mat System will achieve
market acceptance, that our Sensor Mat System will function as anticipated or
that automobile manufacturers will implement our Sensor Mat System in their
automobiles. Because we expect to derive a substantial amount of our future
income from Sensor Mat System sales, the failure to sell a significant number
of systems may result in the discontinuance of our business due to lack of
revenues.

Automobile manufacturers may not incorporate our Sensor Mat System into
new vehicles.

Sales of our Sensor Mat System are dependent upon the decision of
automobile manufacturers to incorporate our Sensor Mat System into smart air
bag systems for the automobiles they are manufacturing. There can be no
assurance that we will be successful in arranging for our Sensor Mat Systemto
be incorporated into new vehicles. If automobile manufacturers do not purchase
our Sensor Mat System in large quantities our business, operating results and
financial condition will be materially adversely effected.

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<PAGE>

We may not have adequate experience to successfully manage anticipated
growth.

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 (i) improve existing and implement new financial
controls and systems, management information systems, operating,
administrative, financial and accounting systems and controls, (ii) maintain
close coordination among engineering, programming, accounting, finance,
marketing, sales and operations, and (iii) retain and train additional
technical and marketing personnel. 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 are dependent on consultants for the development of the software that
runs our Sensor Mat System.

The development of the software that runs our Sensor Mat System is highly
dependent upon the efforts of programming consultants. There is intense
competition for programming consultants. We do not have long term contracts in
place with our key programming consultants. The loss of the services of any of
our key programming consultants or the failure to attract and retain
additional consultants if and when needed could have a material adverse effect
on our ability to manufacture Sensor Mat Systems.

We may not have adequate manufacturing capacity to meet anticipated
manufacturing demands under the Purchase and Supply Agreement.

We have completed installation of our first production line. Based on
projected orders under the Purchase and Supply Agreement, we will need to
complete a second production line and have it installed and approved by late
2001. The second manufacturing line is expected to result in increased
manufacturing capacity and manufacturing efficiencies. The second production
line will cost approximately $2,500,000. We are currently on schedule to
complete the second line by the estimated due date. We do not have sufficient
funding to complete the second line. There can be no assurance that we will
successfully complete the second production line, that the production lines
will produce product in the volumes required or that the production lines will
satisfy the requirements of our customers. If we fail to perform our
manufacturing obligations in a timely and satisfactory manner it may result in
the discontinuance of our business due to lack of profits

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. Our primary competitors in the
air bag market are International Electronics and Engineering, Siemens, Robert
Bosch Corporation, Denso, Breed Technologies, TRW, Delphi, Autoliv, Takata and
Temic. We believe that none of our competitors have a product that is superior
to our Sensor Mat System 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. 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 effect our business, operating results or financial condition.

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<PAGE>

Our business could be adversely affected by technological changes.

The market for electronic devices such as sensors is characterized by
rapid technological developments, frequent new product introductions and
evolving industry standards. The emerging nature of these products and
services and their rapid evolution will require us to continually improve the
performance, features and reliability of our products. There can be no
assurance that we will be successful in responding quickly, cost effectively
and efficiently to these developments. There are time limited market
opportunities for our Sensor Mat System, and there is no assurance that we
will be successful in achieving widespread acceptance of our system before
competitors offer competitive products with features and performance similar
to or better than our system. In addition, the widespread adoption of new
technologies or standards, could require substantial expenditures to modify or
adapt our products and services and which could have a material adverse effect
on our business, operating results and financial condition. In addition,
although we test our products extensively, new products may contain design
flaws or other defects that could have a material adverse effect on our
business, operating results and financial condition.

Our success is dependent on our intellectual property rights.

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 is 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, would be expensive and, if it occurs, 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.

Potential liability relating to failure of Sensor Mat System.

The sale of air bag systems entails an inherent risk of liability in the
event of product failure or claim of harm caused by product operation. We
could face personal injury, death or property damage claims in the event one
of our Sensor Mat Systems fails to initiate and properly deploy the airbag.
There can be no assurance that we will not be subject to these kinds of
claims, that any claim will be successfully defended or if we are found
liable, that the claim will not exceed the limits of our insurance. We
currently maintain product liability and general comprehensive insurance in
the amount of $1,000,000. There is no assurance that we will be able to
maintain product liability insurance on acceptable terms and in reasonable
amounts in the future.

Dependence on market for automobiles.

We expect to receive a substantial portion of our income from the sale of
our Sensor Mat System to Delphi. As a result, our business is indirectly
affected by certain characteristics and trends in the automotive industry,
like (i) fluctuations in the automotive industry's business cycle, (ii)
varying fuel and labor costs, including consolidation and restructuring of
certain automotive companies, (iii) labor strike and work stoppage; (iv) price
competition and regulatory scrutiny, and (v) consolidation and restructuring
of automotive companies or the failure of projected market growth to
materialize or continue. In the event that these characteristics and trends
adversely affect customers in the automotive industry, they would reduce the
overall demand for our Sensor Mat System, thereby decreasing our sales and
operating income. There can be no assurance that characteristics and trends
that might affect the automotive industry will not adversely affect our sales
of Sensor Mat Systems.

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<PAGE>

No Assurance of a Liquid Public Market for Securities.

There can be no assurance as to the depth or liquidity of any market for
our common stock or the prices at which holders may be able to sell their
shares. As a result, an investment in our common stock may not be totally
illiquid, and investors may not be able to liquidate their investment readily
or at all when they need or desire to sell.

Risk of Our Possible Failure to Comply with Securities Laws.

From November 1999 through February 2000, we sold convertible notes in
the principal amount of $1,000,000 to investors. At the time of the sale we
neglected to verify that each investor was accredited and provide disclosure
documentation. We believe that all of the investors were accredited and that
the offering was exempt from the registration requirements of applicable
securities laws. We are in the process of verifying the accredited status of
the investors. In the event problems are discovered, and depending on the
availability of funding, we may offer to rescind the sale of the notes offered
to investors in that offering. In the event that it is later determined that
this private offering or any other offering was not exempt from registration
or was not otherwise in compliance with applicable securities laws, it is
possible that an investor may have the right to rescind his or her purchase of
the securities and we may be subject to significant civil and criminal
penalties. If any purchasers were to successfully seek rescission or civil or
criminal penalties were imposed, we could face severe financial demands that
could result in the discontinuance of our business due to lack of funding.

Conversion of our convertible securities may dilute stockholders.

As of May 5, 2000, we had issued or authorized the issuance of
securities that are convertible into approximately 15,971,305 shares of common
stock. See " Shares available for future sale." To the extent these
convertible securities are converted into common stock, stockholder interests
in us may be diluted. If the market value of the common stock decreases
significantly, the offering price per share in our private placements or
public offerings as well as the conversion price of the outstanding
convertible securities, may decrease causing dilution of ownership to other
stockholders and make it significantly more difficult to raise additional
funding.

Dilution of Stockholders Due to Sales of Common Stock and Conversion of
Convertible Securities May Affect Our Ability to Raise Additional Capital.

Sales of common stock and convertible debentures, and the exercise of
options, warrants and other convertible securities may have an adverse effect
on the trading price of and market for our common stock. We may sell or issue
common stock or convertible securities in the future at market prices or at
prices below the current market price, which issuance would cause dilution to
stockholders.

Common stock price may continue to be volatile.

The trading price of our common stock could be subject to wide
fluctuations in response to variations in operating results, announcement of
technological innovations or new products. In addition, in recent years the
stock market has experienced extreme price and volume fluctuations that have
had a substantial effect on the market prices for many emerging growth
companies, which may be unrelated to the operating performance of the specific
companies.

We must comply with governmental regulations.

We are subject to the requirements of federal, state and local
environmental and occupational safety and health laws and regulations in the
United States and other countries. There can be no assurance that we have been
or will be at all times in complete compliance with all applicable
requirements or that we will not incur material costs or liabilities in
connection with these requirements. In addition, these

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<PAGE>

requirements are complex, change frequently and have tended to become more
strict over time, and there can be no assurance that these requirements will
not change in the future in a manner that could have a material adverse effect
on our business.

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 airbag technology into
vehicles beginning in 2003 with the phase in to be completed by 2006. These
proposals call for upgraded airbag 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 Sensor Mat System and we believe that our Sensor Mat
System will meet the proposed standards. There can be no assurance, however,
that our Sensor Mat System will meet the proposed National Highway
Transportation and Safety Administration standards or the standards will not
be modified. In addition, automakers may react to these proposals and the
uncertainty surrounding these proposals by curtailing or deferring investments
in new technology, including our Sensor Mat System, 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.

FORWARD LOOKING STATEMENTS

Some of the statements contained in this prospectus discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. This information can
be identified by the use of "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements are based on our beliefs
and the assumptions we made using information currently available to us. When
considering these forward-looking statements, you should keep in mind the risk
factors and other cautionary statements in this prospectus. These statements
are subject to known and unknown risks, uncertainties and other factors that
could cause our actual results to differ materially from those contemplated by
the statements.

USE OF PROCEEDS

The net proceeds from the sale of common stock will be received by
Aspen Capital Resources, Inc.. We will not receive any of the proceeds from
any sale of the shares by Aspen Capital Resources, Inc. Aspen Capital
Resources, Inc. may acquire shares upon exercise of warrants. Any proceeds we
received from the exercise of warrants will be used as working capital.

CAPITALIZATION

On March 3, 2000, we 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 us with
proceeds of $2,000,000, less a ten percent placement fee and other offering
and registration costs of Aspen Capital Resources, Inc. and ourselves 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 our 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

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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 our
securities. The exercise price of the Series 2000-A Warrants varies depending
on the market price of our securities. The sale of the convertible debentures
through May 5, 2000 will result in our recognizing amortization of debt
discount in the approximate amount of $2,386,709.

The following table sets forth information concerning our
capitalization at March 31, 2000, and such capitalization as adjusted upon
recognition of the amortization of debt discount relating to the Securities
Purchase Agreement. The information below should be read in conjunction with
our consolidated financial statements and related notes appearing elsewhere
herein.

The following table sets forth our capitalization as of March 31, 2000:

- on an actual basis and

- on a pro forma basis to reflect proceeds from issuance of $1,500,000
convertible promissory notes payable and 963,000 warrants to purchase common
stock from $1.50 to $1.58 per share on April 4, 2000, May 3, 2000 and June 3,
2000 for net proceeds of $1,350,000, the amortization of the related discount
and loan costs from these convertible promissory notes and $2,000,000 of
existing promissory notes, and the conversion of the related $3,500,000
promissory notes into 3,500,000 shares of common stock at $1.00 per share.

As of March 31, 2000:
Actual Pro Forma
------------- -------------
Notes payable - current portion, notes payable
- related parties, and capital lease
obligation - current portion $ 2,990,446 $ 1,298,412
------------- -------------
Long-term notes payable and capital lease
obligation net of current portion $ 113,491 $ 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 shares issued and
outstanding (actual) and 1,695 shares
(pro forma) 1,475 ,175 1,475,175
Common stock - $0.001 par value; 100,000,000
shares authorized; 19,414,129 shares issued
and outstanding(actual) and 22,914,129 shares
(pro forma) 19,414 22,914
Additional paid-in capital 17,454,109 22,089,633
Deficit accumulated during the development
stage (18,575,639) (20,198,522)
Unearned compensation (106,711) (106,711)
------------- -------------
Total Stockholders' Equity 266,348 3,282,489
------------- -------------
Total Capitalization $ 379,839 $ 3,395,980
============= =============
__________________

Does not include any shares of common stock which may be issued pursuant to
the exercise of stock options or warrants that are not owned by Aspen Capital
Resources, Inc.
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<PAGE>

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock has been quoted on the OTC Bulletin Board since September
14, 1998 under the trading symbol "MICP." Prior to this date, no active
trading market existed for our common stock. In June 1999 our symbol was
changed to "FLXP". The following table sets forth the high and low bid
information of the common stock for the periods indicated. The price
information was obtained from IDD Information Services, Inc. and other sources
we believe are reliable. It should be understood that such over the counter
market quotations reflect inter-dealer prices without retail markup, markdown
or commission, and the quotations may not reflect any actual market
transactions in the common stock.

Quarter Ended High Low
- ------------- ------ -------
1998
- ----
September 30 $8.50 $5.50
December 31 $8.31 $6.38

1999
- -----
March 31 $6.83 $4.25
June 30 $4.94 $2.83
September 30 $3.88 $1.94
December 31 $2.88 $1.59

To date, we have not paid dividends on our common stock. The payment of
dividends, if any, in the future is within the discretion of the board of
directors and will depend upon our earnings, capital requirements, financial
condition and other factors the board views are relevant. The board does not
intend to declare any dividends in the foreseeable future, but instead intends
to retain all earnings, if any, for use in our operations.

As of May 5, 2000, there were 446 holders of record of our common stock.
The number of holders of record was calculated by reference to our stock
transfer agent's books.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis provides information that we
believe is relevant to an assessment and understanding of our consolidated
results of operations and financial condition. The discussion should be read
in conjunction with our consolidated financial statements and notes thereto.
Except as otherwise stated or implied by the context, all references to "us,"
"our," "we" or similar phrases will be deemed to refer to Flexpoint Sensor
Systems, Inc. and its subsidiaries on a consolidated basis.

Overview

We are in the development stage and since inception, have incurred
losses from operations. As of March 31, 2000, we had cumulative losses
totaling $18,575,639. We are primarily engaged in the sensor business and are
currently marketing our patented Bend Sensor(R) 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. We believe this worldwide market growth will continue.

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Financial Position

We 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, we 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.

We expect to derive a substantial portion of our future income from the
sale of our Sensor Mat Systems to Delphi. Under our Purchase and Supply
Agreement, Delphi may purchase sensor mats incorporating the Bend Sensor
technology from us for integration into a "smart" air bag system being
developed for General Motors. We currently have one production line in place.
This line has produced over 15,000 pre-production seat sensors. We believe all
known technical and manufacturing issues have been properly identified and
resolutions are being implemented. We do 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 Purchase and 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. We are also seeking opportunities to supply the electronic
assembly, including the sensor, to increase sales potential. Due to the
seasonality of the toy industry, we currently have no agreements relating to
the manufacture of sensors in the toy market and there can be no assurance
that we will successfully enter into toy related agreements in the future. We
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 us, 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 our 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 us; (iii) we may have only limited
protection from changes in manufacturing costs and raw materials costs; and
(iv) if we are reliant on other parties for all or substantially all of our
sales, we may be limited in our 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 we 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 comparable

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period from the prior year. The interest expense of debt discount related to
our 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, we had unamortized debt discount of $336,079.

We have also entered into arrangements whereby we expect to be borrowing
between an additional $1 and $3 million. The loans are expected to be
unsecured, but as additional consideration for the loans, we will be issuing
warrants to the lender. See " Liquidity and Capital Resources." This is
expected to result our 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.

Operation for the Years Ended December 31, 1999 and 1998

During the year ended December 31, 1999, we had operating revenues
$773,233, compared with operating revenues of $1,915,628 for the year ended
December 31, 1998. In 1999, operating revenues were comprised of $332,182 in
product sales and $441,051 in engineering fee revenues. Substantially all of
the 1999 revenues related to the Supply Agreement. In 1998, operating revenues
were comprised of $1,767,476 in product sales, including $511,291 in royalties
associated with a toy licensing agreement with Ohio Art, Inc. that has since
expired, and $201,786 in engineering fee revenues.

General and administrative expenses were $3,915,562 for 1999, compared
with $1,953,432 for the prior year. Of the 1999 total, $418,350 is comprise of
salary, wages and fees relating to the grant of stock options and warrants to
employees and consultants at less than market price. The increase in
expenditures between 1999 and 1998 is also related to increases in salary and
wage expenses as a result of hiring additional manufacturing employees,
depreciation expenses relating to leasehold improvements, equipment at our new
manufacturing facility, travel expenses relating to the Purchase and Supply
Agreement and consulting expenses.

Research and development expenses were $3,339,916 for 1999, compared
with $1,382,101 for the prior year. Of the 1999 total, $1,907,623 is comprised
of consulting expenses relating to software development of our sensor mats.
The increase in expenditures between 1999 and 1998 is primarily related to
increases in salary and wage expenses as a result of hiring additional
engineering personnel and increased consulting expenses.

Interest expense was $194,229 for 1999, compared to $17,157 for the
prior year. The difference between the periods relates mainly to an increase
in outstanding debt during the periods. Interest income was $23,288 for 1999,
compared with $22,177 for the prior year. The difference in interest income
between said periods relates mainly to interest earned on funds on deposit.

Amortization of debt discount and loan costs was $1,666,936 in 1999 and
no amortization of debt discount was incurred in the prior year. The
amortization of debt discount related primarily to our issuing convertible
notes payable with attached warrants or warrants issuable upon conversion of
the notes and issuing warrants as consideration for note payable. All of the
notes were converted. Proceeds from the notes were allocated between the fair
value of the warrants and the notes, resulting in a discount to the notes of
$1,669,962. Amortization of the discount to the notes resulted in $1,567,136
of interest expense. The $1,666,936 in amortization of debt discount also
included $109,800 in recording the warrants issued as additional consideration
for two $100,000 promissory notes. We anticipate recognizing an additional
$112,826 in 2000 as the balance of the discount is amortized.

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Net other income (expense) was $(120,311) in 1999 and $12,493 in the
prior year. The difference between the two periods relates primarily to the
issuance of 100,000 restricted shares to settle litigation in which we were
involved. At the time of the settlement the share price was $1.75, therefore
we recognized an expense of $175,000 related to the settlement. Also included
as other income was the collection of over $54,000 of previously written off
receivables.

Preferred dividends were $(693,551) in 1999 and no preferred dividends
were paid in the prior year. The preferred dividends related to the issuance
of Series A Convertible Preferred Stock and Series A Warrants. Proceeds from
the issuance were allocated to the preferred stock and the warrants based upon
their relative fair values. The resulting preferred stock discount of $693,551
was amortized immediately as a preferred stock dividend.

Liquidity and Capital Resources

To date, we have financed our operations principally through private
placements of debt and equity securities and sales. We generated $13,402,001
in net proceeds through financing activities from inception through March 31,
2000 and we received $2,075,168 in net proceeds from financing activities
during the three months ended March 31 in 2000. We used net cash in operating
activities of $11,749,976 from inception through March 31, 2000 and we used
$1,837,712 in operating activities during the three months ended March 31 in
2000. As of March 31, 2000, our total liabilities were $4,147,888, net of
unamortized discount of $336,079.. We had a working capital (deficit) as of
March 31, 2000 of $(2,391,104).

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.

We have committed to spend $282,924 in lease payment for our 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, we contracted for certain
improvements to our physical facilities. As of May 5, 2000, we do not have
material commitments for capital expenditures. At March 31, 2000, we 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.

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As of March 31, 2000, we 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 us 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 our 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, we 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 our 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.

Our 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 our products and the amounts owed
on debt that is not converted. We believe that existing funds, funds received
under the Securities Purchase Agreement and funds generated from sales will be
sufficient to support our 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 we will need to raise approximately $3,000,000 in
additional funding to support our operations during 2000 and in 2001 we need
to raise substantial additional funding to fully execute our business plan
assuming revenues from the Supply Agreement as currently projected.

We are working to obtain additional funding from several sources, but we
have no firm commitments for funding and there can be no assurance that
additional funding will be available to us 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 us, including
possibly requiring us to cease our operations.

Inflation

We do not expect the impact of inflation on operations to be significant.

Year 2000

We had developed plans to address the possible exposures related to the
impact on our computer systems of the Year 2000. Since entering the Year 2000,
we have not experienced any major disruptions to our business nor are we aware
of any significant Year 2000 related disruptions impacting our customers and
suppliers. Furthermore, we did not experience any material impact on business
at calendar year end. We will continue to monitor our critical systems over
the next several months but do not anticipate any significant impacts due to
Year 2000 exposures from our internal systems as well as from the activities
of our suppliers and customers.

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Forward-Looking Statements

When used in this Form SB-2, in our filings with the SEC, in our press
releases or other public or stockholder communications, or in oral statements
made with the approval of our 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 our beliefs and the assumptions we made using
information currently available to us.

We 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, our actual results for future periods
could differ materially from those anticipated or projected.

DESCRIPTION OF THE BUSINESS

Company Background

We were incorporated in 1992 as a Delaware corporation under the name
Nanotech Corporation. We had no operations until April 1998. On that date, we
acquired Sensitron, a Utah corporation, through a merger with a subsidiary of
Flexpoint Sensor Systems, Inc. We changed our name to "Micropoint, Inc." and
Sensitron became our wholly owned subsidiary. In June 1999 we changed our name
to "Flexpoint Sensor Systems, Inc." At the closing of the Sensitron
acquisition, the officers and directors of Nanotech Corporation resigned and
the appointees of Sensitron were appointed as our officers and directors. In
addition, the outstanding securities of Sensitron were exchanged for
securities of Nanotech Corporation. Prior to the acquisition, neither
Sensitron nor any affiliate of Sensitron had an interest in Nanotech
Corporation.

Sensitron is engaged in the business, through Flexpoint, Inc. and
Technology and Machine Company, Inc. ("Tamco") which are wholly owned
subsidiaries of Sensitron, of developing manufacturing and marketing patented
sensor technology know as the Bend Sensor technology. Sensitron and Flexpoint,
Inc. were incorporated in 1995 as Utah corporations.

Tamco was incorporated in 1990 as a Utah corporation. Tamco is a
manufacturing and machining company which machines metal parts and injection
molds based on custom orders for third parties. We use Tamco to perform
machining and manufacturing for our products and for our manufacturing
facilities. Tamco also operates a third party business to the extent that
excess capacity remains after servicing our needs.

Our principal executive offices are located at 6906 South 300 West,
Midvale, Utah 84047. Our telephone number is (801) 568-5111.

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The Sensor Business

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. We believe this worldwide market growth will
continue.

We believe that the sensing devices that are most likely to compete with
the Bend Sensor technology are force transducer sensors and certain fiber
optic sensors. We believe, however, that force transducer sensors are not as
reliable as the Bend Sensor technology and that they are not capable of
measuring the same range of motion as the Bend Sensor technology. We also
believe that fiber optic sensors are not as cost effective as the Bend Sensor
technology .

The Bend Sensor Technology

The Bend Sensor technology is a sensor consisting of a coated material,
like plastic, that measures electrical changes when it is bent. Electronic
systems can connect to the sensor and measure with fine detail the amount of
bending or movement that occurs. Certain applications of the Bend Sensor have
been patented, including automobile horn switches and Sensor Mat System. Other
patent applications, like accelerometers, various automobile seat sensors and
function controls, are pending.

A typical sensor functions through the means of metal contacts swiping or
rubbing across a resistive element. The Bend Sensor is a single layer sensor
with no mechanical assembly. Our Bend Sensor technology can provide accurate
measurement and sensing of deflection, acceleration, and range of motion. We
have produced over 7,000,000 sensors for the toy and consumer industries to
date.

Production Contracts and Specific Applications

Air Bag Applications

Automakers and regulators seem to be moving toward smart air bag systems
as a solution to the rising concerns over deaths and injuries to children and
small adults by air bags. Smart air bag systems are those that can detect not
only the presence of a seat occupant, but also the size and positioning of the
seat occupant. This data is used to tailor the speed and force of the air bag
deployment to the seat occupancy conditions at the time of impact. Reliable
analog seat sensors like the Bend Sensor technology are a key component of the
system.

General Motors, Ford, Chrysler, TRW, Lear, Takata, Magna, Allied Signal,
Autoliv, Johnson Controls, Siemens, and Delphi have asked us to demonstrate
our Bend Sensor technology in seat occupant detection applications. Response
has been positive. By automatically sizing up a car's passenger, our sensor
can distinguish between an infant car seat and an adult passenger and
deactivate an air bag when a person under 60 pounds or a car seat is in the
seat.

In June 1998, we entered into a Purchase and Supply Agreement with
Delphi under which Delphi may purchase sensor mats incorporating the Bend
Sensor technology from us for integration into a "smart" air bag system being
developed for General Motors. We currently have one production line in place.
This line has produced over 15,000 pre-production seat sensors. We believe all
known technical and manufacturing issues have been properly identified and
resolutions are being implemented. We do 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 seat sensors under the
Purchase and Supply

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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.

Automobile Horn Applications

We have also developed an automobile horn application of the Bend Sensor
technology. Traditional automobile horn assemblies, when receiving pressure on
any part of the horn assembly surface, activate the horn control system. On
current airbag configurations, horn switches are generally placed on sides of
the column. Because our switch is a thin sheet of screen printed plastic that
can be laminated between the airbag assembly and a flexible cover to the
steering wheel, the device can be placed over the airbag assembly on the
steering wheel in place of the traditional switch. This product can be
integrated with electronic assembly counterparts in their configuration. We
have not entered into any sales, license or distribution agreements with
respect to the horn application that are currently in effect. We have two
patents relating to the horn switch assembly.

Toy Applications

We are marketing toy, traditional game and video applications of the Bend
Sensor technology directly to the toy manufacturers. Presently, there are
three different toy products that utilize the Bend Sensor technology. The toy
products are manufactured by Irwin Toys Limited, Toy Biz, Inc. and Jakks Toys
and they can now be found at major retailers, including Target, Wal-Mart and
Toys R Us. We expect toy revenues for 2000 to exceed 1999 due to an increase
in toy products designed to utilize our sensor. There can be no assurance as
to what level, if any, of sales that we will secure in the toy industry.

Other Applications

We believe the potential market for the Bend Sensor technology includes
using the Bend Sensor technology to replace or upgrade devices used in
industrial control systems, medical equipment and instrumentation, computer
peripherals, automotive transmission equipment, commercial vending equipment
and other devices. We intend to further identify applications of the Bend
Sensor technology in additional fields and industries. We specifically intend
to seek applications of the Bend Sensor technology for products used by
customers that emphasize functionality, reliability, quality, and user
convenience.

Business Strategy

We believe that our success will depend upon our ability to coordinate
our product design, manufacturing, distribution and service strategies in a
long-term business model. Our sales strategy is to offer a line of standard
sensor products with corresponding hardware and software to facilitate ease of
implementation of the Bend Sensor technology into a customer's system. The
standard product line is expected to be sold directly to the customer and
through manufacturer's representatives, distributors and the Internet. We will
further seek to expand our product offering to include substantially complete
value-added assemblies. We will continue to consider licensing or partnership
arrangements. We anticipate selling primarily to original equipment
manufacturers ("OEMs") initially in the United States and eventually
worldwide. For the international and smaller customers, we plan to contract,
sell and distribute our products through various manufacturer representatives
and distributors.

In the long term we will attempt to add value by expanding our sensor
product line through licensing, distribution agreements, and purchasing of
other entities. It is anticipated that diversification of sensor products will
enhance our ability to offer sensor "system " solutions to customers. These
product lines, when combined, could create a much larger value added profit
margin. There is, however, no assurance that these profit margins will be
achieved. Eventually, by adding circuit boards, enclosures, etc., we expect to
integrate to a more extensive product line.

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Research and Development

Others are working to develop products that compete with our Bend Sensor
technology. To stay on the forefront of the technology, and to serve the needs
of the customer, we will need to aggressively pursue improvements to existing
systems and develop new systems. We spent $3,339,916 during 1999 and
$1,382,101 in 1998 in research and development activities. Of these amounts,
$1,907,623 was spent in 1999 and $705,265 was spend in 1998 to fund
development of the software that will be used with the smart air bag system.
There can be no assurance that we will be successful in pursuing improvements
to existing systems or developing new systems.

We believe that the coatings for the Bend Sensor products are difficult
to duplicate. We must develop new coatings to fit emerging customer needs and
to stay ahead of the competition. There can be no assurance that we will be
successful in developing new coatings.

Marketing, Distribution, Sales and Customers

We will principally market our products to OEMs. Our primary marketing
objectives are to generate demand for our products, enhance name recognition
and support OEMs. Our products are expected to be purchased primarily by OEMs.
We believe that the successful use of our products by OEMs will create
additional demand for higher quantity of existing products.

We intend to develop a field and in house sales force including direct
marketing employees in strategic areas and manufacturers representatives to
generate OEM customers. Currently we are selling directly to the automotive
industry and utilizing outside representatives in the toy industry. As the
market grows in North American, we anticipate expanding our distribution
network throughout the world. There can be no assurance that we will be
successful in developing a sales force or in expanding our distribution
network.

Manufacturing and Suppliers

We currently own equipment installed in our facility located at 6906 South
300 West, Midvale, Utah, that enables us to manufacture up to 25 million
finger size Bend Sensors per year. In preparation to supply Delphi, we have
completed the first phase of our automotive sensor manufacturing facility at
our 60,000 square foot leased facility located near the Salt Lake
International Airport. We will continue to use our Midvale, Utah facility for
research and development and non-automotive sensor manufacturing.

We use standard materials for our products and have taken steps to
eliminate dependence on components which can only be obtained from a single or
a limited number of sources. Currently, all materials necessary to manufacture
the products, other than ink, are standard components available from several
sources. We have developed our own inks for our Bend Sensor products. We have
established some long-term contractual relationships with suppliers who have
agreed to keep materials in stock to meet our manufacturing needs.

Domestic and international organizations set recognized standards for
manufacturing quality and certify manufacturers who are able to comply with
those standards. Those standards are commonly known in the industry as
International Standards of Organization ("ISO"). There are different ISO
levels. The automotive industry has embraced the ISO standards but the
organization has augmented these requirements. The organization developed what
is known as QS 9000 compliance for automotive suppliers. Under the Delphi
Purchase and Supply Agreement we are required to seek QS 9000 certification
for our manufacturing facilities. In order to obtain a QS 9000 certification,
we must apply to the organization that sets those standards and prove to the
organization that those standards have been met. Due to production delays and
financial constraints, our efforts to obtain QS 9000 quality certification has
been delayed. However, we believe we have built our facility in a manner that
will allow us to obtain the certification in due time. However, there is no
assurance that we will obtain the certification.

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Competition

The sensor business is highly competitive and competition is expected to
continue to increase. We are competing with firms that have longer operating
histories, more experience, substantially greater financial resources, greater
size, more substantial research and development and marketing organizations,
established distribution channels and are better situated in the market than
us. We do not have a significant customer base and are likely to encounter a
high degree of competition in developing a customer base.

To our knowledge and except as noted below, technology similar to ours is
not currently in production by any competitor. We believe that our products
will be sufficiently distinguishable from the existing products so they will
not compete directly with existing sensor products. A majority of all sensing
devices require physical contacts. Certain force transducer sensors and fiber
optic sensors are comparable to our Bend Sensors. However, we believe that the
force transducer sensor is not as reliable as our Bend Sensor and that the
fiber optic sensors are not as cost effective as the Bend Sensor. As this new
area grows, additional manufacturers may attempt to introduce similar products
and competition could intensify.

In the medical electronics field, our competitors are the numerous sensor
manufacturers. In the auto seat field our competitors are the numerous
capacitive, piezo, infrared, and ultrasonic sensor manufacturers. Competitors
may use their economic strength to influence the market to continue to buy
their existing products. One or more of these competitors could use their
resources to improve their current products or develop new products that may
compete more effectively with our products. New competitors may emerge and may
develop products and capabilities that compete directly with our products. No
assurance can be given that we will be successful in competing in this
industry.

We intend to compete on the basis of early entry into the market,
enhanced features, performance, ease of use, compatibility, reliability,
price, marketing, distribution, quality and support. We also believe our
intellectual property provides an advantage over our competitors. Although we
believe that our products will be well received in the markets because of
innovative features, performance characteristics and cost-effective pricing,
there can be no assurance that comparable or superior products incorporating
more advanced technology or other features or having better price and
performance characteristics will not be introduced by competitors.

Intellectual Property

We attempt to protect our Bend Sensor technology with patents and by
restricting disclosure of confidential information. We have six issued United
States patents and five additional pending applications for patents in the
United States. We also have one issued patent in Canada and have four patent
applications pending in foreign countries evolving from and based upon one
application under the Patent Cooperation Treaty. All patents and patent
applications relate to the Bend Sensor technology.

There can be no assurance that the protection provided by patents and
patent applications, if issued, will be broad enough to prevent competitors
from introducing similar products or that these patents, if challenged, will
be upheld by the courts of any jurisdiction. Patent infringement litigation,
either to enforce our patents or defend ourselves from infringement suits,
would be expensive and, if it occurs, could divert our resources from other
planned uses. Any adverse outcome in litigation could have a material adverse
effect on us. Patent applications filed in foreign countries and patents in
these countries are subject to laws and procedures that differ from those in
the United States. Patent protection in these countries may be different from
patent protection under U.S. laws 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 Bend
Sensor technology.

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We believe that because of the rapid pace of technological change in the
markets, legal protection of our information is less significant to our
competitive position than factors like continuing product innovation in
response to evolving industry standards, technical and cost-effective
manufacturing expertise, effective product marketing strategies and customer
service. Without legal protection, however, it may be possible for third
parties to exploit commercially our products.

Employees

As of May 5, 2000, we had thirty-nine full-time employees and three
part-time employees. We are also utilizing the services of outside contractors
and consultants in connection with our ink, hardware and software development.
We are currently spending more on outside contractors and consultants than we
spend to compensate our employees. As development of our Sensor Mat System is
completed it is expected that the amount spent on outside contractors and
consultants will decrease. Although there is competition for qualified
personnel in the business in which we operate, to date we have not had
significant problems recruiting and retaining qualified personnel. None of our
employees are subject to collective bargaining agreements, and we have not
experienced work stoppages. We believe that our employee relations are good.

DESCRIPTION OF PROPERTY

Our principal offices are located at 6906 South 300 West, Midvale, Utah,
under terms of a lease which was extended to October 2000 , with a monthly
rent of approximately $5,700. The lease covers approximately 13,000 square
feet of space which will accommodate the manufacture of up to 25 million
finger size Bend Sensor units per year. We have the option to extend the
existing lease for an additional one year term. The Midvale facility is
currently being used for research and development and non-automotive
manufacturing. The physical condition of the leased property is adequate for
our needs.

On November 18, 1998, we entered into an Industrial Space Lease with
Prudential Insurance Company of America for approximately 61,250 square feet
of manufacturing space located at 635 North Billy Mitchell Road in Salt Lake's
International Center. We are using this facility for automotive sensor
manufacturing. We believe that the physical condition of the property is
adequate for our needs at this time. The lease expires in the year 2004 and
contains an extension option for an additional three year term, with a monthly
rent of approximately $20,825 per month. The lease also includes a Right of
First Offer for an additional 60,000 square feet of space adjacent to the
premises in two 30,000 square feet increments. We intend to move our
headquarters and principal manufacturing from our current location at 6906
South 300 West to the new International Center facility.

LEGAL PROCEEDINGS

On February 13, 1998, Private Equity Partners LLC filed a lawsuit against
Sensitron, one of our wholly owned subsidiaries, 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.

19
<PAGE>

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Set forth below is certain information concerning each of our directors
and executive officers as of May 5, 2000.

Name Age Position With the
Company Since
- ---------------- ------ --------------------------- --------------
Douglas M. Odom 40 President, Chief Executive
Officer and Director 1995

Thomas E. Danielson 38 Vice-President 1995

Jeffrey A. Coleman 40 Director 1998

Don M. Jackson, Jr. 63 Director 1998

M. Richard Wadley 56 Director 1999

John Sindt 55 Director 1999

Douglas M. Odom. Mr. Odom has been our President, Chief Executive
Officer and a Director since April 1998, and has held the same positions with
respect to Flexpoint, Inc. since 1995 and with respect to Sensitron since
1996. From 1993 to 1995, Mr. Odom served as the Marketing and Sales
Manufacturing Director of Xymox Technologies, Inc. Xymox Technologies, Inc. is
one of the world's largest manufacturers of membrane switches and related
electronic interface devices. Prior to his employment at Xymox Technologies,
Inc., Mr. Odom was a key executive in the reorganization of EEC, Inc. from a
public company in bankruptcy to private company posting profits and positive
cash flow. From 1985 to 1990, Mr. Odom was Vice president of Operations of
Comptec, Inc., a world-wide plastic injection molder and electronic device
corporation. From 1983 to 1985, Mr. Odom was the manager of manufacturing
engineering at AMP Keyboard Technologies. Mr. Odom received a bachelors degree
in General Science/Chemistry from Grinnell College, Grinnell, Iowa in 1982. He
completed his masters studies at the American Graduate School of International
Management in Glendale, Arizona and furthered graduate studies at Harvard
University, Cambridge, Massachusetts.

Thomas E. Danielson. Mr. Danielson has been our Vice-President since
1995. Mr. Danielson was with Xymox Technologies, Inc., Milwaukee, Wisconsin
from 1993 to 1995, in an operations management and sales management role.
Prior to that, Mr. Danielson was with W.H. Brady Company, Milwaukee, Wisconsin
from 1986 to 1993, in a variety of roles, including engineering, manufacturing
and sales. Mr. Danielson holds a bachelors of science degree in Civil
Engineering from the University of Wisconsin and a MBA in Production
Operations Management from the University of Wisconsin-Whitewater.

Jeffrey A. Coleman. Mr. Coleman has been a director since April 1998,
and served as a director of Sensitron since January 1998. From 1998 to
present, Mr. Coleman has been operating as owner and partner of a national
real estate development and contractor company, Majestic West, LLC. Mr.
Coleman has been a managing member of Coleman Capital Partners, a private
equity investment group, since 1996. From 1985 to 1997, he was Director of
Operations for the Pyramid Group, a national real estate development,
investment and management firm. From 1982 to 1983 he was a consultant in the
Management Information Consulting Division of Arthur Andersen & Co. Mr.
Coleman received an MBA from the Amos Tuck School of Business at Dartmouth
College and a BA (honors) from Stanford University.

Don M. Jackson, Jr., PhD. Dr. Jackson has been a director since April
1998, and served as a director of Sensitron since January 1998. Dr. Jackson
founded SITEK Incorporated , a semiconductor material and equipment business
in July of 1998. Dr. Jackson has been President and Chairman since inception
of that company. Dr. Jackson has been active in the founding and operating of
a number of

20
<PAGE>

semiconductor equipment and materials companies since 1976 when he founded ASM
America in Phoenix. From 1960 until 1976, Dr. Jackson held a number of
technical and management positions in the semiconductor industry, specifically
Motorola and General Electric Corporation. Dr. Jackson is a director of M & I
Thunderbird Bank in Phoenix and three other high-technology corporations. He
received a Ph.D. in Electrical Engineering from Arizona State University, an
M.S. in Physics from Iowa State University and a B.A. in Physics from William
Jewell College.

M. Richard Wadley. Mr. Wadley has served as a Director since July, 1999.
He has over 25 years of successful general management and marketing experience
with almost 20 years of full operational and profit and loss responsibility as
General Manager/President/CEO of organizations with yearly sales of $30-$400
million. From 1993 through 1999, Mr. Wadley served as Board Chairman and Chief
Executive Officer for T-Chem Products, a private label household cleaning
product company. Prior to that he handled the acquisition of Alta-Dena Dairy,
a $150 million food products company and was its CEO from 1989-1991. From 1986
to 1988, Mr. Wadley was Vice-President/General Manager of Tambrands' largest
division with sales of almost $400 million and responsibility for over 3,000
employees. From 1981 to 1986, he was a Corporate Director of Product
Management for Hallmark Cards. From 1968 to 1981, Mr. Wadley held positions of
increasing marketing management responsibility with Proctor and Gamble
including a successful launch of several new products like Dawn dishwashing
liquid. Mr. Wadley has a BA degree from Brigham Young University and an MBA
from Northwestern University.

John Sindt. Mr. Sindt has been a director since December 1999. Mr. Sindt
is a Salt Lake County constable. He is the president of the National
Constables Association having previously served as its corporate secretary and
director. Mr. Sindt has owned and operated a successful chain of retail
consumer goods stores. Mr. Sindt has served on the Governor's Task Force for
the State of Utah and has held office as a Senatorial District Chairman for
the Republican Party. Mr. Sindt currently has an ownership interest in and
provides business advisory services to a internet service provider.

Our executive officers are elected by the board of directors on an annual
basis and serve at the discretion of the board of directors.

EXECUTIVE COMPENSATION

The table below set forth certain information concerning compensation we
paid to our chief executive officer and all other executive officers with
annual compensation in excess of $100,000, determined for the year ended
December 31, 1999 (the "Named Executive Officers"). The table includes
information related to stock options granted to the Named Executive Officers.

Summary Compensation Table

Annual Compensation Long Term Compensation
------------------- -----------------------
Other All
Name Annual Restricted Securities Other
and Compensa- Stock Underlying LTIP Compensa-
Principal sation Awards Options/ Payouts tion
Position Year Salary($) Bonus($) ($) ($) SAR's(#) ($) ($)
- --------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas M. Odom (1) 1997 120,000 - - - 515,000(2) - -
President, CEO and 1998 120,000 10,000 - - - - -
Director 1999 120,000 15,000 - - - - $1,275(3)

_______________
(1) The Summary Compensation Table reflects salary and bonus compensation paid by Flexpoint,
Inc. to Mr. Odom. Mr. Odom received no compensation from Flexpoint Sensor Systems, Inc,
Sensitron or Tamco during the periods specified.

21
<PAGE>

(2) Options to acquire 5,000 shares were exercised in October 1998 and options to acquire
515,000 shares are currently exercisable.

(3) Represents terms life insurance premiums paid for the benefit of Mr. Odom.

</TABLE>

Compensation of Directors

Mr. Richard Wadley was compensated for service on the board of directors
through the grant of stock options to purchase 80,000 shares of common stock
which stock options are exercisable at $2.00 per share. Of these options,
twenty-five percent vested on the date of grant and the remaining options vest
in equal installments of twenty-five percent per year as long as Mr. Wadley is
a member of the board. Mr. Wadley was also entitled to compensation of $72,000
and options exercisable for 25,000 shares of common stock at $2.00 for
consulting services during 1999. In 2000, Mr. Wadley received stock options
exercisable for 20,000 shares of common stock and $24,000 for consulting
services. Mr. Jeff Coleman and Mr. Don Jackson were each granted options to
acquire 80,000 shares of common stock on the dates they were elected to the
board. These stock options vest in equal installments of twenty-five percent
per year beginning on the date of grant. The other members of the board did
not receive any compensation for their service as directors. All directors are
entitled to reimbursement for reasonable expenses incurred in the performance
of their duties as board members. We have made no other agreements regarding
compensation of directors.

Employment Agreements

Effective December 31, 1997, Flexpoint, Inc. entered into an employment
agreement with Mr. Odom as our chief executive officer. Under the employment
agreement, Flexpoint, Inc. pays Mr. Odom an annual base salary of $120,000 per
year plus such discretionary bonus as the Flexpoint, Inc. board may deem
appropriate. The employment agreement has an initial term of three years and
will be automatically renewed successive one-year terms unless terminated by
either party. The employment agreement also provides Mr. Odom currently with
options to acquire 585,000 shares of common stock at an exercise price between
$.16 and $.77 per share under our Omnibus Stock Option Plan. As of December
31, 1999, options to acquire 515,000 shares of common stock were outstanding
and exercisable. We do not have employment agreements with any of our other
employees.

Indemnification for Securities Act Liabilities

Delaware law authorizes, and our Bylaws and indemnity agreements provide
for, indemnification of directors and officers against claims, liabilities,
amounts paid in settlement and expenses in a variety of circumstances.
Indemnification for liabilities arising under the Securities Act of 1933 may
be permitted for directors, officers and controlling persons pursuant to the
foregoing or otherwise. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.

22
<PAGE>

Stock Options

We have adopted an Omnibus Stock Option Plan for the benefit of our
officers, directors, employees and consultants. The grant of options to
acquire an aggregate of 6,000,000 shares of common stock have been authorized
under the plan. The plan will permit us to grant "non-qualified stock options"
or "incentive stock options" to acquire shares of our common stock. The total
number of shares authorized under the plan may be allocated between the
non-qualified stock options and the incentive stock options from time to time,
subject to limitations imposed by the Internal Revenue Code of 1986, as
amended. The plan is currently being administered by the board, which will
select optionees and determine the number of shares of common stock subject to
each option. The plan provides that no option which is to be a qualified
option may be granted at an exercise price less than the fair market value of
the common stock on the date of grant and in all cases the term of the stock
option shall not exceed ten years. Options to acquire 4,735,939 shares of
common stock at exercise prices ranging from $.16 to $4.00 are presently
outstanding under the plan.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serve on the compensation committee, or
in a like capacity, of Flexpoint Sensor Systems, Inc. or any other entity.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of May 5, 2000, for: (i) each
person who is known by us to beneficially own more than five percent of the
our common stock, (ii) each of our directors, (iii) each of our Named
Executive Officers (defined below), and (iv) all directors and executive
officers as a group. As of May 5, 2000, we had 19,414,129 shares of common
stock outstanding.

Name and Address Shares Beneficially Percentage
of Beneficial Owner(1) Owned(2)(3) of Total(2)(3) Position
- ---------------------- -------------------- -------------- ----------------
Douglas Odom 580,000(4) 3.0% President, CEO and
Director
Jeffrey A. Coleman 77,553(5) * Director

Don M. Jackson, Jr. 40,000(6) * Director

M. Richard Wadley 153,334(7) * Director

John A. Sindt 1,463,610(8) 7.4% Director

All officers and
directors
as a group (5 persons) 2,314,497 11.3%

Northridge Investment, LLC
47 E. 7200 South, #221
Midvale, UT 84047 1,447,750(9) 7.4%

Jules A. deGreef
47 E. 7200 South, #201
Midvale, UT 84047 2,154,575(10) 10.7%

Aspen Capital Resources, LLC
8989 South Schofield Circle,
Sandy, Utah 84093 3,935,747(11) 17.1%

* Less than 1%.
_______________

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<PAGE>

(1) Except where otherwise indicated, the address of the beneficial owner is
deemed to be the same address as Flexpoint Sensor Systems, Inc.

(2) Beneficial ownership is determined in accordance with SEC rules and
generally includes holding voting and investment power with respect to the
securities. Shares of common stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for
computing the percentage of the total number of shares beneficially owned by
the designated person, but are not deemed outstanding for computing the
percentage for any other person.

(3) Flexpoint Sensor Systems, Inc. has common stock and Series A Convertible
Preferred Stock outstanding. The common stock and Series A Convertible
Preferred Stock vote as a single voting group, unless otherwise required by
law. The total outstanding Series A Convertible Stock comprises less than five
percent of the total outstanding voting securities. None of the beneficial
owners listed in the table above own shares of Series A Convertible Preferred
Stock. As a result, no information relating to the Series A Preferred Stock is
included in the table.

(4) Includes vested options to purchase 580,000 shares of common stock.

(5) Includes 37,553 shares of common stock. Also includes options to acquire
40,000 shares of common stock. Does not include options to acquire 40,000
shares of common stock that vests in equal installments in July 2000 and 2001.

(6) Includes options to acquire 40,000 shares of common stock. Does not
include options to acquire 40,000 shares of common stock that vests in equal
installments in July 2000 and 2001.

(7) Includes 33,334 shares of common stock. Also includes options to acquire
120,000 shares of common stock. Does not include options to acquire 60,000
shares of common stock that vests in equal installments in July 2000, 2001 and
2002.

(8) Includes 15,860 shares of common stock held by Mr. Sindt and 894,250
shares Mr. Sindt claims beneficial ownership of through an entity. Also
includes warrants to acquire 553,500 shares of common stock.

(9) Includes 894,250 shares of common stock and warrants to acquire 553,500
shares of common stock.

(10) Includes 311,292 shares of common stock. Also includes 769,783 shares of
common stock that Mr. deGreef claims beneficial ownership of through his
membership interest in an entity and warrants and stock options to acquire
1,073,500 shares of common stock.

(11) Includes warrants exercisable for 1,935,747 shares of common stock and
convertible debentures in the principal amount of $3,000,000 that are
convertible into common stock. This assumes conversion of the principal amount
of the debentures at $1.50 per share. The conversion price of these debentures
varies depending on the market price of our common stock. As a result, the
number of shares of common stock issuable upon conversion of these debentures
is an approximation and may differ materially from the amount described.

We are not aware of any arrangements, the operation of which may, at a
subsequent date, result in a change in control of Flexpoint Sensor Systems,
Inc.

DESCRIPTION OF SECURITIES

Our authorized capital stock currently consists of 100,000,000 shares of
common stock, $.001 par value per share; and 1,000,000 shares of blank check
preferred stock, $.001 par value per share. The following description of our
securities, is a summary, does not purport to be complete and is qualified in
its entirety by the provisions of our Certificate of Incorporation and the
provisions of the Delaware General Corporation Law.

Common Stock

As of May 5, 2000, we had 19,414,129 shares of common stock issued and
outstanding. Holders of common stock are entitled to one vote for each share
on all matters voted on by the stockholders. Holders

24
<PAGE>

of common stock have no cumulative voting rights. Holders of common stock are
entitled to share ratably in dividends, if any, as may be declared, from time
to time by the board of directors in its discretion, from funds legally
available therefor. In the event of our liquidation, dissolution or winding
up, the holders of common stock are entitled to share pro rata all assets
remaining after payment in full of all liabilities and amounts as may be owed
to the preferred stockholders. Holders of common stock have no preemptive
rights to purchase our common stock. There are no conversion rights or
redemption or sinking fund provisions with respect to our common stock. All of
the outstanding shares of common stock are fully paid and non-assessable.

Preferred Stock

Blank Check Preferred Stock. We are authorized to issue 1,000,000 shares
of preferred stock, $.001 par value per share, of which 4,500 have been
designated as Series A Convertible Preferred Stock. Our board of directors
may, without further action by stockholders, to issue from time to time one or
more series of preferred stock, with the designations, rights, preferences and
limitations as the board may determine by resolution. The rights, preferences
and limitations of separate series of preferred stock may differ with respect
to these matters among the series as may be determined by the board,
including, without limitation, the rate of dividends, method and nature of
payment of dividends, terms of redemption, amounts payable on liquidation,
sinking fund provisions, conversion rights and voting rights. Some issuances
of preferred stock may have the effect of delaying or preventing a change in
control that stockholders may believe is in their interest.

Series A Convertible Preferred Stock. As of May 5, 2000, there were 1,695
shares of Series A Convertible Preferred Stock issues and outstanding. All of
the outstanding shares of Series A Convertible Preferred Stock are fully paid
and nonassessable. The holders of the outstanding Series A Convertible
Preferred Stock have no preemptive rights with respect to any shares of our
capital stock or any of our other securities convertible into or carrying
rights or options to purchase shares. The Series A Convertible Preferred
Stock is not subject to any sinking fund or other obligations to redeem or
retire the Series A Convertible Preferred Stock. Unless converted, the Series
A Convertible Preferred Stock is perpetual. No dividends accrue on the Series
A Convertible Preferred Stock. The Series A Convertible Preferred Stock ranks,
with respect to rights on liquidation, senior to all classes of common stock
and each other class of capital stock or series of preferred stock established
after the Series A Convertible Preferred Stock that does not expressly provide
that it ranks senior to or on a parity with the Series A Convertible Preferred
Stock as to rights on liquidations, winding-up and dissolution. Except as
otherwise required by applicable law, all voting rights are vested in and
exercised by the holders of the common stock and Series A Convertible
Preferred Stock, as a single voting group, with each share of common stock
being entitled to one vote and each share of Series A Convertible Preferred
Stock being entitled to 250 votes.

Upon our dissolution, liquidation or winding up, the assets remaining
after the payment of all our debts and liabilities are to be paid to the
holders of the Series A Convertible Preferred Stock in an amount equal to $875
per share, or on a pro rata basis if our remaining assets are insufficient to
pay this amount. After payment of the $875 per share the holders of Series A
Convertible Preferred Stock will not be entitled to any further participation
in any distribution of our assets.

Shares of Series A Convertible Preferred Stock may be convertible at any
time, in whole or in part, at the option of the holder thereof into common
stock at a conversion price of $3.50 per share. That is, each share of Series
A Convertible Preferred Stock is convertible into 250 shares of common stock.

The outstanding shares of Series A Convertible Preferred Stock will
automatically be converted into common stock at the conversion price of $3.50
per share if the closing bid price for the common stock for 15 successive
trading days is equal to or greater than $12.00 per share. Notice of
conversion shall be given by mail, not less than 20 nor more than 60 days
after the conversion has occurred, to each record holder of the shares of
Series A Convertible Preferred Stock.

25
<PAGE>

If any recapitalization, merger, consolidation, sale or similar
transaction occurs, then appropriate provisions will be made so that the
holder of each share of Series A Convertible Preferred Stock then outstanding
shall have the right thereafter to convert the Series A Convertible Preferred
Stock into the kind and amount of the securities, cash or other property that
would have been receivable upon the event by holders of the number of shares
of common stock issuable upon conversion of the Series A Convertible Preferred
Stock immediately prior to the recapitalization, merger, consolidation, sale,
or similar transaction.

If at any time we issue a convertible security, whether in the form of
debt or equity, with differing conversion and suspension characteristics from
the Series A Convertible Preferred Stock, then each stockholder who then holds
outstanding Series A Convertible Preferred Stock shall have the option to
convert these securities into the number of subsequently-issued securities
that the stockholder would have received had the stockholder invested the
funds used to acquire the Series A Convertible Preferred Stock to acquire the
subsequently-issued securities instead. The conversion rights described in
this paragraph shall not apply to any securities issued solely to one or more
of our strategic partners that are reasonably expected to generate revenues
for us of at least $1,000,000 following the issuance of these securities. In
addition, the conversion rights described in this paragraph do not apply to
non-convertible notes or debentures with warrant coverage not in excess of 10%
of the face amount of the notes or debentures.

Shares Eligible for Future Sale

As of May 5, 2000, we had 19,414,129shares of common stock outstanding and
had authorized up to approximately 15,971,305 shares of common stock upon
conversion of convertible preferred stock, convertible debt, and upon exercise
of warrants and options. Assuming the conversion of all of these securities
into common stock we would have approximately 35,385,434 shares of common
stock outstanding. Of said shares, approximately 22,938,102 are subject to
resale restrictions and approximately 12,447,323 could be immediately resold
pursuant to this prospectus or pursuant to Rule 144. Sales of substantial
amounts of common stock in the public market could adversely affect prevailing
market prices.

Transfer Agent

The transfer agent for the common stock and Series A Convertible Preferred
Stock is Colonial Stock Transfer Co., Inc., 455 East 400 South, Salt Lake
City, Utah 84111.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Jehu Hand, an officer and director of our company prior to the April
1998 acquisition wherein Flexpoint, Inc. became a wholly owned subsidiary of
Flexpoint Sensor Systems, Inc., acted as legal counsel for Nanotech, Inc.

Sens Partnership, LLC, with which Mr. Coleman was affiliated, was issued
30,303 shares of the our common stock in December 1998. These shares were
issued to satisfy in full obligations that we made to Sens Partnership, LLC in
connection with its investment in us in December 1997.

SELLING SECURITY HOLDER

The following table provides the names of and number of shares of common
stock offered for sale by the selling security holder. Aspen Capital
Resources, Inc.may sell all, some or none of its shares of common stock. The
following entries to the table represent the total number of shares that Aspen
Capital Resources, Inc.may sell pursuant to the registration statement.
Assuming that all of the stock offered hereby is sold, Aspen Capital
Resources, Inc. would not own more than 1% of our outstanding common stock.

The shares of common stock offered by this prospectus may be offered
from time to time by Aspen Capital Resources, Inc. Aspen Capital Resources,
Inc. does not have any material relationship with us or any of our affiliates
except as noted below.
Number of Share that will be
Shares of Beneficially Owned on
Number of Shares Common Stock Completion Of Offering
Name of Selling Beneficially Owned Offered ----------------------
Security Holder As of May 5, 2000 Hereby (1) Number % of Class
- ----------------- ------------------ -------------- --------- -----------
Aspen Capital
Resources, Inc. 3,935,747 6,006,697 6,006,697 23.6%

______________
(1)Includes common stock issuable upon exercise of Series A-2000 Warrants and
convertible debentures that Aspen Capital Resources, Inc. is obligated to
acquire in June 2000. The conversion price of the convertible debentures in
the principal amount of $3,500,000 varies depending on the market price of our
securities. As a result, the number of share reported as beneficially owned
could differ materially from the number reported.

PLAN OF DISTRIBUTION

Aspen Capital Resources, Inc. may sell some or all of its shares at any time
and in any of the following ways. It may sell their shares:

* To underwriters who buy the shares for their own account and resell them
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. Any
public offering price and any discount or concessions allowed or reallowed or
paid to dealers may be changed from time to time; or

* Through brokers, acting as principal or agent, in transactions, which
may involve block transactions, on the OTC Bulletin Board or on other
exchanges on which the shares are then listed, in special offerings, exchange
distributions pursuant to the rules of the applicable exchanges or in the
over-the-counter market, or otherwise, at market prices prevailing at the time
of sale, at prices related to prevailing market prices, at negotiated prices
or at fixed prices; or

* Directly or through brokers or agents in private sales at negotiated
prices; or

* In open market transactions in reliance upon rule 144 under the
Securities Act of 1933, provided Aspen Capital Resources, Inc. complies with
the requirements of the rule; or

* By any other legally available means.

Aspen Capital Resources, Inc. may pay part of the proceeds from the sale
of shares in commissions and other compensation to underwriters, dealers,
brokers or agents who participate in the sales.

To our knowledge, the sellers purchased in the ordinary course of
investment.

At the time the sellers purchased the securities to be resold, they
represented to us that they had purchased the securities for their own account
and not with a view to distribution or resale.

27
<PAGE>

Some states may require shares to be sold only through registered or
licensed brokers or dealers. In addition, some states may require the shares
to be registered or qualified for sale unless an exemption from registration
or qualification is available and complied with.

Aspen Capital Resources, Inc. and any broker-dealers who act in
connection with the sale of their shares may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933 and any
commissions received by them and profit on any resale of the shares as
principal might be deemed to be underwriting discounts and commissions under
the Securities Act of 1933.

Prior to the effective date of this registration statement, we shall
advise Aspen Capital Resources, Inc. that it and any securities broker-dealers
or others who may be deemed to be statutory underwriters will be subject to
the prospectus delivery requirements under the Securities Act of 1933. Under
applicable rules and regulations under the Securities Exchange Act of 1934 any
person engaged in a distribution of any of the shares may not simultaneously
engage in market activities with respect to the common stock for the
applicable period under Regulation M prior to the commencement of the
distribution. In addition and without limiting the foregoing, the selling
stockholders will be subject to applicable provisions of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, including
without limitation Rules 10b-5 and Regulation M, which provisions may limit
the timing of purchases and sales of any of the shares by the selling
stockholders. All of the foregoing may affect the marketability of the common
stock.

In the absence of this registration statement, the selling stockholders
would be able to sell their shares subject to the limitations of Rule 144
promulgated under the Securities Act of 1933 ("Rule 144"). In general, under
Rule 144 as currently in effect, an "affiliate" of the issuer, or a person who
has beneficially owned shares which are "restricted securities" for at least
one year, is entitled to sell within any three-month period a number of shares
that does not exceed the greater of: one percent (1%) of the then outstanding
shares of common stock of the issuer or the average weekly trading volume of
the common stock during the four calendar weeks preceding a sale by these
person. Sales under Rule 144 are also subject to manner of sale provisions,
notice requirements and the availability of current public information about
the issuer. Under Rule 144, however, a person who is not, and for the three
months prior to the sale of the shares has not been, an affiliate of the
issuer is free to sell shares which are "restricted securities" which have
been held for at least two years without regard to the limitations contained
in Rule 144. None of the selling stockholders will be subject to the foregoing
restrictions when selling their shares pursuant to this prospectus.

Under Section 16 of the Securities Exchange Act of 1934, our executive
officers, directors, and 10% or greater stockholders will be liable to us for
any profit realized from any purchase and sale, or any sale and purchase, of
common stock within a period of less than six months.

We have agreed to indemnify the selling stockholders against liabilities
under the Securities Act of 1933.

LEGAL MATTERS

The validity of the common stock offered by this prospectus will be
passed upon for us by Blackburn & Stoll, LC, Salt Lake City, Utah.

EXPERTS

The consolidated balance sheets of Flexpoint Sensor Systems, Inc. as of
December 31, 1999 and 1998, and the consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the years then ended and
for the cumulative period from January 5, 1995 (date of inception) through
December 31, 1999 have been included in this prospectus and registration
statement in reliance on the report of

28
<PAGE>

Hansen, Barnett & Maxwell, independent certified public accountants, given on
the authority of that firm as experts in auditing and accounting.

AVAILABLE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York, and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms.

This prospectus does not contain all the information which is in the
registration statement, as allowed by the rules and regulations of the SEC. We
refer you to the registration statement and to the exhibits for further
information offered in this prospectus. Copies of the registration statement
and the exhibits are on file at the offices of the SEC and may be obtained
upon payment of the prescribed fee. They may be examined without charge at the
SEC's Public Reference Room or through the SEC's website described above.
Statements contained in this prospectus concerning the provisions of documents
are necessarily summaries of the material provisions of such documents, and
each statement is qualified in its entirety by reference to the copy of the
applicable document filed with the SEC.

<PAGE>

<PAGE>
FINANCIAL STATEMENTS

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Page

Audit Report of Independent Certified Public Accountants..................F-2

Consolidated Balance Sheets - March 31, 2000 (Unaudited) and
December 31, 1999 and 1998..............................................F-3

Consolidated Statements of Operations for the Three Months Ended
March 31, 2000 and 1999 and for the Period from January 5, 1995
(Date of Inception) through March 31, 2000 (Unaudited)..................F-4

Consolidated Statements of Operations for the Years Ended December 31,
1999 and 1998 and for the Period from January 5, 1995
(Date of Inception) through December 31,................................F-5

Consolidated Statements of Stockholders' Equity (Deficit) for the
Period from January 5, 1995 (Date of Inception) through
December 31, 1997, for the Years Ended December 31, 1998 and
1999 and for the Three Months Ended March 31, 2000 (Unaudited)..........F-6

Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 and for the Period from January 5, 1995
(Date of Inception) through March 31, 2000 (Unaudited)...................F-7

Consolidated Statements of Cash Flows for the Years Ended December 31,
1999 and 1998 and for the Period from January 5, 1995 (Date of
Inception) through December 31, 1999....................................F-8

Notes to Consolidated Financial Statements................................F-8

F-1

<PAGE> 30

HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
Member of SECPS 345 East 300 South, Suite 200
Member of Summit International Associates Salt Lake City, Utah 84111-2693

AUDIT REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders and the Board of Directors
Flexpoint Sensor Systems, Inc.

We have audited the accompanying consolidated balance sheets of Flexpoint
Sensor Systems, Inc. and subsidiaries (a company in the development stage) as
of December 31, 1999 and 1998 and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for the years then
ended and for the cumulative period from January 5, 1995 (date of inception)
through December 31, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Flexpoint Sensor
Systems, Inc. and subsidiaries as of December 31, 1999 and 1998 and the
results of their operations and their cash flows for the years then ended and
for the cumulative period from January 5, 1995 (date of inception) through
December 31, 1999, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses from operations and has
had negative cash flows from operating activities during the years ended
December 31, 1999 and 1998 and cumulative from inception through December 31,
1999. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to those matters are
also described in Note 1. The financial statements do not include any
adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that might
result should the Company be unable to continue as a going concern.

/s/ Hansen, Barnett & Maxwell

HANSEN, BARNETT & MAXWELL
March 24, 2000
Salt Lake City, Utah

F-2

<PAGE> 31

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED BALANCE SHEETS

March 31, December 31,
2000 1999 1998
------------- ------------- -------------
(Unaudited)

ASSETS
<S> <C> <C> <C>
Current Assets
Cash $ 370,586 $ 134,642 $ 657,775
Trade accounts receivable, net of allowance
for doubtful accounts of $2,595(unaudited),
$3,000 and $ 90,721, respectively 129,333 36,656 298,586
Royalty receivable - - 152,570
Receivable from shareholder - - 1,573,750
Inventory 145,880 174,750 42,691
Prepaid expenses 68,891 29,323 50,915
Unamortized loan costs 928,603 - -
------------- ------------- -------------
Total Current Assets 1,643,293 375,371 2,776,287
------------- ------------- -------------
Property and Equipment 3,557,817 3,403,651 1,273,326
Less accumulated depreciation (965,994) (847,172) (387,858)
------------- ------------- -------------
Net Property and Equipment 2,591,823 2,556,479 885,468
------------- ------------- -------------
Deposits 49,549 54,549 246,441

Patents, net of accumulated amortization
of $63,260 (unaudited),$59,418 and $45,018 117,591 119,921 101,331

Goodwill, net of accumulated amortization
of $107,822 (unaudited), $101,832 and
$77,871 unamortized loan costs 11,980 17,970 41,931
------------- ------------- -------------
Total Assets $ 4,414,236 $ 3,124,290 $ 4,051,458
============= ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Notes payable, net of unamortized discount
of $336,079 (unaudited),$112,826 and none $ 2,929,539 $ 1,047,174 $ -
Notes payable - related parties 55,000 - -
Capital lease obligation - current portion 5,907 - -
Trade accounts payable 710,331 956,206 348,473
Related party payable - - 1,234
Accrued liabilities 333,620 539,056 100,290
Accrued income taxes - - 8,314
------------- ------------- ------------
Total Current Liabilities 4,034,397 2,542,436 458,311
------------- ------------- -------------
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), 2,438 and 0 shares issued and
outstanding; liquidation preference-
$1,483,125 (unaudited), $2,133,250 and $0 1,475,175 2,125,175 -
Common stock - $0.001 par value; 100,000,000
shares authorized; 19,414,129 (unaudited),
19,077,310 and 16,990,296 shares issued
and outstanding 19,414 19,077 16,990

Additional paid-in capital 17,454,109 13,615,677 9,127,091
Deficit accumulated during the development
stage (18,575,639) (15,041,600) (5,550,934)
Unearned compensation (106,711) (136,475) -
------------- ------------- -------------
Total Stockholders' Equity 266,348 581,854 3,593,147
------------- ------------- -------------
Total Liabilities and Stockholders' Equity $ 4,414,236 $ 3,124,290 $ 4,051,458
============= ============= =============

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

F-3
</TABLE>
<PAGE> 32

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

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
consolidated financial statements.

F-4
<PAGE> 33

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF OPERATIONS

For the Period
January 5, 1995
For the Years Ended (Date of
December 31, Inception)
----------------------------- Through
1999 1998 December 31,1999
-------------- -------------- ----------------
Sales $ 773,233 $ 1,915,628 $ 4,063,958

Cost of goods sold 356,682 819,931 1,884,985
-------------- -------------- ----------------
Gross Profit 416,551 1,095,697 2,178,973

General and administrative
expenses 3,915,562 1,953,432 7,858,600
Research and development 3,339,916 1,382,101 6,643,865
-------------- -------------- ----------------
Loss From Operations (6,838,927) (2,239,836) (12,323,492)

Interest expense (194,229) (17,157) (265,430)
Interest from amortization of
debt discount (1,666,936) - (1,666,936)
Interest income 23,288 22,177 58,899
Other income (expense), net (120,311) 12,493 (151,090)
-------------- -------------- ----------------
Net Loss (8,797,115) (2,222,323) (14,348,049)

Preferred dividends (693,551) - (693,551)
-------------- -------------- ----------------
Loss applicable to common
shareholders $ (9,490,666) $ (2,222,323) $ (15,041,600)
============== ============== ================
Basic and diluted loss per
common share $ (0.54) $ (0.16) $ (1.22)
============== ============== ================

Weighted average number of
common shares used in per
share calculation 17,684,212 14,259,935 12,323,797
============== ============== ================

The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 34
<TABLE>
<CAPTION>

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

Deficit
Accumulated Total
Common Stock Additional During the Stockholders'
-------------------- Paid-in Development Equity
Shares Amount Capital Stage (Deficit
----------- -------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance January 5, 1995
(Date of inception) - $ - $ - $ - $ -

1995:
Issuance for cash, $0.00 per share 3,705,000 3,705 (1,705) - 2,000
Issuance for cash, $0.46 per share 649,987 650 299,350 - 300,000
Issuance for cash, $0.74 per share 852,800 853 631,147 - 632,000
Contribution of patents by stock-
holder,no additional shares issued - - 22,232 - 22,232
Issuance to acquire Flexpoint,
Inc., $(0.02) per share 5,395,000 5,395 (99,579) - (94,184)
Issuance to acquire Tamco, $0.46
per share 130,000 130 59,870 - 60,000

1996:
Issuance for services, $0.77
per share 260,000 260 199,740 - 200,000
Issuance for cash, $0.77 per share 123,500 124 94,876 - 95,000
Issuance for cash, $0.54 per share,
net of offering costs of $246,547 1,957,111 1,957 1,051,496 - 1,053,453

1997:
Issuance for cash, $0.97 per share 143,000 143 109,857 - 110,000
Issuance for cash, $0.04 per share 1,820,000 1,820 78,180 - 80,000
Issuance for cash and a $390,000
receivable, $0.72 per share 1,116,375 1,116 802,884 - 804,000
Redemption from officers, $0.03
per share (6,308,666) (6,309) (193,691) - (200,000)
Conversion of debt,$0.57 per share 100,672 100 53,852 - 53,952

Cumulative net loss - - - (3,328,611) (3,328,611)
----------- -------- ------------ ------------- -------------

Balance - December 31, 1997 9,944,779 10,976 3,108,509 (3,328,611) (210,158)

Issuance of 30,303 warrants
for services - - 22,727 - 22,727
Issuance for cash, $4.00 per share 288,841 289 1,155,073 - 1,155,362
Conversion of notes payable,
$0.80 per share 248,833 249 199,751 - 200,000
Conversion of debt,$0.61 per share 69,602 69 42,759 - 42,828
Acquisition of Nanotech Corporation,
$0.50 per share 6,000,000 6,000 2,977,275 - 2,983,275
Exercise of options,$0.16 per share 14,500 15 2,296 - 2,311
Exercise of warrants,
$0.00 per share 30,303 30 (30) - -
Issuance for receivable from
shareholder 393,438 394 1,573,356 - 1,573,750
Compensation related to grant
of stock options - - 45,375 - 45,375
Net loss - - - (2,222,323) (2,222,323)
----------- -------- ------------ ------------- -------------

Balance - December 31, 1998 16,990,296 $16,990 $ 9,127,091 $ (5,550,934) $ 3,593,147
=========== ======== ============ ============= =============

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

F-6
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(CONTINUED)
Deficit
Accumulated Total
Preferred Stock Common Stock Additional During the Unearned Stockholders
----------------- ------------------ Paid-in Development Compen- Equity
Shares Amount Shares Amount Capital Stage sation (Deficit)
------ ---------- ---------- ------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1998 - $ - 16,990,296 $16,990 $ 9,127,091 $(5,550,934) $ - $3,593,147

Issuance for cash, $4.00 per share - - 158,258 158 632,867 - - 633,025
Issuance of convertible preferred
stock and 134,000 warrants for cash,
net of offering costs of $8,263 536 326,738 - - 134,000 - - 460,738
Conversion of common shares into
convertible preferred stock and
559,551 warrants 2,238 1,398,886 (489,523) (490) (1,398,396) - - -
Amortization of preferred stock
discount as preferred dividend - 693,551 - - - (693,551) - -
Issuance of common shares and
476,600 warrants for cash,
$2.00 per share, net of offering
costs of $12,000 - - 476,600 477 940,723 - - 941,200
Conversion of Convertible preferred
stock into common stock and
147,000 warrants, $2.00 per share (336) (294,000) 147,000 147 293,853 - - -
Beneficial conversion feature of 8%
convertible promissory notes - - - - 404,062 - - 404,062
Conversion of 8% convertible
promissory notes into common
stock, $1.70 per share - - 508,825 509 864,492 - - 865,001
Compensation related to grant of
stock options - - - - 369,825 - (369,825) -
Amortization of unearned compensation - - - - - - 233,350 233,350
Exercise of options for cash, $0.16
to$0.47 per share - - 919,094 919 306,521 - - 307,440
Issuance of 508,825 warrants in
connection with notes payable - - - - 1,265,900 - - 1,265,900
Issuance of 45,000 warrants in
payment of interest - - - - 109,800 - - 109,800
Compensation related to 100,000
warrants granted for services - - - - 185,000 - - 185,000
Exercise of warrants for cash,
$0.77 per share - - 237,510 238 182,545 - - 182,783
Exercise of warrants for services,
$0.77 per share - - 29,250 29 22,494 - - 22,523
Issuance in settlement of lawsuit,
$1.75 per share - - 100,000 100 174,900 - - 175,000
Net loss - - - - - (8,797,115) - (8,797,115)
------ ---------- ---------- ------- ----------- ------------ ---------- -----------
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 (unaudited) (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
====== ========== ========== ======= =========== ============ ========== ===========

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

F-7
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

For the Period
January 5, 1995
For the Three Months Ended (Date of
March 31, Inception)
----------------------------- 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)
Other receivable - - -
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 Noncash investing and financing activities Note 6

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

F-8
</TABLE>
<PAGE> 37
<TABLE>
<CAPTION>

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Period
January 5, 1995
For the Year Ended (Date of
December 31, Inception)
----------------------------- Through
1999 1998 December 31, 1999
-------------- -------------- -----------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (8,797,115) $ (2,222,323) $ (14,348,049)
Adjustments to reconcile net loss to
net cash used by operating activities:
Gain on sale of available-for-sale securities - (21,225) (21,225)
Loss on sale of assets - 9,227 9,227
Depreciation and amortization 497,675 227,233 1,020,758
Amortization of debt discount 1,557,136 - 1,557,136
Issuance of warrants for interest 109,800 - 109,800
Compensation paid with stock options 233,350 45,375 278,725
Compensation paid by grant of warrants 185,000 - 185,000
Issuance of common stock to settle lawsuit 175,000 - 175,000
Exercise of warrants in exchange for services 22,523 - 22,523
Stock issued for services - 22,727 222,727

Allowance for doubtful accounts (87,721) 90,721 154,567
Changes in operating assets and liabilities:
Accounts receivable 349,651 (343,484) (55,182)
Other receivable 152,570 (152,570) -
Inventory (132,059) (42,691) (174,750)
Accounts payable 607,733 (157,259) 777,392
Accrued liabilities 438,766 (263,428) 470,072
Deferred revenue - (200,000) (6,163)
Other assets (7,597) (284,075) (289,822)
-------------- -------------- -----------------
Net Cash Used In Operating Activities (4,695,288) (3,291,772) (9,912,264)
-------------- -------------- -----------------
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 - 455,082 455,082
Net cash received in Nanotech acquisition - 1,492,907 1,492,907
Payments received from related parties - 34,661 34,661
Collection of receivable from escrow agent - 64,825 64,825
Payments to purchase equipment (1,912,558) (379,263) (2,913,355)
Proceeds from sale of equipment - 14,592 22,682
Issuance of note receivable - - (12,507)
Payments received on note receivable - 4,950 12,505
Payments for patents (32,990) (39,029) (143,314)
-------------- -------------- -----------------
Net Cash Provided By (Used In)
Investing Activities (1,945,548) 1,648,725 (1,279,927)
-------------- -------------- -----------------
Cash Flows From Financing Activities

Proceeds from issuance of preferred stock 460,738 - 460,738
Proceeds from issuance of common stock 2,064,448 1,157,664 6,155,112
Cash payments to officers to repurchase stock - - (50,000)
Proceeds from issuance of warrants 1,265,900 - 1,265,900
Proceeds from beneficial conversion feature
related to convertible promissory notes 404,062 - 404,062
Cash paid for offering costs - - (123,020)
Cash paid for loan costs (5,000) - (5,000)
Collection of receivables from issuance
of common stock 1,573,750 390,000 1,963,750
Proceeds from borrowings 705,039 - 1,008,999
Principal payments of debt (350,000) (353,336) (748,751)
Borrowings from Nanotech prior to acquisition - 1,000,000 1,000,000
Proceeds from related party notes - - 60,208
Principal payments of related party notes (1,234) - (65,165)
-------------- -------------- -----------------
Net Cash Provided By Financing Activities 6,117,703 2,194,328 11,326,833
-------------- -------------- -----------------
Net Change In Cash (523,133) 551,281 134,642
Cash - Beginning of Period 657,775 106,494 -
-------------- -------------- -----------------
Cash - End of Period $ 134,642 $ 657,775 $ 134,642
============== ============== ================

Supplemental cash flow information and Noncash investing and financing activities - Note 6

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

F-9
</TABLE>
<PAGE> 38

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with Respect to March 31,2000 and for the Three Months Ended
March 31, 2000 and 1999 is Unaudited)

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 of the Company 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 dates 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 sensors and related
equipment using its flexible potentiometer technology. Through December 31,
1998, a majority of Flexpoint's sales were to toy manufacturers. Flexpoint has
negotiated a significant contract to supply flexible sensors to an automobile
component manufacturer. Sales under the contract are scheduled to begin upon
Flexpoint's completion of required research and development of applicable
sensors and establishment of a manufacturing facility.

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 these estimates.

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, during the
years ended December 31, 1999 and 1998 and cumulative from inception through
December 31, 1999, 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. During March 2000,
the Company received $1,800,000 in net proceeds from the issuance of a
convertible note payable and warrants, among other financing transactions.
Management's plans include obtaining the remainder of the $5,000,000
commitment under the convertible notes agreement 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.

Fair Values of Financial Instruments - The amounts reported as cash, trade
accounts receivable, royalty receivable, receivable from shareholder, notes
payable, notes payable to related parties, capital lease obligation, trade
accounts payable and accrued liabilities approximated fair value due to their
short maturities. The fair value of notes payable was based on the terms of
ongoing financing transactions with similar discount rates. Considerable
judgement is necessary to develop estimated fair values of financial
instruments. Accordingly, estimates presented herein are not necessarily
indicative of the amounts the Company could realize on disposition or pay on
settlement of the financial instruments.

<PAGE> 39

Investment in Securities - During the year ended December 31, 1998, Flexpoint
sold marketable securities for $455,082 and realized gross gains of $21,225.
The gain is included in other income (expense), net in the accompanying
statements of operations.

Concentration of Risk and Major Customers -The Company has concentration of
risk with respect to cash on deposit with a bank in excess of insured limits,
and from doing business in one-industry. The latter subjects Flexpoint to a
concentration of credit risk relating to trade accounts receivable. During
the year ended December 31, 1999, 76% of Flexpoint's revenues were from
customers in the auto industry. During 1999, revenue from two major customers
totaled 59% and 17% of sales, respectively. During the year ended

December 31, 1998, 85% of Flexpoint's revenues were from customers in the toy
industry. During 1998, revenues from two major customers totaled 40% and 35%
of sales, respectively. Flexpoint relies on a few significant production
contracts for its revenue and generally does not require collateral from its
customers with respect to trade receivables.

Inventory - Inventory is valued at the lower of cost or market. Cost is
determined using the first-in, first-out method.

Property and Equipment - Property and equipment are stated at cost. Additions
and major improvements are capitalized while maintenance and repairs are
charged to operations. Upon retirement, sale or disposition, the cost and
accumulated depreciation of the items sold are eliminated from the accounts,
and any resulting gain or loss is recognized in operations. Depreciation is
computed using the straight-line and the double-declining-balance methods and
is recognized over the estimated useful lives of the property and equipment,
which are three to seven years.

Long-Lived Assets - The realization of non-current assets is evaluated
periodically when events or circumstances indicate a possible inability to
recover the carrying amount. Such evaluation is based upon various analyses,
including estimates of net future cash flows, and involves significant
management judgement. No impairment losses were required to be recognized as
a result of the evaluation of these assets through March 31, 2000.

Revenue Recognition - Revenue from the sale of products is recorded at the
time of shipment to the customers. Revenue from research and development
engineering contracts is recognized as the services are provided and accepted
by the customer. Revenue from contracts to license Flexpoint's technology to
others is deferred until all conditions under the contracts are met and then
recognized as licensing royalty over the remaining term of the contracts.

Advertising Costs - During the periods ended March 31, 2000 and 1999,
Flexpoint incurred $8,540 and $4,214, respectively. During the years ended
December 31, 1999 and 1998, Flexpoint incurred $260,983 and $65,635 of
advertising costs, respectively. Flexpoint follows the policy of expensing
these advertising costs at the time the advertising services are rendered.

Stock-Based Compensation -Stock-based compensation arising from granting
stock options to employees is measured by the intrinsic-value method. This
method recognizes compensation expense based on the difference between the
fair value of the underlying common stock and the exercise price on the date
the options are granted.

<PAGE> 40

Flexpoint also presents pro forma results of operations assuming compensation
had been measured by the fair-value method.

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, 7,463,291, 9,174,055 and 6,944,310 potentially issuable
common shares at March 31, 2000 and 1999 and December 31, 1999 and 1998,
respectively, were excluded from the calculation of diluted loss per share as
they would have decreased loss per share.

NOTE 2 - ACQUISITIONS

Nanotech Corporation ("Nanotech") was incorporated June 11, 1992 under the
laws of the state of Delaware, and was a publically-held shell corporation.
On December 30, 1997, Sensitron entered into an Agreement and Plan of
Reorganization (the "Agreement") with Nanotech whereby Sensitron became a
wholly owned subsidiary of Nanotech. The agreement required Nanotech to raise
capital of approximately $3,000,000 in a private placement prior to completion
of the reorganization. The $3,000,000 was raised and the reorganization was
consummated in April 1998. Nanotech changed its name to Micropoint, Inc., and
subsequently to Flexpoint Sensor Systems, Inc. ("Flexpoint"), and the
shareholders of Sensitron exchanged each of their shares of common stock for
13 shares of Flexpoint common stock which resulted in the issuance of
9,860,279 shares of common stock to the Sensitron shareholders. As a result,
the Sensitron shareholders became the majority shareholders of Flexpoint in a
transaction intended to qualify as a tax-free reorganization.

The Agreement has been accounted for as a recapitalization of Sensitron in a
manner similar to a stock split. The accompanying historical financial
statements prior to the reorganization are those of Sensitron and have been
restated to reflect the effects of the 13-for-1 stock split resulting from the
conversion of the outstanding Sensitron common shares into Flexpoint shares.
The accompanying financial statements have been restated for the effects of
the stock split for all periods presented. The agreement was further
considered to be the issuance of 6,000,000 common shares for Nanotech's net
assets of $2,983,275, which were primarily cash and cash equivalents. The
accompanying consolidated financial statements include the operations of
Flexpoint from the date of the reorganization.

In April 1995, Sensitron acquired 100 shares of common stock of Flexpoint
Inc., a Utah Corporation, in exchange for the forgiveness of $50,000 of
accounts receivable. On September 26, 1995, Sensitron completed the
acquisition of Flexpoint, Inc. by exchanging 5,395,000 shares (post-split) of
Sensitron's common stock for the remaining outstanding common stock of
Flexpoint, Inc. in a purchase business combination accounted for in a manner
similar to a pooling of interests. Flexpoint, Inc. and Sensitron were
principally owned by the same individuals prior to the combination.

On September 26, 1995, Sensitron acquired all of the outstanding stock of
Tamco, a company engaged in manufacturing and selling various molds and dies.
The purchase price was approximately $170,000, consisting of $25,000 of cash,
a long-term note payable of $85,000 and 130,000 common shares (post-split)
valued at $60,000.

<PAGE> 41

The purchase price was allocated based on the estimated fair values of the net
assets acquired. This allocation resulted in recording of goodwill of
$119,802.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

March 31 December 31
2000 1999 1998
------------ ------------ -------------
Furniture and fixtures $ 90,350 $ 90,350 $ 75,356
Machinery and equipment 1,701,325 1,692,100 674,682
Office equipment 276,255 276,255 143,234
Software 179,414 34,979 29,924
Leasehold improvements 1,310,473 1,309,967 350,130
------------ ------------ ------------
Total $ 3,557,817 $ 3,403,651 $ 1,273,326
============ ============ =============

Depreciation expense for the periods ended March 31, 2000 and 1999 was
$118,822 and $75,368, respectively. Depreciation expense for the years ended
December 31, 1999 and 1998 was $459,314 and $188,873, respectively.

NOTE 4 - OTHER ASSETS

Costs to obtain patents have been capitalized and are being amortized over a
five year period. Flexpoint currently has the rights to several patents.
Flexpoint is in the process of developing new patents and protecting its
existing patents internationally. Cost associated with the development of new
patents are capitalized. Amortization of patents is recognized from the date
the patents are awarded. The total patent cost capitalized as of March 31,
2000 and 1999 was $180,851 and $162,449, respectively, of which $80,737 and
$73,470 related to patents being amortized, respectively. The total patent
cost capitalized as of December 31, 1999 and 1998 was $179,339 and $146,349,
respectively, of which $73,470 and $73,470 relates to patents being amortized,
respectively. Amortization expense from patents for the periods ended March
31, 2000 and 1999 was $3,842 and $3,600, respectively. Amortization expense
from patents for the years ended December 31, 1999 and 1998 was $14,400 and
$14,400, 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. Amortization expense from goodwill for the years ended December
31, 1999 and 1998 was $23,960 and $23,960, respectively.

NOTE 5 - LICENSE AGREEMENT

In May 1997, Flexpoint granted an otherwise unrelated third party the
worldwide exclusive license to use and sell flexible potentiometers covered
under Flexpoint's patents for use in toys, traditional games and video game
industries. The license does not include the right to manufacture sensors
manufactured by Flexpoint. A licensing fee of $500,000 was recognized as sales
under the agreement relating to the exclusive use of the technology through
December 1998. After 1998, the exclusive license is to be maintained under the
agreement by the licensee providing revenue from royalties and fees to
Flexpoint of at least $500,000 per year. Royalties to be received

<PAGE> 42

are 2% of sales of the licensee's products in the United States and 3% of
related products to the licensee's international partners. Minimum payments
were not received under the agreement during the year ended December 31, 1999.
As a result, the exclusive rights under the agreement are no longer in force.

Under the agreement, Flexpoint guaranteed that it would deliver flexible
potentiometers in marketable quantities to the licensee by June 1, 1998. That
obligation was fulfilled by Flexpoint and the initial $200,000 licensing fee
was recognized as sales at that date. Additional sales have been recognized as
products have been delivered under the agreement. At December 31, 1998,
Flexpoint had a royalty receivable as a result of this licensing agreement of
$152,570 which was included in trade accounts receivable, and was subsequently
collected.

NOTE 6 - 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. Cash
payments for interest were $5,000 and $15,726 for the years ended December 31,
1999 and 1998, respectively.

Noncash Investing and Financing Activities In connection with the
acquisition of Nanotech on April 11, 1998, liabilities were assumed as
follows:

Fair value of assets acquired ....................$ 1,991,589
Advances from Nanotech prior to acquisition ...... 1,000,000
Fair value of common stock issued in acquisition.. (2,983,275)
------------
Liabilities assumed...........................$ 8,314
============

On September 26, 1995, Flexpoint acquired all of the common stock of Tamco.
In connection with this acquisition, liabilities were assumed as follows:

Fair value of assets acquired, including
goodwill of $119,802...........................$ 170,000
Cash paid in acquisition ......................... (25,000)
Fair value of stock issued in acquisition......... (60,000)
------------

Liabilities assumed ..........................$ 85,000
============

On September 26, 1995, the Company acquired all of the common stock of
Flexpoint, Inc. in exchange for 5,395,000 shares of common stock. The
following assets and liabilities were acquired at their historical cost basis:

Historical cost of assets acquired................$ 394,660
Capital deficiency ............................... 94,184
Advances to Flexpoint prior to acquisition ....... (268,413)
-------------
Liabilities assumed............................$ 220,431
=============
<PAGE>
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with Respect to March 31,2000 and for the Three Months Ended
March 31, 2000 and 1999 is Unaudited)

During 1995, the Company assumed $13,792 of legal costs associated with
patents in connection with the assignment of patents to the Company by an
officer. During the year ended December 31, 1996, 260,000 shares of common
stock were issued for services valued at $0.77 per share, or $200,000.

During the year ended December 31, 1997, $111,816 of notes payable were issued
to acquire leasehold improvements. The Company issued 110,672 shares of
common stock upon conversion of $53,952 of accounts payable and notes payable.
Common stock was redeemed from officers in exchange for $50,000 of cash and
$150,000 of notes payable. The Company issued common stock in exchange for
stock subscription receivables totaling $390,000 which were subsequently
collected.

During the year ended December 31, 1998, 318,435 shares of common stock were
issued upon conversion of $242,828 of debt. The Company issued 393,438 shares
of common stock for a subscription receivable of $1,573,731 which was
collected subsequent to December 31, 1998. During the year ended December 31,
1999, $865,001 of notes payable were converted to common stock as described in
Note 10.

During the period 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, as discussed further in Note 7. 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. $205,000 of convertible notes payable
were converted into 120,588 shares of common stock as discussed further in
Note 9.

NOTE 7 - NOTES PAYABLE

Notes payable consisted of the following:

March 31, December 31
2000 1999 1998
----------- ---------- -----------
$2,000,000 Convertible debenture payable
to a financing company, 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 to
individuals, 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 -

<PAGE>

Note payable to a shareholder, due July 15,
1999, monthly interest accrues at 10%,
the Company 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 1998
---------- ---------- ------------
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. Subsequent to December 31, 1999, the credit facility and the cash
on deposit with the bank was reduced to $40,000.

From January through March of 1998, management of the Company negotiated the
terms of a conversion of notes payable issued during 1997. In March 1998, the
holders of $200,000 of notes payable accepted the conversion terms and
converted those notes into 248,833 shares of common stock. The notes were
converted at $0.80 per share which was at or above the fair value of the
common stock at the time the conversion terms were established. In addition,
$42,828 of notes payable were issued during 1997 which were convertible into
common stock at $0.61 per share, which approximated the fair value of the
common stock on the date the notes were issued. The notes were converted into
69,602 shares of common stock during October 1998.

During the year ended December 31, 1999, the Company issued 8% convertible
promissory notes. The notes were convertible into common stock during 1999 as
further discussed in Note 9. In addition to the convertible notes, the
Company issued non-convertible notes with warrants to purchase 780,000 shares
of the common stock. The proceeds received were allocated between the notes
and the warrants based upon their relative fair values. The fair value of the
warrants of $1,265,900 was determined by the Black Scholes option pricing
model with the following weighted-average assumption: 6.2% risk-free interest
rate; 93.7% volatility 0% yield and a 5 year estimated life. The allocation of
$1,265,900 to the warrants resulted in a discount on the notes of $1,265,900.
The discount is

<PAGE> 45

being amortized over the term of the notes. During the year ended December
31, 1999, $1,153,074 of the discount was amortized to interest expense.

During the period ended March 31, 2000, the Company issued 8% convertible
promissory notes. Some of the notes were converted during the period as
further described in Note 9.

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.

<PAGE> 46

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information with Respect to March 31,2000 and for the Three Months Ended
March 31, 2000 and 1999 is Unaudited)

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.

NOTE 8 - EMPLOYEMENT AND COMPENSATION AGREEMENT

Effective August 26, 1997, two officers resigned from the Board of Directors
and sold 6,308,666 shares of common stock to the Company for $200,000, or
approximately $0.03 per share. One of the officers was granted options to
acquire 650,000 shares of common stock at $0.30 per share and 325,000 shares
for $0.77 per share for a period of five years.

The Company has an employment agreement with an officer which includes an
annual base salary $120,000 per year through December 31, 2001.

Effective May 1, 1995, Flexpoint entered into a royalty agreement whereby an
officer was to provide technical assistance and be paid a monthly fee of
$8,333 for five years. During 1997, Flexpoint suspended payments under the
royalty agreement. An agreement was signed April 15, 1998 whereby Flexpoint
agreed to pay the officer $160,000 in settlement of all past and future
obligation under the compensation agreement. The amount paid was recognized in
general and administrative expense during 1998.

The Company entered an agreement with a board member for marketing, business
development, investor and financial advisory services effective July 1, 1999.
The terms of the agreement require the Company to pay $12,000 per month. No
formal term was stated in the contract; however, no services were provided
after February 2000.

The Company entered an agreement for financing and business management
advisory services effective August 1, 1999. The terms of the agreement
require the Company to pay $6,250 per month for eighty hours of services per
month. Any service over and above the eighty hours will be billed at $80 per
hour. The agreement is effective for three years from the effective date.

NOTE 9 - STOCKHOLDERS' EQUITY

Preferred Stock During the year ended December 31, 1999, 4,500 shares of
preferred stock were designated as Series A convertible preferred stock with a
stated value of $875. The preferred stock will rank, with respect to rights
on liquidation, senior to all classes of common stock and each other class of
capital stock or series of preferred stock established after the date
designated by the Board of Directors. The preferred stock has no stated
dividend rate and no dividends will be payable thereon unless declared by the
Board of Directors. Each share

<PAGE> 47

of preferred stock outstanding is entitled to 250 votes. The preferred shares
are entitled to a preference in liquidation over the common shares equal to
$875 per preferred share.

Shares of preferred stock may be convertible at any time, in whole or in part,
at the option of the holder thereof into common stock at a conversion price of
$3.50 per share. The outstanding shares of preferred stock will automatically
be converted into common stock if the closing bid price for the common stock
for 15 successive trading days is equal to or greater than $12.00 per share.

Series A convertible preferred stock and Series A warrants to purchase 250
shares of common stock were issued as a unit in an offering from May through
July 1999. In addition to units sold, shareholders who purchased common stock
under the Company's prior private offering were given the option of converting
the shares of common stock purchased into units of the new offering. The
offering resulted in the issuance of 536 shares of convertible preferred stock
and Series A warrants to purchase 134,000 shares of common stock at $4.00 per
share. The conversion resulted in the cancellation of 489,523 shares of common
stock and the issuance 2,238 shares of convertible preferred stock and Series
A warrants to purchase 559,551 of common stock at $4.00 per share. The gross
proceeds from the offering before $8,263 offering costs were $469,000. These
proceeds and the conversion of the common shares were allocated on the dates
received to (a) the Series A Warrants to purchase common stock based upon
their fair value in the amount of $ 693,551 and (b) $1,725,624 was allocated
to the convertible preferred stock. The resulting discount on the preferred
stock of $693,551 was immediately amortized as a preferred stock dividend on
the dates the convertible preferred stock was issued. The convertible
preferred stock is convertible into 693,551 shares of common stock through
January 1, 2001.

As the result of a subsequent offering of common stock 336 shares of Series A
convertible preferred stock were cancelled and converted into common stock.

In March 2000, 743 shares of convertible preferred stock were converted into
185,714 shares of common stock.

Common Stock- In connection with the reorganization agreement with Nanotech,
the Company's common stock was split 13-for-1 on April 11, 1998. All
references to common shares in these financial statements reflect the change
in the number of common shares outstanding for all periods presented.

In January 1995, an officer and shareholder assigned certain patents to the
Company as an additional contribution to capital of $22,232. No additional
shares were issued to the shareholder for the contribution.

On March 18, 1996, the Company entered into a share purchase agreement whereby
the Company agreed to issue 1,957,111 shares of its common stock for
$1,300,000 in a private placement offering. The proceeds were received and the
shares were issued throughout 1996 as required by the Company's cash flow
needs. Offering costs incurred in connection with the offering were $246,547.

On August 26, 1997, the Company entered into a settlement agreement with two
officers of the Company whereby the relationship between the officers and the
Company was terminated. As part of the agreement, the Company redeemed
6,308,666 shares of common stock from the officers for $200,000, or
approximately $0.03 per share by paying $50,000 in cash and by issuing
$150,000 of notes payable.

<PAGE> 48

On December 24, 1997, the Company issued 422,500 shares of common stock in
exchange for stock subscriptions in the amount of $390,000 receivable from the
investors. The subscriptions were collected in January 1998.

In January 1998, the Company recognized compensation related to an agreement
with a shareholder whereby the shareholder would be able to maintain a 1%
equity interest in the Company through the date of the merger with Nanotech.
The agreement has been accounted for as the grant of a warrant to the
shareholder for the purchase of 30,303 shares of common stock at a zero
purchase price. $22,727 of compensation expense was recognized on the date the
warrant was granted, based upon a $0.75 fair value of the stock on that date.
The warrant was exercised on October 14, 1998.

On December 23, 1998, Flexpoint issued 618,588 shares of common stock in
exchange for a stock subscription in the amount of $2,474,350 receivable from
the investor. The Company collected $1,573,750 of the subscription through
February 16, 1999. On March 31, 1999, the Company closed the private placement
offering, released a shareholder from a $900,600 receivable under the
subscription contract and cancelled the related 225,150 shares of common
stock.

Units consisting of 10,000 shares of common stock and Series B warrants to
purchase 10,000 shares of common stock were issued as a unit in an offering
from July through October 1999. In addition to units sold, shareholders who
purchased convertible preferred stock under the Company's prior private
offering were given the option of converting the shares of convertible
preferred stock purchased into units of the new offering. The offering
resulted in the issuance of 476,600 shares of common stock and Series B
Warrants to purchase 476,600 shares of common stock at $3.50 per share. The
conversion resulted in the cancellation of 336 shares of Series A Convertible
Preferred Stock and the issuance of 147,000 shares of common stock and Series
B Warrants to purchase147,000 shares of common stock at $3.50 per share. The
gross proceeds from the offering before $12,000 offering costs were $953,200.

Convertible debt and Series C warrants to purchase common stock were issued as
a unit in an offering in November 1999. The offering resulted in the issuance
of warrants to purchase 508,825 shares of common stock at priced ranging from
$2.00 to $2.25 per share and $865,001 of notes payable which were convertible
into common stock at $1.70 per share. The excess of the market value of the
common stock over the conversion price at the dates the notes payable were
issued ranged from $0.52 to $1.02 per share and was a beneficial conversion
feature of the convertible debt. The gross proceeds from the offering were
$865,001 and were allocated on the dates received to (a) to the beneficial
conversion feature of the notes payable based upon the excess of the fair
value of the common stock over the conversion price in the amount of $404,062,
and (b) $460,939 to the notes payable. The resulting discount to the notes
payable was amortized immediately as the notes were convertible upon issuance
and resulted in $404,062 of interest expense. The notes payable were converted
into 508,825 shares of common stock in December 1999.

In November 1999, the Company issued 100,000 shares of common stock in
settlement of a stock ownership claim as explained further in Note 15.

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

<PAGE> 49

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 fo 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 fo 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.

NOTE 10 - STOCK OPTIONS

On April 1, 1995, the Board of Directors and shareholders adopted an Omnibus
Stock Option Plan (the "Plan"). Under the terms of the Plan, as amended in
October 1997, Flexpoint may grant options to employees, directors and
consultants to purchase up to 5,037,500 shares of common stock. Incentive or
non-qualified options may be granted under the Plan. Options granted under the
Plan are exercisable over periods determined by the Board of Directors, not to
exceed 10 years from the date of grant. Options generally vest from
immediately to five years. The exercise price of options granted under the
Plan generally have been equal to or in excess of the fair value of
Flexpoint's common stock on the date of grant. Generally, the only condition
for exercise of options granted under the Plan is that the employees remain
employed through the date the options are exercised or vested.

In October 1995, the Company granted options, exercisable at $0.77 per share,
to an officer for 195,000 shares of common stock which vested upon Flexpoint
obtaining specified levels of sales and gross profit. During August 1997, the
Company agreed upon the terms of a new employment agreement with the officer.
The agreement was executed in December 1997 and included canceling 130,000
options exercisable at $0.77 and granting 390,000 options exercisable at
$0.38, which management considered to be the fair value of the Company's
common stock in August 1997. The new options vest through 2001 and do not
have any performance criteria for vesting. The modification to the options did
not result in additional compensation over the amount referred to below.

Flexpoint measures compensation under stock-based options and plans using the
intrinsic value method prescribed in Accounting Principles Board Opinion 25,
Accounting for Stock Issued to Employees, and related interpretations, for
stock options granted to employees, and determines compensation cost granted
to non-employees based on the fair value at the grant dates consistent with
the alternative method set forth under Statement of Financial Accounting
Standards No. 123, (SFAS 123) Accounting for Stock-Based Compensation.
Stock-based compensation charged to operations was $29,764, $233,350 and
$45,375 for the period ended March 31, 2000

<PAGE> 50

and the years ended December 31, 1999 and 1998, respectively. Had
compensation cost been determined based on the fair value of the options at
the grant dates consistent with the alternative method of SFAS No. 123,
Accounting for Stock-Based Compensation, Flexpoint's net loss and loss per
share would have increased to the pro forma amounts indicated below. The
weighted average assumptions used to estimate the fair value of each option
grant, using the Black Scholes option pricing model, are also presented:

Years Ended
Period December 31,
Ended -------------------------
March 31, 1999 1998
------------- ------------- ------------
Net Loss
As reported ........................$(3,534,039) $ (9,490,666) $(2,222,323)
Pro forma .......................... (3,595,727) (9,790,042) (2,342,574)
Primary and Diluted Loss per share
As reported.........................$ (0.18) $ (0.54) $ (0.16)
Pro forma ..........................$ (0.19) $ (0.55) $ (0.16)
Weighted-Average Assumptions:
Divided yield....................... 0.0% 0.0% 0.0%
Expected volatility................. 118.50% 77.29% 53.42%
Risk-free interest rate............ 6.68% 5.44% 5.53%
Expected life of options, in years.. 5.62 % 6.34 5.0

A summary of the status of stock options as of March 31, 2000 and December 31,
1999 and 1998 and changes during the years ended on those dates are presented
below:

Options Outstanding
-------------------------------------------------------------------
December 31
-------------------------------------------
March 31 2000 1999 1998
----------------------- --------------------- ---------------------
Weighted- Weighted- Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
period 4,708,456 $ 0.62 5,507,550 $ 0.42 4,717,050 $ 0.42
Granted 58,000 1.92 315,000 3.06 805,000 0.75
Exercised (30,517) 0.31 (919,094) 0.34 (14,500) 0.16
Forfeited - - (195,000) 0.39 - -
------------- --------- ---------- ----------
Outstanding at
end of period 4,735,939 0.63 4,708,456 0.62 5,507,550 0.42
============= ========== ==========
Options exercisable
at end of period 3,562,644 0.55 3,456,411 0.51 3,617,554 0.41
============= ========== ==========

Weighted-average
fair value of
options granted
during period $ 1.64 $ 3.25 $ 0.47
============= ========== ==========

</TABLE>
<PAGE> 51

The following table summarizes information about stock options outstanding at
December 31, 1999:

Outstanding Exercisable
----------------------------------------------- -----------------------------
Weighted-Average
Range of Number Remaining Weighted-Average Number Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- --------------- ------------ ----------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
$ 0.00 - 0.50 3,350,000 2.3 years $ 0.34 2,494,119 $ 0.33
0.51 - 0.99 1,063,550 4.3 0.76 876,886 0.76
2.00 - 2.99 106,000 5.6 2.01 45,500 2.01
3.00 - 3.99 43,000 6.1 3.50 11,500 3.51
4.00 - 4.99 145,906 5.6 4.00 37,406 4.00
------------ ------------
$ 0.00 - 4.99 4,708,456 3.0 0.62 3,456,411 0.51
============ ============
</TABLE>

NOTE 11 - STOCK PURCHASE WARRANTS

In connection with the acquisition of Flexpoint, Inc. and Tamco during 1995,
the Company issued warrants to purchase 22,750 shares of its common stock
exercisable at $0.77 per share (which was the fair value of the common stock
on the date of the issuance as determined by the Board of Directors) to its
outside legal counsel for services. Additionally, the Company issued warrants
during 1995 to purchase 23,010 shares of its common stock at a purchase price
of $0.77 per share to equity investors.

During 1996, warrants were issued to purchase 214,500 shares of common stock
at $0.77 per share to equity investors in the Company and warrants to
purchase 6,500 shares at $0.77 per share were issued to outside legal counsel
for services.

During 1997, Flexpoint issued warrants to purchase 260,000 shares of common
stock at $0.77 per share to equity investors. Additionally, warrants to
purchase 910,000 shares of common stock at $1.15 per share were issued to a
retiring member of the Board of Directors.

All of the above warrants had no material fair value on the date issued. On
the date issued, the fair value of each warrant was estimated using the Black
Scholes option pricing model.

During 1999, warrants to purchase 1,722,048 shares of common stock were
issued as part of offerings as further described in Note 10. Warrants to
purchase 780,000 shares of common stock were issued with notes payable as
further discussed in Note 7. An additional 100,000 warrants were issued to a
consultant for services. Compensation of $185,000 was recognized from the
grant of these warrants.

During the period ended March 31, 2000, warrants to purchase 1,404,285 shares
of common stock were issued as part of offerings as further discussed in
Notes 7 and 10. Warrants to purchase 100,000 shares of common stock were
issued with notes payable as further discussed in Note 7. Warrants to
purchase 500,000 shares of common stock were issued to extend the terms of a
note payable as further described in Note 7.

<PAGE> 52

The following table summarizes information about warrants outstanding at
December 31, 1999:
Weighted-Average
Warrants Remaining
Exercise Prices Outstanding Contractual Life
---------------- ------------- -----------------
$ 0.00 - 0.99 260,000 1.7 years
1.00 - 1.99 910,000 0.7
2.00 - 2.99 1,053,825 3.8
3.00 - 3.99 938,600 2.8
4.00 - 4.99 609,623 1.0
--------------
$ 0.00 - 4.00 3,772,048 2.2
===============

NOTE 12 - 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 and for the years ended December 31, 1999 and 1998
were as follows:

<TABLE>
<CAPTION

March 31, December 31,
------------------------- ------------------------
2000 1999 1999 1998
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Products
Sales of sensors $ 48,678 $ (7,762) $ 289,264 $ 1,051,022
Licensing royalty - - 250 511,291
Tooling and dies 15,702 8,623 42,668 205,162
------------ ------------ ----------- ------------
Total Products 64,380 - 332,182 1,767,476

Engineering Services 83,826 120,896 441,051 148,152
------------ ------------ ----------- ------------
Total Sales $ 148,206 $ 121,757 $ 773,233 $ 1,915,628
============ ============ =========== ============
</TABLE>

NOTE 13 - INCOME TAXES

There was no provision for, or benefit from, income tax for any period. The
components of the net deferred tax asset as of March 31, 2000 and as of
December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
March 31, December 31,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Operating loss carry forwards $ 6,437,294 $ 5,132,458 $ 1,921,033
Allowance for doubtful account 968 1,119 -
Amortization of intangibles 14,280 14,711 11,167
------------ ------------ ------------
Total Deferred Tax Assets 6,452,542 5,145,288 1,932,200
Valuation Allowance (6,452,542) (5,148,288) (1,932,200)
------------ ------------ ------------

Net Deferred Tax Asset $ - $ - $ -
============ ============ ============

</TABLE>
<PAGE> 53

For tax reporting purposes, the Company had net operating loss carry forwards
in the amount of $14,081,751at December 31, 1999 that will expire beginning
in the year 2012.

The following is a reconciliation of the amount of benefit that would result
from applying the federal statutory rate to pretax loss with the provision
for income taxes for the years ended December 31, 1999 and 1998:

For the Years Ended
December 31,
1999 1998
-------------- --------------

Tax at statutory rate (34%) $ (2,991,019) $ (755,590)
Non-deductible expenses 100,275 1,030
Increase in valuation allowance 4,177,296 937,153
State tax benefit, net of federal tax effect (290,305) (73,337)
Change in effective tax rate (996,247) (109,256)
-------------- --------------
Provision for Income Taxes $ - $ -
============== ==============

NOTE 14 -- LONG-TERM CONTRACTS

On May 28, 1998, Flexpoint entered into a purchase and supply agreement with
an automotive manufacturer. Under the terms of the agreement, Flexpoint is to
provide engineering and support to the automotive manufacturer. For the
years ended December 31, 1999 and 1998, Flexpoint received $424,551 and
$148,152, respectively from such services. The agreement for the engineering
and support services runs through December 31, 2001 and is to provide
Flexpoint with an additional $455,382 of related revenue. Flexpoint is also
to provide the automotive manufacturer with sensors for use as a component in
automobile manufacturing. The agreement for the sensors runs through December
31, 2003. The agreement may be renewed for one or more successive one-year
terms upon the mutual written agreement of both parties.

NOTE 15 - 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)
--------------
$ 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:

<PAGE> 54

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 December 31, 1999
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. Lease expense for the years ended December 31, 1999
and 1998 was $366,270 and $82,751, respectively.

In 1995, a third party entity loaned $35,000 to a former officer of the
Company as a personal loan. This entity made a claim against the former
officer for repayment of the advance and for other consideration. Flexpoint
was required to provide compensation to the former officer sufficient to
settle the claim during the year ended December 31, 1998, in the amount of
$48,618. During the year ended December 31, 1999, the third party appealed
its share ownership claim. In November 1999, the Company settled the share
ownership claim by issuing 100,000 shares of common stock valued at $1.75 per
share, the fair market value on the date of settlement. As a condition of
the settlement agreement, each party released the other party from any
further liability.

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 claims to have
sustained damages for breach of contract and seeks damages in the amount of
6.5% of financing obtained from an equity

<PAGE> 55

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 was only a remote possibility that Flexpoint would
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 and 1998. On May 1, 2000, the court
granted summary judgement in favor of Flexpoint and dismissed the claims with
prejudice.

NOTE 16 - SUBSEQUENT EVENTS

During the year ended December 31, 1999, the Company raised capital under
notes payable as further discussed in Note 7.

<PAGE> 56

==========================================================================

You should rely only on the information provided in this prospectus or any
prospectus supplement. We have not authorized anyone else to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of those documents.

_____________________

TABLE OF CONTENTS Page
Risk Factors 2
Forward Looking Statements 7 6,006,697 Shares
Use Of Proceeds 7 Of Common Stock
Capitalization 7
Market For Common Equity And
Related Stockholder Matters 9
Management's Discussion And Analysis
Or Plan Of Operation 9
Description Of The Business 14
Description Of Property 19
Legal Proceedings 19
Directors, Executive Officers,
Promoters And Control Persons 20 FLEXPOINT SENSOR
Executive Compensation 21 SYSTEMS, INC/
Security Ownership Of Certain
Beneficial Owners And Management 23
Description Of Securities 24
Certain Relationships And Related
Transactions 26 _________________
Selling Security Holder 26
Plan Of Distribution 27 Prospectus
Legal Matters 28 _________________
Experts 28
Available Information 29
Financial Statements F-1
______________________

<PAGE> 57

Until 90 days after the date of this Prospectus, all dealers effecting
transactions in the registered securities, whether or not participating in
this distribution, may be required to deliver a prospectus. This is in
addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.

___________________________

May ___ , 2000

<PAGE> 58

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification Of Directors And Officers

Section 145 of the Delaware General Corporation Law permits us to indemnify
our directors, officers, employees and agents, subject to limitations imposed
by the Delaware General Corporation Law. Article VII of our Bylaws require us
to indemnify officers, employees and agents to the full extent permitted by
the Delaware General Corporation Law . We have also entered into indemnity
agreements with our officers pursuant to which we have agreed to indemnify
them. The indemnity agreements require payment of any amount which an
indemnitee is legally obligated to pay because of claims relating to his or
her service as an officer, although in some circumstances indemnification
would be discretionary. The indemnity agreements also provide that we will
have the burden of proving that the applicable standard of conduct has not
been met. However, we are not obligated to make any payment prohibited by law
or to pay where payment is made to an indemnitee under an insurance policy or
otherwise.

Our Bylaws, together with the indemnity agreements, expand our indemnity
obligations to the full extent permitted by law. While Delaware law
contemplates some expansion of indemnification beyond what is specifically
authorized by the Delaware General Corporation Law , the courts have not yet
established the boundaries of permissible indemnification.

Flexpoint Sensor Systems, Inc. and its directors and officers are also
covered by liability insurance coverage.

Item 25. Other Expenses Of Issuance And Distribution

The following table sets forth all estimated costs and expenses, other
than underwriting discounts, commissions and expense allowances, payable by
the registrant in connection with the maximum offering for the securities
included in this Registration Statement:

Securities and Exchange Commission registration fee.......$ 3,695
Blue Sky fees and expenses ............................... -
Printing and shipping expenses............................ 500
Legal fees and expenses .................................. 20,000
Accounting fees and expenses ............................. 15,000
Transfer Agent and Miscellaneous fees..................... 1,000
-------
Total ..............................$40,195
=======

_______________

* All expenses are estimated except the Commission filing fee.

Item 26. Recent Sales Of Unregistered Securities

In December 1997, we issued 726,200 shares of common stock in connection
with the conversion of certain convertible debentures, dated April 1, 1995,
in the principal amount of $2,421. These securities were issued under Rule
506 of Regulation D and Sections 3(9) and 4(2) of the Securities Act of 1933.
We did not use an underwriter in connection with the conversion of the
convertible debentures.

In April 1998, as part of the acquisition wherein we acquired Sensitron,
758,483 shares of Sensitron common stock that were issued and outstanding
immediately prior to the effective date of the acquisition were converted
into 9,860,279 shares of our common stock. In addition, on the effective date
of the acquisition options, warrants and convertible debentures of Sensitron
were converted options, warrants and convertible debentures of

II-3

<PAGE> 59

Flexpoint Sensor Systems, Inc. with a corresponding price adjustment
and without any other substantial changes to the terms of these instruments.
These securities were issued under Rule 506 of Regulation D and Section 4(2)
of the Securities Act of 1933. We did not use an underwriter in connection
with the transaction.

In April 1998, we completed a private placement wherein we raised
gross proceeds of $2,924,922 through the sale of 3,899,896 shares of common
stock to accredited qualified investors for $.75 per share. The common stock
was issued under Rule 506 of Regulation D and Section 4(2) of the Securities
Act of 1933. We did not use an underwriter in connection with the Private
Placement.

In December 1998, we issued 30,303 shares of common stock to an affiliate of
one of our directors. The shares were issued in full satisfaction of certain
obligations that we made to said director in connection with an investment in
our common stock in December 1997. We did not use an underwriter in
connection with the transaction.

In July through October 1998, we granted stock options to acquire 410,000
shares of common stock at $.75 per share to certain directors, officers and
key employees. Of said options, 145,004 were immediately exercisable and
88,332 vest during each of the three year periods following the date of
grant. Said options were granted under our Omnibus Stock Option Plan pursuant
to Section 4(2) of the Securities Act. We did not use an underwriter in
connection with the transaction.

In October 1998, we issued 10,000 shares of common stock to two of our
executive officers pursuant to the exercise of stock options. The strike
price of the options exercised was $.16 per share. Said common stock was
issued under Section 4(2) of the Securities Act. We did not use an
underwriter in connection with the transaction.

On March 31, 1999, we closed a private placement whereby we raised gross
proceeds of $3,362,137 through an offering of common stock to accredited
investors for $4 per share. During this offering we began discussions with
several people regarding a private offering that we began in May 1999. In the
May offering the we sold 536 Units, each Unit being comprised of one share of
Series A Convertible Preferred Stock and Series A Warrants to purchase 250
shares of common stock. We gave investors in the March offering the
opportunity to exchange the securities purchased in the March offering for
the securities the investor could have purchased in the May offering had the
investment been made under the May offering terms rather than the March
offering terms. In July and August, investors who acquired 489,523 shares of
common stock in the March offering elected to convert to the May offering
terms. As a result, 489,523 shares of outstanding common stock were cancelled
and we issued 1,695 shares of Series A Convertible Preferred Stock and Series
A Warrants to purchase 559,551 shares of common stock. The transactions were
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. We did
not use an underwriter in connection with the transactions.

On June 18, 1999, we borrowed $310,000 from a non-affiliated accredited
lender in a private transaction. Of said amount, $200,000 bore interest at
20% per annum, payable monthly. The principal is payable in two equal
installments of $100,000 on September 18, 1999 and December 18, 1999. The
remaining principal amount of $110,000 bore interest at 10% per annum and was
payable and was repaid on July 15, 1999. These notes were unsecured. As part
of the consideration for these notes, we granted to lender warrants to
acquire 75,000 shares of our common stock. The warrants are exercisable at
approximately $3.44 per share for a period expiring in June 2004. The
warrants were issued under Rule 506 of Regulation D, Section 4(2) of the
Securities Act and Section 4(6) of the Securities Act. We did not use an
underwriter in connection with the transactions.

During the three months ended June 30, 1999, we offered and sold to
accredited investors in a private placement 536 Units for gross proceeds of
$469,001. Each Unit consisted of one share of Series A Convertible Preferred
Stock and Series A Warrants to purchase 250 shares of our common stock. The
Series A Preferred Stock is convertible, at the option of the holder at any
time, into common stock at the conversion rate of 250 shares of common stock
for one share of Series A Preferred Stock. The Series A Warrants are
exercisable at $4.00 per share

II-4

<PAGE> 60

through January 1, 2001. Each Unit was sold for $875. The Series A Preferred
Stock was issued under Rule 506 of Regulation D, Section 4(2) of the
Securities Act of 1933 and Section 4(6) of the Securities Act. We did not use
an underwriter in connection with the private placement.

During the three months ending September 30, 1999, there were 107,510
shares of common stock were issued upon exercise of outstanding warrants an
exercise price of $.77 per share and 728,500 shares of common stock were
issued upon exercise of outstanding options at exercise prices ranging from
$.16 - $.47 per share. We also issued warrants to acquire 735,000 shares of
common stock to various lenders in connection with loan transactions in the
aggregate principal amount of $1,510,000. The warrants and common stock
issued upon conversion of the warrants and stock options 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 of 1933. We did not use an
underwriter in connection with the exercise of the warrants and stock
options.

Between July and October 1999, we offered and sold to accredited
investors in a private placement 47.7 Units for gross proceeds of $953,200.
Each Unit consisted of 10,000 shares of our common stock and a Series B
Warrant to purchase 10,000 shares of common stock. The Series B Warrants are
exercisable at $3.50 per share for a period ending on the two year
anniversary of the date of grant. The Units were issued 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. We did not use an underwriter in connection with
this private placement.

In October 1999, 130,000 shares of common stock that were issued upon
exercise of outstanding stock options at an exercise price of $.77 per share.
The common stock issued upon exercise of the stock options 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. We did not use an
underwriter in connection with the exercise of the warrants and stock
options.

In November through March 2000, we issued convertible notes in the
principal amount $1,131,001. The notes were convertible into common stock at
the conversion rate of $1.70 per share and upon conversion the holder
received a Series C Warrant to acquire a number of shares of common stock
equal to the number of shares of common stock issued on the conversion date.
The Series C Warrants are exercisable at prices ranging from $2.00 to $2.25
per share for a period of three years from the date of grant. Most of the
notes were converted and we issued 629,413 shares of common stock and Series
C Warrants to acquire 629,413 shares of common stock. The notes, and common
stock and warrants issued upon conversion of the notes are believed to be
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. We did
not use an underwriter in connection with the exercise of the warrants and
stock options.

In November 1999, we issued 100,000 shares of common stock to an
accredited litigant in full settlement of litigation with John Clayton and
Blaine Taylor litigation. See "Legal Proceedings." The common stock sale was
exempt from registration under Rule 506 of Regulation D, Section 4(2) of the
Securities Act and Section 4(6) of the Securities Act. We did not use an
underwriter in connection with the exercise of the warrants and stock
options.

In February 2000, we 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 Note was originally issued in August 1999 and is
secured by our assets. We were 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. We accepted the offer to extend the note for six months
by 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

II-5

<PAGE> 61

Act of 1933 and Section 4(6) of the Securities Act of 1933. We did not use an
underwriter in connection with this transaction.

On March 3, 2000, we 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 us with
proceeds of $2,000,000, less a ten percent placement fee and other offering
costs of investor and ourselves of approximately $15,000, 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 our common stock for a
four year period. Under the Securities Purchase Agreement, Aspen Capital
Resources, Inc. made an additional investments of $500,000 each in April and
May 2000 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 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 our common stock. The exercise price of the Series 2000-A Warrants varies
depending on the market price of our common stock. These securities sales to
Aspen Capital Resources, Inc. 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.

In March 2000, stock options to acquire 30,517 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.

Item 27. Exhibits Index

EXHIBIT NO. DESCRIPTION OF EXHIBIT

3(i).1 Certificate of Incorporation of Flexpoint (Incorporated by reference
to Exhibit 3.1 of Flexpoint Sensor Systems, Inc.'s Registration
Statement on Form 10-SB, dated June 17, 1994).

3(i).2 Certificate of Amendment to Certificate of Incorporation
(Incorporated by referenced to Exhibit 3.1 of our Current Report on
Form 8-K, dated April 9, 1998).

II-6
<PAGE> 62

3(i).3 Articles of Incorporation of Sensitron (Incorporated by referenced to
Exhibit 3.(i).3 of our Annual Report on Form 10-KSB, dated March 31,
1998).

3(i).4 Articles of Incorporation of Flexpoint, Inc. (Incorporated by
referenced to Exhibit 3.(i).4 of our Annual Report on Form 10-KSB,
dated March 31, 1998).

3(i).5 Articles of Incorporation of Tamco (Incorporated by referenced to
Exhibit 3.(i).5 of our Annual Report on Form 10-KSB, dated March 31,
1998).

3(i).6 Certificate of Designation for the Series A Convertible Preferred
Stock (Incorporated by reference to Exhibit 3(i).3 of our quarterly
report on Form 10-QSB, dated June 30, 1999).

3(ii).1 Restated Bylaws of Flexpoint Sensor Systems, Inc. (Incorporated by
reference to Exhibit 3.2 of our Registration Statement on Form 10-SB,
dated June 17, 1994).

3(ii).2 Bylaws of Sensitron (Incorporated by referenced to Exhibit 3.(ii).2
of our 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 our Annual Report on Form 10-KSB, dated March 31, 1998).

3(ii).4 Bylaws of Tamco (Incorporated by referenced to Exhibit 3.(ii).4 of
our Annual Report on Form 10-KSB, dated March 31, 1998)..

5.1* Opinion of Blackburn & Stoll, LC

10.1 Employment Agreement with Douglas M. Odom (Incorporated by reference
to Exhibit 10.1 of our Current Report on Form 8-K, dated April 9,
1998).

10.2 Lease Agreement with 72nd South Associates (Incorporated by
reference to Exhibit 10.2 of our Current Report on Form 8-K, dated
April 9, 1998).

10.3 Agreement with Ohio Art (Incorporated by reference to Exhibit 10.3 of
our 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 of our Annual Report on
Form 10-KSB, dated December 31, 1998).

10.5 Industrial Space Lease with Prudential Insurance Company of America
(Incorporated by reference to Exhibit 10.5 of our 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).

21.1 Schedule of Subsidiaries (Incorporated by referenced to Exhibit 21.1
of our Annual Report on Form 10-KSB, dated March 31, 1998).

23.1 Consent of Hansen Barnett & Maxwell, Independent Public Accountants

23.2* Consent of Blackburn & Stoll, LC (included in Exhibit 5.1 hereto)

24.1 Powers of Attorney (included in Part II of this Registration
Statement)

27.1 Financial Data Schedule

_______________

* To be filed by amendment.

Item 28. Undertakings

The registrant hereby undertakes that it will:

(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (i) Include any
prospectus required by section 10(a)(3) of the Securities Act of

II-7

<PAGE> 63

1933; (ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; (iii) Include any additional or changed material
information on the plan of distribution.

(2) For determining any liability under the Securities Act of 1933, treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.

(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of Salt Lake, State of Utah, on May 12, 2000.

Flexpoint Sensor Systems, Inc.
(Registrant)

By /s/ Douglas M. Odom

Douglas M. Odom,
President, Chief Executive
Officer and Director

We the undersigned, directors and officers of Flexpoint Sensor Systems,
Inc., do hereby severally constitute and appoint Douglas M. Odom as our true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign and all amendments or post-effective amendments to this
registration statement, and to file the same with all exhibits thereto, and
all other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each or any of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that the
said attorneys-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

<PAGE> 64

II-8

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

Signature

s/ Douglas M. Odom
- ---------------------------
Douglas M. Odom
President, Chief Executive Officer
and Director (Principal Executive Officer)

May 12, 2000

/s/ Jeffrey Coleman
- -------------------------
Jeffrey Coleman
Director

May 12, 2000

/s/ Don M. Jackson
- -----------------------------
Don M. Jackson
Director

May 12, 2000

/s/ M. Richard Wadley
- -----------------------
M. Richard Wadley
Director

May 12, 2000

/s/ Thomas N. Strong
- --------------------------
Thomas N. Strong
Comptroller (Principal Financial and Accounting Officer)

May 12, 2000

EXHIBIT 23.1

(Consent of Hansen Barnett & Maxwell)

HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS

(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
SEC Practice Section 345 East 300 South, Suite 200
Member of Summit International Associates Salt Lake City, Utah 84111-2693

To the Board of Directors
Flexpoint Sensor Systems, Inc.

We consent to the inclusion in this Registration Statement and Prospectus of
our report, dated March 24, 2000, on our audit of the financial statements of
Flexpoint Sensor Systems, Inc. We also consent to the use our name and
reference to us in the "Independent Certified Public Accountants" section of
the Registration Statement and Prospectus.

/S/ Hansen, Barnett & Maxwell

HANSEN, BARNETT & MAXWELL

May 10, 2000

<ARTICLE> 5
<LEGEND>
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.
</LEGEND>

<S> <C>
<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
<TOTAL-ASSETS> 4,414,236
<CURRENT-LIABILITIES> 4,034,397
<BONDS> 113,491
0
1,475,175
<COMMON> 19,414
<OTHER-SE> (1,258,241)
<TOTAL-LIABILITY-AND-EQUITY> 4,414,236
<SALES> 48,678
<TOTAL-REVENUES> 148,206
<CGS> 15,109
<TOTAL-COSTS> 15,109
<OTHER-EXPENSES> 713,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,155,390
<INCOME-PRETAX> (3,534,039)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,534,039)
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<NET-INCOME> (3,534,039)
<EPS-BASIC> (0.18)
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