UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                           FORM 10-KSB

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

       For the fiscal year ended December 31, 2005

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       AND EXCHANGE ACT OF 1934

       Commission file number: No. 0-24368

                  FLEXPOINT SENSOR SYSTEMS, INC.
          ---------------------------------------------
          (Name of small business issuer in its charter)

         Delaware                        87-0620425
  ------------------------  -----------------------------------
  (State of incorporation) (I.R.S. Employer Identification No.)

106 West Business Park Drive, Draper, Utah               84020
------------------------------------------              ----------
(Address of principal executive offices)                (Zip code)

Issuer's telephone number:  801-568-5111

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:  Common Stock

Check whether the issuer is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act. [ ]

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.  Yes [X]  No [ ]

Check if disclosure of delinquent filers in response to item 405 of Regulation
S-B is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).   Yes [ ]   No [X]

State issuer's revenue for its most recent fiscal year: $12,595

As of February 23, 2006, Flexpoint Sensor Systems, Inc. had 22,992,887 shares
of common stock outstanding.  The market value of the shares of voting common
stock held by non-affiliates on that date was approximately $30,085,174.

Check if the issuer has filed all documents and reports required to be filed
by Section 12, 13, 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.  Yes [X]  No [ ]

Documents incorporated by reference: None.

Transitional Small Business Disclosure Format: Yes [ ] No [X]


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                        TABLE OF CONTENTS

                              PART I

Item 1.  Description of Business...........................................3
Item 2.  Description of Property...........................................9
Item 3.  Legal Proceedings.................................................9
Item 4.  Submission of Matters to a Vote of Security Holders..............10

                             PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.........10
Item 6.  Management's Discussion and Analysis or Plan of Operations.......12
Item 7.  Financial Statements.............................................18
Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.............................................36
Item 8A. Controls and Procedures..........................................36
Item 8B. Other Information................................................36

                             PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons,
         Compliance with Section 16(a) of the Exchange Act................36
Item 10. Executive Compensation...........................................37
Item 11. Security Ownership of Certain Beneficial Owners and Management
         and Related Stockholder Matters..................................39
Item 12. Certain Relationships and Related Transactions...................41
Item 13. Exhibits.........................................................41
Item 14. Principal Accountant Fees and Services...........................42
Signatures................................................................43


In this annual report references to "Flexpoint Sensor," "we," "us," and "our"
refer to Flexpoint Sensor Systems, Inc. and its subsidiaries.


                    FORWARD LOOKING STATEMENTS

The Securities and Exchange Commission ("SEC") encourages companies to
disclose forward-looking information so that investors can better understand
future prospects and make informed investment decisions.  This report contains
these types of statements.  Words such as "may," "will," "expect," "believe,"
"anticipate," "estimate," "project," or "continue" or comparable terminology
used in connection with any discussion of future operating results or
financial performance identify forward-looking statements.  You are cautioned
not to place undue reliance on the forward-looking statements, which speak
only as of the date of this report.  All forward-looking statements reflect
our present expectation of future events and are subject to a number of
important factors and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements.


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                              PART I

                 ITEM 1.  DESCRIPTION OF BUSINESS

HISTORICAL DEVELOPMENT

Flexpoint Sensor Systems, Inc. was incorporated in the state of Delaware in
June 1992 as Nanotech Corporation.  In April 1998, Nanotech acquired
Sensitron, Inc., a Utah corporation ("Sensitron"), as a wholly-owned
subsidiary through a reverse triangular merger.  Nanotech also acquired
Sensitron's wholly-owned subsidiary, Flexpoint, Inc.   As part of this
acquisition, Nanotech changed the company name to Micropoint, Inc.  In July
1999 Micropoint changed its name to Flexpoint Sensor Systems, Inc.

Flexpoint Sensor was forced to seek bankruptcy protection on July 3, 2001, and
we filed a voluntary petition for reorganization pursuant to Chapter 11 of the
United States Bankruptcy Code.  (See Part I, Item 4 "Legal Proceedings,"
below).  On February 24, 2004, the bankruptcy court confirmed our Plan of
Reorganization.  As a result of our reorganization, we are now a development
stage company with a date of emergence from bankruptcy of February 24, 2004.
We used fresh-start reporting and all assets of Flexpoint Sensor Systems, Inc.
were restated to reflect their reorganization value, which approximated the
fair value at the date of reorganization.

The bankruptcy reorganization plan resulted in a 7-to-1 reverse stock split
that was effected March 5, 2004.  All share and per share amounts presented in
this report reflect the reverse split.  The reorganization plan resulted in
discharged debt of $7,123,213, which included the issuance of 13,822,331
shares of stock for creditor claims and conversion of $1,500,000 of notes
payable and the cancellation of 828,571 shares of common stock issued or
issuable to an officer during 2001.  Options, warrants or executory contracts
for acquisition of any common shares entered into prior to our petition for
bankruptcy protection were canceled upon confirmation of the reorganization
plan. Outstanding preferred stock and super-voting preferred stock were also
canceled upon confirmation.

On March 31, 2004, Flexpoint Sensor entered into an asset purchase agreement
with Flexpoint Holdings, LLC.  The agreement provided that Flexpoint Sensor
acquire substantially all of Flexpoint Holdings' equipment and proprietary
technology.  We paid consideration of $963,000, which included $265,000 in
cash and assumption of a $698,000 convertible note payable, and issued common
shares valued at $1,931,309 for assets with a fair value of $4,302,643.  (See
"Management's Discussion and Analysis . . . Asset Purchase," below)

BUSINESS OVERVIEW

We are a development stage company principally engaged in designing,
engineering, and manufacturing sensor technology and equipment using flexible
potentiometer technology.  We are actively seeking financing and manufacturing
contracts for the use of design and engineering of Bend Sensor  technology and
equipment using a flexible potentiometer technology.  In early 2005 we
completed a private placement offering of units and issued 2,836,335 shares of
common stock and warrants to purchase 2,836,335 shares of common stock at
$3.00 per share.  (See "Management's Discussion and Analysis . . . - Liquidity
and Capital Resources," below, for information about the units).  We realized
net proceeds of approximately $ 3.9 million which we have used to fund our
ongoing operations.  In prior years, our operations have been minimal or
limited due to bankruptcy.  Since confirmation of our bankruptcy
reorganization plan in March 2004 we have been negotiating contracts,
manufacturing Bend Sensor  technology devices and have further developed our
technologies.  We have completed installation of our first production line and
plan to begin installation and qualification of a TS-16949 production line and
facility in 2006.

PRODUCTS

      Bend Sensor(R) Technology

Sensitron owns the rights to our Bend Sensor(R) technology, which is a
flexible potentiometer bend sensor product consisting of a coated substrate,
such as plastic, that changes electrical conductivity as it is bent.
Electronic systems can connect to this sensor and measure with fine detail the
amount of bending or movement that occurs.  Certain applications of the Bend
Sensor(R) potentiometer have been patented (See "Patents and Intellectual
Property," below).

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A typical potentiometer functions through the means of metal contacts swiping
or rubbing across a resistive element. Our Bend Sensor(R) potentiometer is a
single layer with no mechanical assembly that makes it more reliable and
significantly smaller and lighter in weight than mechanical potentiometers.
Management believes many sensor applications can be improved using our
technology and the use of our technology will result in new products and new
sensor applications.

We have developed the following applications for the Bend Sensor(R)technology:

      Pedestrian Detection Sensor

Management's informal survey has estimated that throughout the European Union
Countries more than 6,000 accidental pedestrian deaths and 155,151 injuries
occur annually.  In 2003, the European Parliament and the Council of the
European Union published a Directive on pedestrian protection to reduce the
number of pedestrian deaths and injuries.  All new 2005 vehicles must comply
with special tests demonstrating they meet standards protecting pedestrians
against head and leg injuries in accidents.  In 2010, two additional stringent
tests will be imposed.

We have developed a Pedestrian Impact Detection system that we believe will
meet the requirements for cars in Europe.  Four separate automotive
suppliers/original equipment manufacturers are testing the Bend Sensor(R)
device for use in pedestrian impact detection.  Thus far, testing has shown
that the Bend Sensor(R) device is able to detect impact with a human leg and
in the event of an accident, trigger a safety response.  The device is also
capable of determining the difference between a human leg and a steel post and
can therefore alter the automobile's response based on the appropriate safety
response. The automobile response can include raising the hood or deploying an
external air bag.  We believe the Bend Sensor(R) device's advantages over the
competition include reliability, accuracy, and lower costs.  Our sensors have
gone through several years of testing for this application.

In October 2005 we completed the initial stage of testing for the Pedestrian
Impact Detection system with Tier One suppliers and confirmed the system's
ability to distinguish within milliseconds between a human leg and an
inanimate object.  The second testing phase will consist of narrowing the
specific materials and applications that will be used in the final
manufacturing process and testing to ensure the system's accuracy and
capabilities.

      Medical Bed

We currently have working prototypes of beds for use in medical applications.
The electronics of the bed are able to record, based on our Bend Sensor(R)
technology input, the position of the person on the bed and how they are
moved.  The bed has the ability to roll the person left or right to remove
pressure areas as well as facilitate dressing changes.  Using our sensor
technology on each of the individual chambers of the bed allows an accurate
automatic profile mapping of the position of the person and immediately
identifies the high pressure zones.  This allows needed adjustments to be made
to meet the required standards of care and comfort.  Adjustments are also
programmable for customized patient care and may be recorded for
administrative use at later dates.

Our Bend Sensor(R) Technology allows the medical bed to read all information
by measuring minute changes in surface deflection.  These measurements are
correlated and calibrated with intra-compartmental air pressure changes to
determine variances in surface pressure where the patient's body is in contact
with the mattress.  Competitors' products use random adjustments and blindly
move pressure zones.  Management believes this application of our technology
is sufficiently unique to provide a major source of revenue.

On September 28, 2005, Flexpoint Sensor Systems, Inc. entered into a
manufacturing agreement with R&D Products, LLC, a Utah limited liability
company, doing business in Midvale, Utah.  For the purpose of this contract,
management considers R&D Products to be a related party because a controlling
member of R&D products, LLC is also a non-controlling interest shareholder of
Flexpoint Sensor.  R&D Products has developed a mattress with multiple air
chambers that use Bend Sensors(R) and we agreed to manufacture the Bend
Sensors(R)  for the mattresses.  The initial term of the agreement is for a
period of five years and the term will renew automatically for one or more
successive one-year terms, unless either party provides written notice of
non-renewal.  The unit prices will be adjusted on an annual basis to reflect
industry standard price changes. The initial order is for 300,000 Bend
Sensors(R) to be used to begin manufacture of 10,000 mattresses.  The
realization of the manufacturing and sales of the Bend Sensors(R) is dependent
upon R&D Products selling either their bed directly to customers or licensing
their

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technology to a third party.  There are no guarantees the R&D Products will
complete sales in such quantities to meet the demands of this contract.

R&D Products will deliver purchase orders for the Bend Sensors(R) to us and
may inspect the production of the Bend Sensors(R).  In addition, both parties
have agreed to maintain the confidentiality of proprietary information
obtained from each other.  The agreement may be terminated by either party for
breach of the agreement by the other party or dissolution of the other entity.
The rights under the agreement cannot be assigned without prior written
consent from the other party.

In December 2005 R&D Products reached a manufacturing agreement with Powin
Corporation to mass produce the medical "SmartBed."  Powin Corportion
dedicated an 80,000 square foot manufacturing facility to manufacture the
SmartBed.  The SmartBed is a pressure neutralizing bed using our Bend
Sensor(R) Technology to precisely identify areas of the body where high
pressure skin contact is most vulnerable and redistributing pressure when and
where needed.  Our Bend Sensor(R) Technology allows the SmartBed to read all
information by measuring minute change in surface deflection.  These
measurements are correlated and calibrated with intra-compartmental air
pressure changes to calculate variances in surface pressure where the
patient's body is in contact with the mattress.

      Air Bag Applications

Automakers and regulators agree that smart air bag systems are the solution to
the rising concerns over the deaths of 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
such as our Bend Sensor(R) technology are a key component of a smart air bag
system.

We have developed an Occupant Classification System that uses a series of
sensors in an automobile seat to sense whether an object on a seat is a human
being and whether it is a child or an adult.  By automatically sensing and
correctly categorizing a car's passengers, our sensors can distinguish between
an object, an infant car seat, a child or an adult passenger.  This
classification system is capable of deactivating an air bag when a person
under 60 pounds or a car seat is in the seat.  This allows the air bag to
deploy in a fashion so as to improve the safety of the passenger.
Management's informal survey of this market has found that the market
opportunity for these applications is substantial considering an annual market
of 19,000,000 vehicles in North America and 50,000,000 worldwide.  We are in
discussions with a Tier 1 supplier for implementation of this device.  We will
continue to work with this Tier 1 supplier to make sure that we meet all
requirements set forth by the government for the device.

The Passenger Presence Detection system is used to detect if there is any
object in the front passenger seat.  This device could be used widely in the
European market because there are specific requirements for this type of
device in Europe.  We are currently working with three Tier 1 suppliers on
this application.  This device could also be used as a seat belt reminder with
a potential market of 17,000,000 vehicles per year.

We have developed a crash sensor, which is a series of sensors mounted in
strategic places on the side and door panels to detect an impact, as well as
the speed, direction and force of the impact.  This allows an onboard computer
to deploy side air bags where needed.

      Flow Control Applications

Our flexible sensor has proven to be an extremely robust and durable flow
control switch.  The Bend Sensor(R) product allows for the measurement of
liquid and air flow, and has been tested to over 35 million cycles without
failure.  When the Bend Sensor(R)  device is placed in a flow stream, it can
measure if flow is occurring, or it can measure the amount of flow that is
occurring.  The fact that our design incorporates a single layer design allows
for it to operate in many harsh environments. While other technologies are
affected by dirt, dust, and liquids, the Bend Sensor(R)  product is able to
operate under these conditions.  We are currently working with a number of
customers on various flow type applications.


                                5

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      Humidity Sensor

We have developed a new version of our patented Bend Sensor(R) technology.
This sensor has proven to function as a very accurate and low cost humidity
sensor.  Environmental chamber testing has been performed from 0% relative
humidity to 100% relative humidity at a wide range of temperatures.
Throughout all of the environmental conditions that the sensors have been
exposed to, they have continued to correlate very accurately to humidity
levels.  The resistance value of the Bend Sensor(R)  changes in direct
response to changes in humidity.  We expect to begin marketing this new
product in 2006 upon completion of qualification testing.

      Other Applications

Management believes the potential market for our technology includes using the
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
have developed, or are developing:
..      a vibration sensor,
..      a steering wheel position device that communicates to an automobile
       onboard computer the amount of rotation of the steering wheel to assist
       the computer in stabilizing control over the vehicle, and
..      sensing devices for medical equipment.

We intend to further identify applications of our technology in numerous
fields and industries.  A core sales strategy is to seek applications of our
technology for products used by customers that emphasize functionality,
reliability, quality, and user convenience.

BUSINESS STRATEGY

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

Since our intended customers are typically technology companies, the design
phase of the sales cycle is extremely important.  We anticipate that the
original equipment manufacturers will typically approach us with a conceptual
product and request that we produce a prototype.  The prototype will then be
tested in the environment in which the ultimate product will be placed.
During this process, customer contact with our application engineers and
internal sales support individuals will be critical for a successful design to
result.

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

MARKETING AND SALES

We intend to market our products primarily to original equipment manufacturers
("OEM's"), either directly or through Tier 1 suppliers.  Our primary marketing
objectives are to generate demand for our products, enhance name recognition
and support OEM's.  We believe that the successful use of our products by
OEM's will create additional demand for a higher quantity of existing
products.  We also anticipate that the success of our existing products will
allow us to successfully introduce new products to the market.

We intend to support OEM's through our network of sales representatives and
our in-house sales force.  We have


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one in-house sales representative and intend to develop sales representative
networks in the Midwest where the major industrial controls manufacturers are
located.  We will also seek to generate interests and explore additional
applications to our technology through attendance and participation at trade
shows and publicity in trade magazines.

We believe that our relationship with OEM's will be an important part of our
overall sales strategy.  We believe that the OEM's will initiate purchase
orders for our products.  In the early stage of this strategy, we likely will
be dependent on a few OEM's and if we lose their business it will have a
significant adverse effect on our results of operations until alternative
distribution channels can be established.  We may consider contractual
commitments to OEM's in exchange for fees and royalties.  In addition, because
we do not sell directly to end users, we are dependent, in part, on the OEM's
for information about retail product sales.  Accordingly, any rapid cessation
of purchases or a switch to other companies' products by end users may not be
immediately evident to us, and could result in increased product returns.

We intend to develop a field sales force including direct marketing employees
in strategic areas and manufacturer's representatives nationwide to generate
OEM customers.  As our market grows in the United States, we anticipate
expanding our distribution network throughout the world.  There can be no
assurance that we will be successful in developing such a sales force or in
expanding our distribution network.

License and supply arrangements, such as those discussed above, create certain
risks for us, including:
..      Reliance for sales of products on other parties, and, therefore,
       reliance on the other parties' marketing ability, marketing plans and
       credit-worthiness;
..      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 Flexpoint Sensor and its subsidiaries;
..      We may have only limited protection from changes in manufacturing costs
       and raw materials costs; and
..      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 such other
       parties upon any renewals of their agreements.

MANUFACTURING AND DISTRIBUTION

Automobile manufacturers and Tier 1 suppliers require all manufactured parts
to be used in their automobiles to be manufactured in ISO/TS-16949 certified
facilities.  IS0/TS-16949 is a Quality Management System that contains the
particular requirements for the application of ISO 9001:2000 for automotive
production and relevant service part organization.  TS-16949 is based on ISO
requirements 9001:2000, but it contains additional requirements that are
particular to the automotive industry.  These additions are considered
automotive "interpretations" by the ISO community of accreditation bodies and
registrars.  TS-16949 is a common supplier quality standard for
DaimlerChyrsler Corporation, Ford Motor Company and General Motors
Corporation.  TS-16949 applies to suppliers of production materials,
production and service parts, heat treating, painting and plating and other
finishing services.  It does not, therefore, apply to all suppliers of the big
three automotive companies.

TS-16949 certification is necessary to assure potential customers that we have
the ability and resources to meet the quantities demanded in a purchase
agreement and that we are able to uphold the quality standards required for
consideration as an automotive supplier.  We are in the process of qualifying
our own manufacturing facility for TS-16949, but we determined that it was
necessary that we had the required manufacturing capabilities now.  As a
result, in February 2005 we entered into a Cooperative Agreement with The
Bergquist Company, a Minnesota corporation that is a qualified automotive
manufacturer.  The agreement provides that the companies will cooperate with
one another to produce Bend Sensor(R)  technology applications for the
automotive industry.  This cooperative agreement provides us with the means to
deliver a finished product to market.

Under the terms of the Bergquist agreement neither company will grant licenses
to the other for their own intellectual property, nor is either company
obligated to rely on the other for production or technology.  Flexpoint Sensor
may produce any production contract or may give Bergquist a reasonable
opportunity to provide a bid for the production contract.  Bergquist may offer
Flexpoint a reasonable opportunity to provide a bid for technology for one of
its production contracts.  The cooperative agreement has a two year term, but
may be extended for a successive one year period at Flexpoint Sensor's option.


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COMPETITION

The sensor business is highly competitive and competition is expected to
continue to increase.  We will compete directly 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.  We do not have an established customer base and are
likely to encounter a high degree of competition in developing a customer
base.

To management's knowledge, technology similar to our technology is currently
in production by other competitors. Management believes that our products will
be sufficiently distinguishable from the existing products so that it will not
compete directly with existing sensor products.  Certain force transducer
sensors and fiber optic sensors are comparable to our Bend Sensors(R)
technology; however, management believes that the force transducer sensor is
not as reliable as our Bend Sensor(R) technology and that the fiber optic
sensors are not as cost effective as our Bend Sensor(R) technology.  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
potentiometer manufacturers.  In the auto seat field our competitors are the
numerous capacitive, piezo, infrared, fsr and ultrasonic sensor manufacturers.
Such competitors may use their economic strength and relationships 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 which compete directly with our products.  No assurance can be
given that we will be successful in competing in this industry.

We intend to compete by offering products that have enhanced features, ease of
use, compatibility, reliability, comparable price, quality and support.
Management also believes our intellectual property provides an advantage over
our competitors.  Although management believes that our products will be well
received in our 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 or performance characteristics will not
be introduced by competitors.

PATENTS AND INTELLECTUAL PROPERTY

We regard certain of our designs as proprietary and attempt to protect them
with patents and by restricting disclosure of the designs as trade secrets.
We have nine issued patents for our Bend Sensor(R) technology and have filed
five additional patent applications, and are in the process of preparing two
additional patents for new types of sensors using our technology.  Sensitron
owns seven United States patents and two foreign patents related to the Bend
Sensor(R)  technology.  Patents do expire and it will be necessary for us to
file patents for each application we develop so that it is protected from
competition.  The earliest patent will expire in October 2009; however, we
have improved these technologies and expect to file new patents based on the
enhancements.  We must file patents on any technology for which we develop
enhancements which contain material improvements to the original technology.
We are aware of three potentially conflicting patents which we believe will
not affect our current or planned use of our 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 such patents, if challenged, will be
upheld by the courts of any jurisdiction.  Patent infringement litigation,
either to enforce our patents or defend us from infringement suits, are
expensive and could divert resources from other planned uses.  For example, we
determined that it was necessary to file a patent encroachment action in
January 2006 (See Item 3. "Legal Proceedings," below).

Patent applications filed in foreign countries and patents in those countries
are subject to laws and procedures that differ from those in the United
States.  Patent protection in foreign countries may be different from patent
protection under United States laws and may not be as favorable to us.  We
also attempt to protect our proprietary 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
proprietary technology.

Management believes that because of the rapid pace of technological change in
our markets, legal protection of our

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proprietary information is less significant to our competitive position than
factors such as 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 commercially exploit the
proprietary aspects of our products.

RESEARCH AND DEVELOPMENT

Although we hold the patent to the basic Bend Sensor(R) technology, as well as
other applications, there will be other competitors working to develop
competing technologies.  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 as well.  For the
year ended December 31, 2005 we spent $479,415 on research and development
related to development engineering for the medical bed technology, new product
development resulting in new patents and testing of products for marketable
applications.

Also, we believe that the coatings for the Bend Sensor(R) 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.  While we expect that future
research and development efforts, if any, will lead to the filing of
additional patent applications, there can be no assurance that any additional
patent filings will be forthcoming.

GOVERNMENTAL REGULATION

During the past several years, the automotive industry has been subject to
increased government safety regulation. Among other things, regulations from
the National Highway Transportation and Safety Administration required
automakers to incorporate advanced air bag technology into vehicles beginning
in 2005 with the phase in to be completed by 2008.  These proposals call for
upgraded air bag system performance tests for passenger cars and light trucks.
The new testing requirements are intended to improve the safety of infants,
children and out-of-position adults, and maximize the protection of properly
seated adults.  The National Highway Transportation and Safety Administration
tests are similar to conditions that we have already been using to test our
Seat Mat System and we believe that our Seat Mat System will meet the
standards as proposed.

EMPLOYEES

As of the date of this filing we have 11 full time employees and employ two
sub-contractors.  Our employees are not presently covered by any collective
bargaining agreement.  We have not experienced any work stoppages and believe
that our relations with our employees are good.

                 ITEM 2.  DESCRIPTION OF PROPERTY

On September 13, 2004, Flexpoint Sensor finalized the lease agreement with
F.G.B.P., L.L.C. for a five-year lease of approximately 11,639 square feet of
office and manufacturing space.  The lease commenced on October 1, 2004 and
terminates on September 30, 2009.  This facility has executive offices and
space for research and development, manufacturing and fulfillment.  The
average monthly payments over the term of the lease are $8,718, including
common area maintenance and a 2% annual increase.  Management is working
toward qualifying this manufacturing facility for TS-16949 certification.  The
building is located in a business park in Draper, Utah consisting primarily of
high tech manufacturing firms and it is located adjacent to Utah's main
interstate.

                    ITEM 3.  LEGAL PROCEEDINGS

On January 20, 2006, Sensitron, Inc. filed a complaint in the United States
District Court for the District of Utah, Central Division, against Michael W.
Wallace, d/b/a Pure Imagination, seeking patent rights for a patent and patent
application that Mr. Wallace filed with the United State Trademark and Patent
Office.  Mr. Wallace assisted Sensitron with the development of certain
software to be used in combination with our Bend Sensor(R)  technology related
to the SEAT MAT(TM) system.  Mr. Wallace failed to deliver the source code to
Sensitron and failed to list our employees and previous employees as
co-inventors on the patent he obtained and for his pending application for a
patent.  Sensitron is seeking a copy of the source code and ownership of the
patent and/or correction of the patent


                                9

<PAGE>


and patent application to add the appropriate co-inventors.  Sensitron is also
seeking unspecified damages along with its costs and attorneys' fees.

On July 3, 2001, Flexpoint Sensor Systems, Inc. filed a voluntary petition for
reorganization pursuant to Chapter 11 of the United States Bankruptcy Code.
The petition was filed in the United States Bankruptcy Court for the District
of Utah, File No. 01-29577JAB.  On February 24, 2004 the bankruptcy court
confirmed our Plan of Reorganization. In our bankruptcy proceeding we objected
to the $1,700,000 claim made by Delco Electronics, Inc.  We believe that
Delphi is precluded by the terms of the agreement from any financial recovery
due to its breach of the sponsorship agreement.  Other potential claims are
breach of contract, breach of fiduciary duties owed to Flexpoint, Inc.
pursuant to the contract, and intentional and negligent interference with
Flexpoint, Inc.'s contractual and business relationship with General Motors.
We believe Delphi will owe a yet to be determined amount of damages for these
claims.  We are currently attempting to negotiate a settlement to this
controversy.


   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On November 22, 2005, we held an annual meeting of shareholders for the
election of three directors and approval of our 2005 Stock Incentive Plan.  On
the record date an aggregate of 22,974,537 shares were outstanding and a
quorum of 21,341,874 shares were represented in person or by proxy at the
meeting.  All of the nominees for director, John A. Sindt, Clark M. Mower and
Ruland Gill, Jr. were elected.  Mr. Mower was elected to serve a one-year
term, Mr. Sindt will serve a two year term and Mr. Gill will serve a
three-year term.

The following tables provide a breakdown of the votes cast on the matters:

Election of directors

      Nominees               Votes For     Votes Withheld    Votes Against
      ---------              ----------    --------------    -------------
      John A. Sindt          21,338,806        3,068              0
      Clark M. Mower         21,338,806        3,068              0
      Ruland J. Gill, Jr.    21,338,806        3,068              0


Adoption of 2005 Stock Incentive Plan

                             Votes For     Votes Withheld    Votes Against
                             ----------    --------------    -------------
                             14,183,473       74,635            51,286



                             PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our common stock is listed on the National Association of Securities Dealers
(NASD) OTC Bulletin Board under the symbol "FLXT."  Pursuant to our bankruptcy
reorganization plan we effected a 7-to-1 reverse split effective March 5,
2004.  The following table lists the range for the high and low bid prices of
our common stock for each quarter for the years ended December 31, 2004 and
2005 as reported by the OTC Bulletin Board.  The price ranges prior to March
5, 2004 are adjusted to account for the reverse.  Over-the-counter market bid
quotations reflect inter-dealer prices, without retail mark-up, mark-downs or
commissions, and may not necessarily represent actual transactions.

      Fiscal Quarter Ended              High                       Low
      --------------------            ---------                 --------
      March 31, 2004                  $  2.20                    $ 0.63
      June 30, 2004                      2.30                      1.30
      September 30, 2004                 1.90                      1.30
      December 31, 2004                  2.00                      1.40


                                10


<PAGE>


      Fiscal Quarter Ended              High                       Low
      ---------------------           ---------                 --------
      March 31, 2005                  $  2.09                   $  1.50
      June 30, 2005                      1.92                      1.40
      September 30, 2005                 2.52                      1.45
      December 31, 2005                  2.67                      1.60


In June 2004 we announced that we were approved for corporate listing in
Standard and Poor's Corporation Records.  This listing is a recognized
securities manual for the Blue Sky standard manual exemption for secondary
trading in more than 35 states.

Our shares are subject to Section 15(g) and Rule 15g-9 of the Securities and
Exchange Act, commonly referred to as the "penny stock" rule.  The rule
defines penny stock to be any equity security that has a market price less
than $5.00 per share, subject to certain exceptions.  The rule provides that
any equity security is considered to be a penny stock unless that security is:
..      Registered and traded on a national securities exchange meeting
       specified criteria set by the SEC;
..      Issued by a registered investment company; or
..      Excluded from the definition on the basis of share price or the
       issuer's net tangible assets.

These rules may restrict the ability of broker-dealers to trade or maintain a
market in our common stock and may affect the ability of shareholders to sell
their shares.  Broker-dealers who sell penny stocks to persons other than
established customers and accredited investors must make a special suitability
determination for the purchase of the security.  Accredited investors, in
general, include individuals with assets in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 together with their spouse, and certain
institutional investors.  The rules require the broker-dealer to receive the
purchaser's written consent to the transaction prior to the purchase and
require the broker-dealer to deliver a risk disclosure document relating to
the penny stock prior to the first transaction.  A broker-dealer also must
disclose the commissions payable to both the broker-dealer and the registered
representative, and current quotations for the security.  Finally, monthly
statements must be sent to customers disclosing recent price information for
the penny stocks.

HOLDERS

As of February 23, 2006, we had approximately 474 stockholders of record of
our common stock, which does not include "street accounts" of securities
brokers.

DIVIDENDS

We have not paid cash or stock dividends and have no present plan to pay any
dividends.  We intend to retain any earnings to finance the operation and
expansion of our business and the payment of any cash dividends on our common
stock is unlikely.  However, our board of directors may revisit this matter
from time to time and may determine our earnings, financial condition, capital
requirements and other factors allow the payment of dividends.

RECENT SALES OF UNREGISTERED SECURITIES

The following discussions describe all securities sold without registration
during the fourth quarter of 2005 that have not been previously reported.

On August 25, 2005, our Compensation Committee under our 2005 Stock Incentive
Plan authorized the grant of options to purchase an aggregate of 1,159,000
shares of common stock to eleven employees.  We relied on an exemption from
registration for a private transaction not involving a public distribution
provided by Section 4(2) of the Securities Act.


                                11

<PAGE>


ISSUER PURCHASE OF SECURITIES

None.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

EXECUTIVE OVERVIEW

We are a development stage company engaged principally in designing,
engineering and manufacturing Bend Sensor(R) technology and equipment.  Our
current focus is to obtain necessary capital to operate and expand our
business.  On February 24, 2004 our Chapter 11 bankruptcy reorganization plan
was confirmed by the bankruptcy court and effected on March 5, 2004.  As a
result, Flexpoint Sensor is considered a new entity for financial reporting
purposes with an inception date of February 24, 2004.

We initiated a private offering in January 2005 that funded our operations for
the 2005 year and will provide funds for at least the next six months.  We
will require additional financing to fund our long-term cash needs and we may
be required to rely on debt financing, loans from related parties, and private
placements of our common stock for additional funding.

During the fourth quarter of 2005 we have concentrated our development efforts
with our customers and have signed a contract to produce Bend Sensors(R) for a
bed application. We have also filed applications for several patents on
products that we have developed.

During the fourth quarter of 2005, development and research for several
automotive customers were approved to be advanced to the next stage of
testing.  Negotiations for potential automotive applications using our Bend
Sensor(R) technology are in process, but we have not yet entered into a major
contract for the sale of our automotive products.  We are also continuing to
develop new products that we may sell or license to an industrial control
company.

Finalizing a major contract with a customer remains our greatest challenge.
We must continue to obtain funding to operate and expand our operations so
that we can deliver our product to the market.  Management believes that even
though we are making positive strides forward with our business plan, it is
likely that significant progress may not occur for the next six months.
Accordingly, we cannot guarantee that we will realize significant revenues or
that we will become profitable within the next twelve months.

LIQUIDITY AND CAPITAL RESOURCES

As a result of the confirmation of our reorganization plan, we used
fresh-start reporting from the February 24, 2004 date of emergence from
bankruptcy and have included the audited financial statements for the interim
period from February 24, 2004 through December 31, 2004 (the "2004 interim
period").

During the first quarter of 2005 we conducted a private offering to raise
funds for operations.  We realized net proceeds of $3,907,207 from our private
placement and as a result we had $1,964,487 in cash and cash equivalents at
December 31, 2005.  In this private placement we issued an aggregate of
2,836,335 units to purchasers and 140,000 units were issued to the placement
agent.  Each unit consisted of one share and one warrant to purchase one share
at an exercise price of $3.00.  If all of the warrants issued in the private
placement are exercised, then we may realize an additional $8,929,005, based
on an exercise price of $3.00 per warrant.  Except for the "call" provision,
the warrant holders have total discretion as to when or if the warrants are
exercised.  The "call" provision requires that if the closing bid price of our
common stock is greater than $4.00 per share for five consecutive trading days
after October 1, 2005 and during the exercise term of the warrant, then we
have the right to call the warrant in whole or in part, forcing the investor
to exercise the warrant within fifteen trading days or the warrant is
forfeited.  We cannot guarantee that the price of our common stock will reach
$4.00 and, in that case, the warrant holders will determine when and if the
warrants are exercised.

Our revenues are not to a level to support our operations.  Net cash used by
operating activities was $1,473,763 for


                                12

<PAGE>


the year ended December 31, 2005 ("2005 year") compared to net cash used for
by operating activities of $535,404 for the 2004 interim period.  We also had
a net operating loss of $1,770,020 for the 2005 year compared to a net
operating loss of $4,510,726 for the 2004 interim period.

During the 2004 interim period we relied primarily on a $1.5 million
convertible line of credit from Broad Investment Partners to fund our
operations after bankruptcy.  This line of credit was executed as part of our
bankruptcy reorganization plan.  During March 2004, we drew $1,443,334 from
this line of credit, which resulted in a discount to the note of $56,666.  Of
the amount drawn from the line of credit, we assumed debt of $698,000 to
acquire the assets of Flexpoint Holdings, LLC, and $102,000 was used to repay
a short-term advance from Flexpoint Holdings, LLC.  We borrowed $583,334 from
the credit line for operations and $60,000 was borrowed from the credit line
to settle certain secured and priority claims of the reorganization plan.

Pursuant to the terms of the convertible line of credit, we initially placed
3,000,000 free trading shares in an escrow account for conversion of the
credit line.  In March and May 2004 the $1,500,000 amount drawn from the line
of credit was converted into common stock at a rate of $0.50 per share.  This
conversion resulted in the issuance of 3,000,000 shares of common stock to
Broad Investment Partners and its assignees.

Management anticipates that the proceeds from our private placement will fund
our operations in the short term, but we may still require debt financing,
notes from related parties, and private placements of our common stock to fund
the expansion of our operations.  However, we cannot assure you that plans to
obtain financing will be completed, or that such sources of financing, if any,
will continue to be available, and if available, that they will be on terms
favorable to us. We intend to use revenues and our cash to purchase and
install equipment and develop our ISO/TS-16949 certified facility.

As we enter into new technology agreements in the future, we must ensure that
those agreements provide adequate funding for any pre-production research and
development and manufacturing costs.  If we are successful in establishing
agreements with adequate initial funding, management believes that our
operations for the long term will be funded by revenues, licensing fees and
royalties related to these agreements.  However, we have formalized only a few
additional agreements since confirmation of our bankruptcy reorganization plan
and there can be no assurance that agreements will come to fruition in the
future or that a desired technological application can be brought to market.

ASSET PURCHASE

On March 31, 2004, Flexpoint Sensor entered into an asset purchase agreement
with Flexpoint Holdings, LLC, a company owned in part and controlled by a less
than 5% shareholder of Flexpoint Sensor.  The owners and manager of Flexpoint
Holdings, LLC were not officers, directors or employees of Flexpoint Sensor,
nor did they hold any controlling relationship in Flexpoint Sensor or retain a
substantial indirect interest in the assets sold as a result of stock
ownership in Flexpoint Sensor. The agreement provided that Flexpoint Sensor
acquire substantially all of Flexpoint Holding's equipment and proprietary
technology.  The equipment consisted of manufacturing equipment to produce our
Bend Sensor(R)  products and the technology consisted of the software
algorithms that interpret data provided by the sensor technology.   Flexpoint
Holdings was a Utah limited liability company formed to acquire and hold the
assets that one of our creditors caused to be seized during 2001 and sold at
public auction during 2002.

To acquire the equipment and technology from Flexpoint Holdings, we paid
$265,000 in cash, we issued 1,600,000 shares of our restricted common stock
valued at $1,931,309, or $1.21 per share, and we assumed a convertible note
payable of $698,000.  The equipment and technology had an appraised fair value
of $4,302,643.  The cost allocated to the property and equipment was
$1,248,732 and to the proprietary technology was $1,645,577.

COMMITMENTS AND CONTINGENCIES

Our principal commitments consist of our total current liabilities of $85,062
at December 31, 2005 and an operating lease.  The operating lease has average
monthly payments of $8,718, including common area maintenance and a 2% annual
increase.  The total future minimum payments under this lease are $395,889 as
of December 31, 2005.


                                13

<PAGE>


During the 2004 interim period we relied on loans from related parties to fund
our operations.  At December 31, 2004 we had an unsecured note payable to
First Equity Holdings Corp., a shareholder, for $198,000 at 12% interest, and
we also had an unsecured note payable to Persimmon LLC for $212,758.  We owed
Persimmon LLC $16,000 upon emergence from bankruptcy.  Then we borrowed an
additional $247,100 from Persimmon and repaid $50,342.  The initial terms of
these notes payable required payment of the principal and interest by December
31, 2004; however, the terms were amended to extend the due dates to March 31,
2005.  As of June 30, 2005, we had repaid the $198,000 note to First Equity
Holdings Corp., plus interest, and paid $212,758 of the note payable, plus
interest, to Persimmon LLC.

In January 2006 we initiated a legal action against Michael Wallace for patent
encroachment (See Item 3. Legal Proceedings, above).  We anticipate that this
legal action will result in legal costs of approximately $100,000.  We will
divert a portion of our financial resources to continue this legal matter.

OFF-BALANCE SHEET ARRANGEMENTS

None.

CRITICAL ACCOUNTING ESTIMATES

We annually test goodwill for impairment or when a triggering event occurs.
Impairment is indicated if undiscounted cash flows are less then the carrying
value of the assets.  The amount of impairment is measured using a
discounted-cash-flows model considering future revenues, operating costs and
risk-adjusted discount rate and other factors.

In connection with the approval of our bankruptcy reorganization plan, we
estimated the fair value of the patents listed on our books as of February 24,
2004.  This valuation was an estimate and subject to completion of an
independent appraisal of our intangible assets consisting of patents and
goodwill.  During the 2004 fourth quarter the independent appraisal was
completed.  The independent appraisal established the fair value of intangible
assets at $5,635,561 and the total fair value was allocated between the value
of the patents and goodwill per the independent appraisal.  Patents were
allocated $279,147 and goodwill was allocated $5,356,414.

RESULTS OF OPERATIONS

The following discussions are based on the consolidated operations of
Flexpoint Sensor and its subsidiaries and should be read in conjunction with
our audited financial statements the year ended December 31, 2005 and for the
interim period from emergence from bankruptcy on February 24, 2004 through
December 31, 2004.  These financial statements are included in this report at
Part II, Item 7, below.


                    SUMMARY OPERATING RESULTS

                                                           Period from
                                                           Feb. 24, 2004
                                         Year ended        through
                                         Dec. 31, 2005     Dec. 31, 2004
                                         --------------    ---------------

Revenue                                  $      12,595     $      345,433

Total costs and expenses                    (1,834,816)        (3,362,604)

Net other income (expense)                      52,201         (1,493,555)

Net profit (loss)                           (1,770,020)        (4,510,726)

Basic and diluted loss per share         $       (0.08)    $        (0.24)




                                14


<PAGE>


Revenue from the sale of a product is recorded at the time of shipment to the
customer.  Revenue from research and development engineering contracts is
recognized as the services are provided and accepted by the customer.  Revenue
from contracts to license technology to others is deferred until all
conditions under the contract are met and then the sale is recognized as
licensing royalty revenue over the remaining term of the contract.

For the 2005 year and the 2004 interim period our revenue was primarily from
licensing fees and royalties, and engineering services.  Licensing revenue of
$225,000 recorded in the fourth quarter of 2004 resulted from the early
cancellation of a licensing agreement, which accelerated recognition of the
revenues previously deferred to be recognized evenly over the six-year term of
the license agreement.  In October 2004 we cancelled the licensing agreement
with a customer and paid the customer $100,000 of the prepayment we had
previously received from the customer.  The balance of $225,000 of deferred
revenues that was being amortized over the six-year term was included as
revenue in the 2004 fourth quarter.

Total costs and expense decreased for the 2005 year compared to the 2004
interim period primarily as a result of decreases in general and
administrative and marketing expenses.  The 2004 interim period general and
administrative and marketing expense included $1,776,000 related to settlement
of claims by the issuance of 1,200,000 shares of restricted common stock to
Mr. Sindt, an officer and director of the company.  In addition $846,008 of
these expenses for the 2004 interim period related to the issuance of 100,000
common shares and the vesting of warrants to purchase 650,000 shares granted
to Summit Resource Group in March 2004 in consideration for public and
investor relations consulting services.

Cost of revenue for 2005 decreased to $7,692 compared to $86,605 for the 2004
year because development engineering labor was allocated to cost of goods in
2004, but was expensed as research and development in 2005.

Total other income of $52,201 for the 2005 year was primarily the result of
interest income of $59,544 related to interest on the proceeds of the private
placement offering which were deposited in a savings account.  Total other
expense for the 2004 interim period was primarily the result of $1,568,823
expense related to the interest on loans and a $1,500,000 beneficial
conversion received by Broad Investment Partners related to the convertible
debt.  The principal balance of the $1,500,000 loan from Broad Investment
Partners was convertible into common stock at $0.50 per share; however, the
average market value at February 24, 2004 was $1.00.  This resulted in Broad
Investment Partners receiving a beneficial debt conversion option of
$1,500,000 which was amortized and recognized as interest expense through
March 31, 2004 when the note was converted into 3,000,000 shares.

As a result of the above, we recorded a net loss for both the 2005 year and
the 2004 interim period, however, our net loss decreased $2,740,706 from the
2004 interim period.

                SUMMARY BALANCE SHEET INFORMATION

The chart below presents a summary of our balance sheets at December 31, 2005
and 2004.

                                      December 31, 2005    December 31, 2004
                                      -----------------    -----------------

Cash and cash equivalents             $   1,964,487        $        54,358

Total current assets                      1,999,148                 55,107

Total assets                             10,304,149              8,556,661

Total current liabilities                    85,062                547,806

Deficit accumulated during               (6,280,746)            (4,510,726)
  the development stage

Total stockholders equity             $  10,219,087        $     8,008,855


                                15


<PAGE>


Cash increased at December 31, 2005, compared to December 31, 2004, primarily
as a result of the proceeds from our private placement.  However, we had
minimal revenues in the 2005 year and our cash is continuing to decrease.  Our
non-current assets increased slightly at December 31, 2005 and include
property and equipment valued at $1,238,404, patents and proprietary
technology of $1,703,683, goodwill of $5,356,414, and a deposit of $6,500.

Total current liabilities decreased at December 31, 2005 primarily as a result
of decreases in accounts payable resulting from our payment of $410,958 of
unsecured notes payable outstanding from our bankruptcy.

Factors Affecting Future Performance

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

We are unable to fund our day-to-day operations from revenues and the lack of
revenues for continued growth may cause us to delay our business plans.  For
the 2005 year, we incurred a net loss of $1,770,020 and had negative cash
flows from operating activities of $1,473,763.  We anticipate proceeds from
our private placement in March of 2005 will fund our operations for at least
the next six months; however, we anticipate that revenues will not increase
until late 2006 or early 2007.  In addition, if we decide to expand our
business activities outside the automotive market in 2006, we anticipate
needing more than approximately $1,000,000 in additional funding.

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

In January 2005 we restructured our management team and brought in an
experienced group of executive level management personnel to direct the growth
of our business operations.   However, we may not be equipped to successfully
manage any future periods of rapid growth or expansion, which could be
expected to place a significant strain on our managerial, operating, financial
and other resources.  Our future performance will depend, in part, on our
ability to manage growth effectively, which will require us to:
..      improve existing and implement new financial controls and systems,
       management information systems, operating, administrative, financial
       and accounting systems and controls,
..      maintain close coordination between engineering,  programming,
       accounting, finance, marketing, sales and operations, and
..      attracting and retaining additional qualified technical and marketing
       personnel.
There is intense competition for management, technical and marketing personnel
in our business.  The loss of the services of any of our key employees or our
failure to attract and retain additional key employees could have a material
adverse effect on our ability to continue as a going concern.

     We may not have adequate manufacturing capacity to meet anticipated
     manufacturing contracts.

Based on projected orders under anticipated agreements, we will need to
complete a second production line and have it installed and approved in 2006.
The second manufacturing line is expected to result in increased manufacturing
capacity and manufacturing efficiencies.  We have completed installation of
our first production line and are in the process of qualifying our own
manufacturing facility for ISO/TS16949 certification.  However, we cannot
assure you that we will satisfy TS-16949 qualification or that the production
lines will produce product in the volumes required or that the production
lines will satisfy the requirements of our customers.

     Our success is dependent on our intellectual property rights which are
     difficult to protect.

Our future success depends on our ability to protect our intellectual
property.  We use a combination of patents and other intellectual property
arrangements to protect our intellectual property.  There can be no assurance
that the protection provided by our patents will be broad enough to prevent
competitors from introducing similar products or that our patents, if
challenged, will be upheld by courts of any jurisdiction.  Patent infringement
litigation, either to enforce our patents or defend ourselves from
infringement suits, will be expensive and could divert our resources from
other planned uses.  Patent applications filed in foreign countries and
patents in these countries are subject to


                                16

<PAGE>

laws and procedures that differ from those in the U.S. and may not be as
favorable to us.  We also attempt to protect our confidential information
through the use of confidentiality agreements and by limiting access to our
facilities.  There can be no assurance that our program of patents,
confidentiality agreements and restricted access to our facilities will be
sufficient to protect our confidential information from competitors.

     Research and development may result in problems which may become
     insurmountable to full implementation of production.

Customers request that we create prototypes and perform pre-production
research and development. As a result, we are exposed to the risk that we may
find problems in our designs that are insurmountable to fulfill production.
In that event, we will be unable to recover the costs of the pre-production
research and development.  However, we are currently unaware of any
insurmountable problems with ongoing research and development that may prevent
further development of an application.

     Our products must satisfy governmental regulations in order to be
     marketable

During the past several years, the automotive industry has been subject to
increased government safety regulation. Among other things, proposed
regulations from the National Highway Transportation and Safety Administration
would require automakers to incorporate advanced air bag technology into
vehicles beginning in 2005 with the phase in to be completed by 2008.  Our
products may not meet the proposed National Highway Transportation and Safety
Administration standards or the standards may be modified.  These proposals
call for upgraded air bag system performance tests for passenger cars and
light trucks.  The new testing requirements are intended to improve the safety
of infants, children and out-of-position adults, and maximize the protection
of properly seated adults.  The National Highway Transportation and Safety
Administration tests are similar to conditions that we have already been using
to test our Seat Mat System and we believe that our Seat Mat System will meet
the standards as proposed.  In addition, automakers may react to these
proposals and the uncertainty surrounding these proposals by curtailing or
deferring investments in new technology, including our Bend Sensor(R)
technology, until final regulatory action is taken.  We cannot predict what
impact, if any, these proposals or reforms might have on our financial
condition and results of operations.

     Because we are significantly smaller than the majority of our
     competitors, we may lack the financial resources needed to capture
     increased market share.

The market for sensor devices is extremely competitive, and we expect that
competition will intensify in the future. There can be no assurance that we
will be able to compete successfully against current or future competitors or
that competitive pressures we face will not materially adversely affect our
business, operating results or financial condition.  Our primary competitors
in the air bag market are International Electronics and Engineering, Siemens,
Robert Bosch GmbH, Denso, Inc., Breed Technologies, TRW Automotive, Delphi
Corporation, Autoliv Inc., Takata and Temic.  We believe that none of our
competitors have a product that is superior to our Bend Sensor(R) technology
at this time.  However, many of our competitors and potential competitors have
substantially greater financial, technical and marketing resources, larger
customer bases, longer operating histories, greater name recognition and more
established relationships than we do.  These competitors may be able to
undertake more extensive marketing campaigns, adopt more aggressive pricing
policies and devote substantially more resources to developing new products
and markets than we can.

     Ongoing industry consolidation among worldwide automotive parts suppliers
     may limit the market potential for our products.

In the automotive parts industry, there is a trend of consolidation through
business combinations and acquisitions of complementary technologies among
worldwide suppliers as these suppliers seek to build stronger customer
relationships with automobile manufacturers.  Automobile manufacturers look to
Tier 1 suppliers (major suppliers) to provide fully engineered systems and
pre-assembled combinations of components rather than individual components.
This trend of consolidation of suppliers may result in fewer Tier 1 suppliers
and thus limit the marketing opportunities for our Bend Sensor(R) technology.
In addition, in recent months large auto makers have


                                17

<PAGE>


announced plans to close plants and reduce their work force, some Tier 1
suppliers are in bankruptcy or in financial difficulty, and two automobile
manufacturers have reported increased financial difficulties.  These industry
trends may limit the market for our products.


                  ITEM 7.  FINANCIAL STATEMENTS


         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
                  (A Development Stage Company)

                                                                         Page
                                                                         ----
Report of Independent Registered Public Accounting Firm....................19

Consolidated Balance Sheets  December 31, 2005 and 2004....................20

Consolidated Statements of Operations for the year ended
 December 31, 2005 and the Period from February 24, 2004
 (date of emergence from bankruptcy) through December 31,
 2004 and for the cumulative period from February 24,
 2004, (date of emergence from bankruptcy) through
 December 31, 2005.........................................................21

Consolidated Statements of Stockholders Equity for the
 period from February 24, 2004 (date of emergence from
 bankruptcy) through December 31, 2004 and for the year
 ended December 31, 2005...................................................22

Consolidated Statements of Cash Flows for the year ended
 December 31, 2005 and for the Period from February 24,
 2004 (date of emergence from bankruptcy) through December
 31, 2004 and for the cumulative period from February 24,
 2004 (date of emergence from bankruptcy) through December
 31, 2005..................................................................23

Notes to Consolidated Financial Statements..............................24-35


                                18

<PAGE>




      HANSEN, BARNETT & MAXWELL
      A Professional Corporation
      CERTIFIED PUBLIC ACCOUNTANTS
      5 Triad Center, Suite 750
      Salt Lake City, UT 84180-1128
      Phone: (801) 532-2200
      Fax: (801) 532-7944
      www.hbmcpas.com


     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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 development stage company) (the
Company) as of December 31, 2005 and 2004 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year
ended December 31, 2005, for the period from February 24, 2004 (date of
emergence from bankruptcy) through December 31, 2004 and for the cumulative
period from February 24, 2004 (date of emergence from bankruptcy) through
December 31, 2005.  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 audit.


We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  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, 2005 and 2004 and the
results of their operations and their cash flows for the year ended December
31, 2005, for the period from February 24, 2004 (date of emergence from
bankruptcy) through December 31, 2004 and for the cumulative period from
February 24, 2004 (date of emergence from bankruptcy) through December 31,
2005 in conformity with U.S. generally accepted accounting principles.



                                         /s/ Hansen, Barnett & Maxwell

                                         HANSEN, BARNETT & MAXWELL

Salt Lake City, Utah
January 20, 2006



                                19
<PAGE>




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


December 31,                                           2005          2004
----------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents                        $  1,964,487  $     54,358
Accounts receivable                                         -           749
Prepaid expenses                                       34,661             -
----------------------------------------------------------------------------
Total Current Assets                                1,999,148        55,107
----------------------------------------------------------------------------

Property and equipment, net of accumulated
 depreciation of $205,640 and $47,695               1,238,404     1,311,139
Patents and proprietary technology, net of
 accumulated amortization of $264,667 and $112,702  1,703,683     1,827,501
Goodwill                                            5,356,414     5,356,414
Deposits                                                6,500         6,500
----------------------------------------------------------------------------
Total Assets                                     $ 10,304,149  $  8,556,661
============================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable                                 $     41,737  $    116,378
Accrued liabilities                                    43,325        20,470
Notes payable - related parties                             -       410,958
----------------------------------------------------------------------------
Total Current Liabilities                              85,062       547,806
----------------------------------------------------------------------------

Stockholders' Equity
Preferred stock - $0.001 par value; 1,000,000
 shares authorized; no shares issued or outstanding         -             -
Common stock - $0.001 par value; 100,000,000 shares
 authorized; 22,992,887 shares and 19,998,202 shares
 issued and outstanding respectively                   22,992        19,998
Additional paid-in capital                         13,777,276    11,768,255
Warrants outstanding                                2,699,565       731,328
Deficit accumulated during the development stage   (6,280,746)   (4,510,726)
----------------------------------------------------------------------------
Total Stockholders' Equity                         10,219,087     8,008,855
----------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity       $ 10,304,149  $  8,556,661
============================================================================


                                20

<PAGE>
<TABLE>
<CAPTION>


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


                                                         For the period    For the Cumulative
                                                         from              Period from
                                                         February 24, 2004 February 24, 2004
                                                        (Date of Emergence (Date of Emergence)
                                       For the Year      from Bankruptcy)  from Bankruptcy)
                                       Ended             through           through
                                       December 31, 2005 December 31, 2004 December 31, 2005
---------------------------------------------------------------------------------------------
<S>                                    <C>               <C>               <C>

Design, Contract and Testing Revenue   $         12,595  $        345,433  $         358,028
---------------------------------------------------------------------------------------------

Operating Costs and Expenses
Amortization of patents and
 proprietary technology                        (128,109)          (96,082)          (224,191)
Cost of revenue                                  (7,692)          (86,605)           (94,297)
Administrative and marketing expense         (1,219,600)       (3,179,917)        (4,399,517)
Research and development expense               (479,415)                -           (479,415)
---------------------------------------------------------------------------------------------
Total Operating Costs and Expenses           (1,834,816)       (3,362,604)        (5,197,420)
---------------------------------------------------------------------------------------------

Other Income and Expenses
Interest expense                                 (7,231)       (1,568,823)        (1,576,054)
Interest income                                  59,544                 -             59,544
Sublease rent income                              3,888                 -              3,888
Gain (loss) on forgiveness of debt               (4,000)           75,268             71,268
---------------------------------------------------------------------------------------------
Net Other Income (Expense)                       52,201        (1,493,555)        (1,441,354)
---------------------------------------------------------------------------------------------

Net Loss                               $     (1,770,020) $     (4,510,726) $      (6,280,746)
=============================================================================================

Basic and Diluted Loss Per Share       $          (0.08) $          (0.24)
==========================================================================

Basic and Diluted Weighted-Average
 Common Shares Outstanding                   22,596,558        18,503,026
==========================================================================




                                   21

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

            FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
                     (A Development Stage Company)
             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
       FOR THE PERIOD FROM FEBRUARY 24, 2004 (DATE OF EMERGENCE
              FROM BANKRUPTCY) THROUGH DECEMBER 31, 2004
                AND FOR THE YEAR ENDED DECEMBER 31, 2005


                                                                                Deficit
                                                                              Accumulated
                                Common Stock        Additional                 During the    Total
                         --------------------------  Paid-in       Warrants   Development Stockholders'
                           Shares        Amount      Capital     Outstanding     Stage       Equity
                         ------------- ------------ ------------ ----------- ------------ -------------

                      <c>           <c>          <c>          <c>         <c>          <c>
Balance - February 24,
 2004 (Date of Emergence
 from Bankruptcy)          14,098,202  $    14,098  $ 4,952,166  $        -  $         -  $  4,966,264

Beneficial debt
 conversion option                   -           -    1,500,000           -            -     1,500,000

Conversion of note
 payable, March 31 and
 May 19, 2004, $0.50
 per share                   3,000,000       3,000    1,497,000           -            -     1,500,000

Issuance for consulting
 services, March 3, 2004,
 $1.15 per share               100,000         100      114,580           -            -       114,680

Share-based compensation
 from 650,000 warrants
 issued on March 3, 2004
 for consulting services             -           -            -     731,328            -       731,328

Issuance for acquisition
 of equipment and
 proprietary technology
 from Flexpoint Holdings,
 LLC, a company controlled
 by a shareholder, March
 31, 2004, $1.21 per share   1,600,000       1,600    1,929,709           -            -     1,931,309

Issuance for compensation,
 November 24, 2004, $1.48
 per share                   1,200,000       1,200    1,774,800           -            -     1,776,000

Net loss                             -           -            -           -   (4,510,726)   (4,510,726)
-------------------------------------------------------------------------------------------------------
Balance -
 December 31, 2004          19,998,202      19,998   11,768,255     731,328   (4,510,726)    8,008,855

Issuance of common stock
 at $ .77 per share and
 2,826,335 warrants at
 $0.61 per warrant for
 cash net of $347,294
 cash offering costs and
 140,000 common shares
 and 140,000 warrants,
 January through March
 2005                        2,976,335       2,976    1,977,294   1,926,937            -     3,907,207

Issuance of 30,000 warrants
 at $1.38 per warrant for
 services rendered July 2005         -           -            -      41,300            -        41,300

Issuance of common stock at
 $ 1.73 per share, as
 compensation to director
 of company for services
 rendered, August 2005          18,350          18       31,727           -            -        31,745

Net loss                             -           -            -           -   (1,770,020)   (1,770,020)
-------------------------------------------------------------------------------------------------------
Balance -
 December 31, 2005          22,992,887  $   22,992  $13,777,276  $2,699,565  $(6,280,746) $ 10,219,087
=======================================================================================================


                                        22

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

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


                                                                    For the period    For the Cumulative
                                                                    from              Period from
                                                                    February 24, 2004 February 24, 2004
                                                                   (Date of Emergence (Date of Emergence)
                                                  For the Year      from Bankruptcy)  from Bankruptcy)
                                                  Ended             through           through
                                                  December 31, 2005 December 31, 2004 December 31, 2005
--------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>               <C>
Cash Flows from Operating Activities:
Net loss                                          $    (1,770,020)  $    (4,510,726)  $    (6,280,746)
Adjustments to reconcile net loss to
 net cash used in operating activities:
  Depreciation                                            157,945            47,695           205,640
  Amortization of patents and proprietary technology      151,965           112,702           264,667
  Issuance of common stock and warrants for services       73,045         2,622,008         2,695,053
  Expenses paid by increase in convertible note payable         -            60,000            60,000
  Amortization of discount on note payable                      -         1,556,666         1,556,666
  Changes in operating assets and liabilities:
    Accounts receivable                                       749              (749)                -
    Accounts payable                                      (74,641)          (91,728)         (166,369)
    Accrued liabilities                                    21,855            18,978            40,833
    Deferred revenue                                            -          (343,750)         (343,750)
    Prepaid expenses                                      (34,661)                -           (34,661)
    Deposits                                                    -            (6,500)           (6,500)
------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities                  (1,473,763)         (535,404)       (2,009,167)
------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Payments for the purchase of equipment                    (85,210)         (110,102)         (195,312)
Payments for patents                                      (28,147)          (15,479)          (43,626)
Payment for acquisition of equipment and proprietary
 technology from  Flexpoint Holdings, LLC                       -          (265,000)         (265,000)
------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities                    (113,357)         (390,581)         (503,938)
------------------------------------------------------------------------------------------------------

Cash Flows from Financing Activities:
Net proceeds from issuance of common stock
  and warrants                                          3,907,207                 -         3,907,207
Principal payments on notes payable - related parties    (409,958)          (50,342)         (460,300)
Proceeds from notes payable - related parties                   -           445,300           445,300
Proceeds from borrowings under convertible note payable         -           583,334           583,334
------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities               3,497,249           978,292         4,475,541
------------------------------------------------------------------------------------------------------

Net Change in Cash and Cash Equivalents                 1,910,129            52,307         1,962,436
Cash and Cash Equivalents at Beginning of Period           54,358             2,051             2,051
------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period        $     1,964,487   $        54,358   $     1,964,487
======================================================================================================

Supplemental Cash flow Information:
------------------------------------------------------------------------------------------------------
Cash paid for interest                            $         7,231   $         9,657   $        16,888
======================================================================================================



                                        23


</TABLE>
<PAGE>


            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - NATURE OF BUSINESS

Nature of Operations - Flexpoint Sensor Systems, Inc. and its subsidiaries
(the Company), located in Salt Lake City, Utah, is a development stage company
engaged principally in designing, engineering, and manufacturing sensor
technology and equipment using flexible potentiometer technology.  On February
24, 2004, the Company's plan of reorganization was confirmed by the U.S.
Bankruptcy Court and the Company emerged from bankruptcy.  As discussed
further in Note 3, the emergence from bankruptcy was accounted for using fresh
start accounting and the Company was considered a new entity for financial
reporting purposes.  The new entity is in the development stage, as planned
operations have not commenced.  Development stage activities primarily include
acquiring equipment and technology, organizing activities, obtaining financing
and seeking manufacturing contracts.  To date, these activities have not
resulted in any sustainable source of revenue or sales of the Company's
products or technology.  There is no assurance that the Company will be
successful in exploiting its technology or in obtaining profitable operations.

Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of Flexpoint Sensor Systems, Inc. and its
wholly owned subsidiaries, Sensitron, Inc., Flexpoint, Inc. and Flexpoint
International, LLC.  During 2005 a minority interest holder in the
subsidiaries relinquished his interest for no consideration. The interest in
the subsidiaries is carried at no value based on its historical cost.
Intercompany transactions and accounts have been eliminated in consolidation.

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 Company had a net operating loss of $1,770,020, and
$4,510,726 and used cash in operating activities of $1,473,763 and $535,404
for the year ended December 31, 2005 and for the period from February 24, 2004
(date of emergence from bankruptcy) through December 31, 2004, respectively.
The Company had accumulated deficits of $6,280,746 and $4,510,726 at December
31, 2005 and December 31, 2004, respectively.

Through December 31, 2004, the Company met its short-term cash needs through
proceeds from related party notes payable and from a convertible note payable.
During 2005, the Company issued common stock and warrants in a private
placement offering for proceeds of $3,980,207.  To meet its short-term cash
need, the Company may issue additional equity securities or incur debt should
the Company not be able to generate sufficient revenues from operations with
its current working capital.  However, there can be no assurance that plans to
obtain financing will be completed as planned, or that such sources of
financing, if any, will continue to be available, and if available, that they
will be on terms favorable to the Company.

Fair Values of Financial Instruments - The amounts reported as notes payable
to a related party are considered to be reasonable approximations of their
fair value due to their short repayment term.

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 method and is recognized over the estimated
useful lives of the property and equipment, which are three to ten years.
Depreciation expense was $157,945 and $47,695 for the year ended December 31,
2005 and for the period from February 24, 2004 (date of emergence from
bankruptcy) through December 31, 2004.  Property and equipment consists of the
following:








                                24

<PAGE>

            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



      December 31,                                 2005        2004
      ------------------------------------------------------------------
      Machinery and equipment                 $ 1,250,406   $ 1,190,257
      Office equipment                            139,397       130,132
      Furniture and fixtures                       42,712        38,445
      Software                                     11,529             -
      ------------------------------------------------------------------
      Total Property and Equipment              1,444,044     1,358,834
      Less: Accumulated depreciation             (205,640)      (47,695)
      ------------------------------------------------------------------
      Net Property and Equipment              $ 1,238,404   $ 1,311,139
      ==================================================================

Valuation of Long-lived Assets - The carrying values of the Company's
long-lived assets are reviewed for impairment annually and whenever events or
changes in circumstances indicate that they may not be recoverable.  When
projections indicate that the carrying value of the long-lived asset is not
recoverable, the carrying value is reduced by the estimated excess of the
carrying value over the projected discounted cash flows.

Intangible Assets - Costs to obtain or develop patents are capitalized and
amortized over the remaining life of the patents, technology rights are
amortized over their estimated useful lives. The Company currently has the
rights to several patents and proprietary technology.  Patents and technology
are amortized from the date the Company acquires or is awarded the patent or
technology right, over their estimated useful lives.  An impairment charge is
recognized if the carrying amount is not recoverable and the carrying amount
exceeds the fair value of the intangible assets as determined by projected
discounted cash flows of anticipated future company revenues of patent or
technology products or royalties.  Upon emergence from bankruptcy, the Company
recognized patents valued at $279,147.  Following emergence, the Company
acquired proprietary technology valued at $1,645,577.  The recorded fair
values of the Company's intangible assets were established through an
independent appraisal.  Amortization of patents and proprietary technology was
$151,965 and $112,702 for the year ended December 31, 2005 and for the period
from February 24, 2004 through December 31, 2004, respectively.

Research and Development - Research and development costs are recognized as
expense during the period incurred until the conceptual formulation, design,
and testing of a process is completed and the process has been determined to
be commercially viable.

Goodwill - Goodwill represents the excess of the reorganization value over the
fair value of net assets of the Company upon emergence from bankruptcy.
Goodwill is not amortized, but is tested for impairment annually or when a
triggering event occurs. When tested, the undiscounted net cash flows of the
asset or entity to which the goodwill relates are evaluated. Impairment is
indicated if undiscounted cash flows are less than the carrying value of the
assets. The amount of the impairment is measured using a discounted-cash-flow
model considering future revenues, operating costs, a risk-adjusted discount
rate and other factors.

Revenue Recognition - Revenue is recognized when persuasive evidence of an
arrangement exists, services have been provided or goods delivered, the price
to the buyer is fixed or determinable and collectibility is reasonably
assured. 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 technology to others is deferred until all
conditions under the contracts are met and then recognized as licensing
royalty revenue over the remaining term of the contracts.


                                25

<PAGE>

            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Sensitron, Inc., the Company's subsidiary, had deferred revenue of $325,000
through September 2004, which consisted of $250,000 of prepaid licensing
royalties to be deferred and recognized as the related licensing royalty sales
were reported to the Company by the customer over the remaining term of the
agreement, and $75,000 of deferred sales related to software license rights
sold to the customer that were being amortized over the six-year term of the
contract.  On October 2, 2004, Sensitron cancelled the licensing agreement by
refunding to the customer $100,000 of the prepayment previously received from
the customer under the license agreement.  The balance of $225,000 of the
prepayment was recognized as licensing revenue in the fourth quarter of 2004.

Stock Based Compensation  - The Company accounts for stock-based compensation
to employees under the recognition method and measurement principles of APB
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and
related Interpretations. Under APB 25, compensation related to stock options
is recorded if an option's exercise price on the measurement date is below the
fair value of the Company's common stock, and amortized to expense over the
vesting period.  Compensation expense for stock awards or purchases, if any,
is recognized if the award or purchase price on the measurement date is below
the fair value of the Company's common stock, and is recognized on the date of
award or purchase.

The Company accounts for its stock-based compensation issued to non-employees
using the fair value method in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation." Under SFAS No. 123, stock-based compensation is
determined as either the fair value of stock granted as estimated using the
Black-Scholes option pricing method. Stock-based compensation to non-employees
totaled $73,027 for the year ended December 31, 2005 and $846,008 for the
period from February 24, 2004 through December 31, 2004.

During 2005, the Company granted stock options to purchase 1,159,000 common
shares with an exercise price of $1.91 per share, under the newly-adopted 2005
Stock Plan.  Because the options granted had no intrinsic value, no
compensation expense was recognized for the grants. The effect on net loss and
net loss per common share if the Company had applied the fair value
recognition provisions of SFAS No. 123 to employee stock-based compensation
for the year ended December 31, 2005 and for the period from February 24, 2004
(date of emergence from bankruptcy) through December 31, 2004 is as follows:

     December 31,                                      2005         2004
     -----------------------------------------------------------------------
     Net loss, as reported                       $ (1,770,020) $ (4,510,726)
       Add back: total stock-based compensation             -             -
       Deduct: total stock-based employee
       compensation determined under fair
       value based method for all awards             (774,419)            -
     -----------------------------------------------------------------------
     Proforma Net Loss                           $ (2,544,439) $ (4,510,726)
     =======================================================================
     Basic and diluted net income (loss) per
     common share:
       As reported                               $      (0.08) $      (0.24)
       Pro forma                                 $      (0.11) $      (0.24)
     =======================================================================

In December 2004, the FASB issued Statement No. 123 (Revised 2004),
"Share-Based Payment" ("Statement 123(R)").  Statement 123(R) supersedes APB
25 and requires the recognition of the cost of employee services received in
exchange for stock options and awards of equity instruments based on the
grant-date fair value of such options and awards, over the period they vest.
Statement 123(R) will be effective beginning January 1, 2006.  Beginning
January 1, 2006, the Company will recognize the unvested portion of employee
compensation from stock options and awards equal to the unamortized grant-date
fair value over the remaining vesting period.


                                26

<PAGE>

            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basic and Diluted Loss Per Share - Basic and diluted loss per share is
computed by dividing net loss by the weighted-average number of common shares
outstanding during the period.  Diluted loss per share is computed by dividing
net loss by the weighted-average number of common shares and common
equivalents outstanding during the period.  At December 31, 2005, there were
warrants to purchase 3,656,335 shares of common stock, and at December 31,
2004, there were warrants outstanding to purchase 650,000 shares of common
stock.  These warrants were not included in the computation of diluted loss
per share as their effect would have been anti-dilutive, thereby decreasing
loss per common share.

NOTE 2 - CONFIRMATION OF PLAN OF REORGANIZATION

On February 24, 2004, the Bankruptcy Court confirmed the Company's plan of
reorganization.  The confirmed plan provided for the following:

Reverse Stock Split - The shares of common stock outstanding prior to the
confirmation of the plan were reverse split on a 1-for-7 basis.  All share
amounts are presented in the accompanying financial statements on a post-split
basis.

Cancellation of Common Stock  - The Company cancelled 828,571 shares of common
stock issued to an officer during 2001, as provided for by the confirmed plan
of reorganization.

Convertible Debentures Payable - Convertible debentures of $3,681,280 were
forgiven in exchange for the Company's agreement not to contest the issuance
of 7,142,087 shares of common stock that were issued to a shareholder for the
exercise of warrants prior to the bankruptcy petition.

Convertible Promissory Note to Former Employee - The Company converted
$194,620 of claims that included accounts payable, accrued wages and a
convertible promissory note to a former employee of $20,000, into 377,682
shares of common stock at a conversion price of $0.5153 per share.

Note Payable to Stockholder - The Company exchanged $1,230,218 of notes
payable to a stockholder for 2,387,382 shares of common stock at a conversion
price of $0.5153 per share.

Lease Obligation - A lease obligation of $574,255 was exchanged for 1,114,410
shares of common stock at a conversion price of $0.5153 per share.

Convertible Note Payable - The plan provided for an investor to provide
$1,500,000 and receive a note payable convertible into 3,000,000 shares of
common stock at $0.50 per share.

Delphi Automotive Systems Supply Agreement - Flexpoint Inc. entered into a
Purchase and Supply Agreement (the Supply Agreement) with Delphi Automotive
Systems (Delphi) in June 1998.  Under the terms of the Supply Agreement, the
Company was to supply its proprietary sensor mats to Delphi for integration
into a weight-based suppression system as a critical part of a smart air bag
system.  The Supply Agreement provided that such sensor mats were to be
exclusively supplied to General Motors, through Delphi, by the Company through
2002.  In May 2000, the Supply Agreement was amended, primarily providing for
Delphi to make loan payments to Flexpoint, Inc. to be used directly for Delphi
programs.  As of December 31, 2000, Flexpoint, Inc. had received loan proceeds
of $1,700,000 from Delphi.

In August 2000, Delphi notified the Company of its intent to terminate the
Supply Agreement.  The Company believes that Delphi was not entitled to
terminate the agreement or had not followed the appropriate contractual
provisions for termination of the Supply Agreement.  As a result of the
termination, the Company was required to significantly reduce its workforce
and its operating costs.  In addition, the Company sought protection under the
United States federal bankruptcy laws.


                                27

<PAGE>

            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Litigation under the Delphi Supply Agreement remains under the jurisdiction of
the bankruptcy court and the outcome of the future legal proceedings between
the Company and Delphi is uncertain.  However, on February 24, 2004, the
Company concluded that the likelihood that this contingency would require that
the Company transfer assets to Delphi was remote, and therefore, the liability
was accounted for as extinguished prior to confirmation of the plan of
reorganization.

NOTE 3 - FRESH START ACCOUNTING

In accordance with the requirements of SOP 90-7, Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code, the Company determined
that a change in control occurred in connection with its reorganization and
therefore the Company accounted for the reorganization using fresh-start
reporting.  Accordingly, all assets of Flexpoint Sensor Systems, Inc. have
been restated to reflect their reorganization value, which approximates fair
value at the date of reorganization.  Management estimated a reorganization
asset value of $5,637,612 based upon the negotiated price at which certain
creditors were willing to convert their claims into common stock.  The Company
obtained an independent valuation, which determined that the reorganization
value consisted of cash of $2,051, patents valued at $279,147 and goodwill
valued at $5,356,414.The patents have a weighted-average remaining life of
13.2 years and are amortized on a straight-line basis with an average yearly
amortization of $21,732.  Goodwill is not amortized; rather the Company
evaluates the carrying value of the goodwill to determine whether the carrying
value should reflect any impairment.  No impairment was noted at December 31,
2004 and 2005.

The following summarizes the effect of the plan of reorganization on the
Company's consolidated balance sheet, as of February 24, 2004, the date of
confirmation of the plan of reorganization:


                                28

<PAGE>

            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

                                                                                           Reorganized
As of Date of Confirmation of          Pre -        Debt       Exchange of                   Balance
 Plan, February 24, 2004          Confirmation    Discharge       Stock      Fresh Start      Sheet
--------------------------------- ------------- ------------- ------------- ------------- -------------

                               <c>           <c>           <c>           <c>           <c>
ASSETS
Current Assets - Cash             $      2,051  $          -  $          -  $          -  $      2,051
Patents and technology, net              1,561             -             -       277,586       279,147
Goodwill                                     -             -             -     5,356,414     5,356,414
-------------------------------------------------------------------------------------------------------

Total Assets                      $      3,612  $          -  $          -  $  5,634,000  $  5,637,612
=======================================================================================================

LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)

Liabilities Not Subject to
Compromise - Current
Accounts payable                  $    244,642  $    (36,536) $          -  $          -  $   208,106
Accrued liabilities                      1,492             -             -             -        1,492
Deferred revenue                       343,750             -             -             -      343,750
Short-term advance payable             102,000             -             -             -      102,000
Notes payable - related party           16,000             -             -             -       16,000
------------------------------------------------------------------------------------------------------
Total Liabilities Not Subject
to Compromise - Current                707,884       (36,536)            -             -      671,348
------------------------------------------------------------------------------------------------------

Liabilities Subject to Compromise    7,777,379    (7,777,379)            -             -            -
------------------------------------------------------------------------------------------------------
Stockholders' Equity (Deficit)
Preferred stock                      1,080,426             -    (1,080,426)            -            -
Common stock (old)                      76,535             -       (76,535)            -            -
Common stock (new)                           -        11,022         3,076             -       14,098
Additional paid-in capital          22,078,206     5,669,351     1,153,885   (23,949,276)   4,952,166
Deficit accumulated during the
 development stage                 (31,716,818)    2,133,542             -    29,583,276            -
------------------------------------------------------------------------------------------------------
Total Stockholders'
 Equity (Deficit)                   (8,481,651)    7,813,915             -     5,634,000    4,966,264
------------------------------------------------------------------------------------------------------
Total Liabilities and
 Stockholders' Equity (Deficit)  $       3,612  $          -  $          -  $  5,634,000  $ 5,637,612
======================================================================================================
</TABLE>


NOTE 4 - PROPERTY AND EQUIPMENT ACQUISITION

On March 31, 2004, Flexpoint Sensor Systems, Inc. entered an asset purchase
agreement with Flexpoint Holdings, LLC, a company controlled by a shareholder,
to acquire equipment and proprietary technology with an aggregate fair value
of $4,302,643 in exchange for $265,000, the assumption of a $698,000
convertible note payable, and 1,600,000 shares of restricted common stock
valued at $1,931,309 or $1.21 per share.  Flexpoint Holdings, LLC is a holding
company with the primary purpose to acquire and hold assets, which one of the
Company's creditors caused to be seized during 2001 and sold at public auction
during 2002.

The owners and manager of Flexpoint Holdings, LLC were not officers, directors
or employees of the Company nor did they hold any controlling relationship in
the Company or retain an substantial indirect interest in the assets sold as a
result of stock ownership in the Company.  Accordingly, the transaction was
recorded at the fair value of the consideration given which was lower than the
fair value of the assets acquired.

The acquisition of the assets of Flexpoint Holdings, LLC was not the purchase
of a business as Flexpoint Holdings, LLC had no operations.  Accordingly, pro
forma financial information is not provided.  The purchase price and the fair
values of the proprietary technology and equipment were established by
independent appraisals.  The Company allocated the purchase price to the
property and equipment acquired and to the proprietary technology based on the
appraised fair values.  The $1,408,334 excess of the appraised fair values of
the acquired assets over the fair value of the consideration paid was
allocated pro rata to reduce the values assigned to assets acquired.  At March
31, 2004, the allocated value of the assets acquired was as follows:


                                29

<PAGE>

            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      -----------------------------------------------------------------
      Property and equipment                                $ 1,248,732
      Proprietary technology                                  1,645,577
      -----------------------------------------------------------------
      Net assets acquired                                   $ 2,894,309
      =================================================================

The equipment consists of manufacturing equipment to produce the Company's
product, and the technology rights consist of software algorithms that
interpret data provided by the Company's flexible sensor technology. The
technology has an estimated weighted-average useful life of 13.2 years.

NOTE 5 - GOODWILL AND INTANGIBLE ASSETS

Intangible Assets - The components of intangible assets at December 31, 2005
and 2004 were as follows:

                              Gross Carrying  Accumulated   Net Carrying
      December 31, 2005             Amount      Amortization    Amount
      ---------------------------------------------------------------------
      Patents                   $     322,773   $   (40,476)  $    282,297
      Proprietary technology        1,645,577   $  (224,191)  $  1,421,386
      ---------------------------------------------------------------------
      Total Amortizing
        Intangible Assets       $   1,968,350   $  (264,667)  $  1,703,683
      =====================================================================

                              Gross Carrying  Accumulated   Net Carrying
      December 31, 2004             Amount      Amortization     Amount
      ---------------------------------------------------------------------
      Patents                   $     294,626   $   (16,620)  $    278,006
      Proprietary technology        1,645,577       (96,082)     1,549,495
      ---------------------------------------------------------------------
      Total Amortizing
        Intangible Assets       $   1,940,203   $  (112,702)  $  1,827,501
      =====================================================================

Patent amortization was $23,856 and $16,620 for the year ended December 31,
2005 and for the period from February 24, 2004 through December 31, 2004, and
amortization related to proprietary technology was $128,109 and $96,082 for
the same periods respectively.  Patent amortization is charged to general and
administrative expense; amortization expense for the proprietary technology is
charged to cost of revenues.

Estimated aggregate amortization expense for each of the next five years is
$151,991 each year.

Goodwill - Intangible assets not subject to amortization as of December 31,
2005 and 2004 consisted of goodwill with a net carrying value of $5,356,414.

During 2004, the Company engaged Houlihan Valuation Advisors, an independent
valuation firm, to assess the value of the Company's goodwill and patents at
the date of emergence from bankruptcy and the fair value of the proprietary
technology at its purchase date.  The appraisal was completed during 2005.

NOTE 6 - NOTES PAYABLE - RELATED PARTIES

The Company had unsecured notes payable to shareholders with interest stated
at 12% and repayment terms that required payment of the principal and interest
by December 31, 2004.  Under amended terms, payment of the entire principal
and interest was due to the shareholders by the extended due date of March 31,
2005.  Principal balance of the note was $16,000 upon emergence from
bankruptcy; The Company borrowed an additional $445,300 and repaid $50,342 on
the notes leaving an aggregate remaining balance of $ 410,958 as of December
31, 2004.  During the year ended December 31, 2005, the company repaid the
balance of $410,958 plus interest of $7,231.


                                30

<PAGE>

            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - CONVERTIBLE NOTE PAYABLE

Under the plan of reorganization, Broad Investment Partners, LLC (the
"lender") agreed to provide financing to the Company under the terms of a
$1,500,000 convertible promissory note.  Under the terms of the note, the
lender advanced $698,000 to Flexpoint Holdings, LLC, which debt was assumed by
the Company as an increase to the promissory note upon the acquisition of
assets from Flexpoint Holdings, LLC in March 2004, and the note was increased
in March 2004 by $102,000 that was used to repay a short-term advance from
Flexpoint Holdings, LLC.  The Company borrowed $583,334 under the note and the
note was increased by $60,000 through direct payments by the lender to settle
certain secured and priority claims determined in the reorganization plan and
other operating expenses.

Although the Company received proceeds under the note of $1,443,334 through
March 31, 2004, principal due under the note was $1,500,000, which resulted in
a discount to the note of $56,666.  Under the terms of the convertible note
payable provided that interest accrued on the $1,500,000 outstanding balance
accrues at 10% per annum and the principal and accrued interest was due three
years from the date of the agreement.  As provided for in the plan of
reorganization, the $1,500,000 principal balance under the note was
convertible into 3,000,000 shares of common stock at $0.50 per share.  The
fair value of the common stock at the date of reorganization was $1.00 per
share, based on its average market value for the three-day period before and
after February 24, 2004, and resulted in the lender receiving a $1,500,000
beneficial debt conversion option under the conversion terms of the promissory
note.  The original discount on the note and the discount from the beneficial
conversion option were amortized and recognized as interest expense through
March 31, 2004 when the note was converted into 3,000,000 shares of common
stock.

NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION

Non Cash Investing And Financing Activities - On March 31, 2004, the Company
issued 1,600,000 shares of common stock valued at $1,931,309, assumed  a
$698,000 convertible note payable and paid cash of $265,000 to Flexpoint
Holdings, LLC, a company controlled by a shareholder, in exchange for
equipment valued at $1,248,732 and proprietary technology  value at
$1,645,577. On March 31, 2004, a $1,500,000 convertible note payable was
converted into 3,000,000 shares of common stock.

NOTE 9 - INCOME TAXES

There was no provision for, or benefit from, income tax during the period.
The components of the net deferred tax asset as of December 31, 2005 and for
the period from February 24, 2004 (date of emergence from bankruptcy) through
December 31, 2004, including temporary differences and operating loss
carryforwards that arose prior to reorganization from bankruptcy, are as
follows:

      December 31                                 2005          2004
      ------------------------------------------------------------------
      Operating loss carry forwards           $ 9,981,842   $ 9,255,417
      Goodwill                                  1,997,942     1,997,942
      Property and equipment                      461,925       489,055
      Patents and proprietary technology          692,157       730,035
      ------------------------------------------------------------------
      Total Deferred Tax Assets                13,133,866    12,472,449
      Valuation allowance                     (13,133,866)  (12,472,449)
      ------------------------------------------------------------------
      Net Deferred Tax Asset                  $          -  $         -
      ==================================================================


                                31

<PAGE>

            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As a result of the confirmation of the bankruptcy plan, $7,813,915 in debt was
discharged. For tax reporting purposes, net operating loss carry forwards were
reduced to $24,750,611 at December 31, 2004. Net operating loss at December
31, 2005 was $26,760,970.  Although net operating losses begin to expire in
the year 2012, those carry forwards will be limited or unavailable, under the
tax laws, due to a change of greater than 50% in ownership of the Company upon
emergence from bankruptcy.

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 year ended December 31, 2005 and for the period from
February 24, 2004 (date emergence from bankruptcy) through December 31, 2004:


     For the Periods Ended December 31,                2005         2004
     -----------------------------------------------------------------------
     Tax at statutory rate (34%)                  $   (601,807) $(1,533,647)
     Non-deductible expenses                            (1,199)        (612)
     Change in valuation allowance                     661,417    1,683,113
     State tax benefit, net of federal tax effect      (58,411)    (148,854)
     -----------------------------------------------------------------------
     Provision for Income Taxes                   $           -  $        -
     =======================================================================

NOTE 10 - COMMON STOCK

Private Placement of Common Stock and Warrants - From January 25, 2005 through
March 31, 2005, the Company issued 2,836,335 shares of common stock and
warrants to purchase 2,836,335 shares of common stock at $3.00 per share from
October 1, 2005 through September 30, 2007 in a private placement offering.
The Company realized proceeds of $3,907,207, net of $347,294 of cash offering
costs. As part of this private placement, the Company also issued the
placement agent 140,000 shares of common stock and 140,000 warrants
exercisable at $3.00 per share for the agent's services in connection with the
offering. The fair value of the warrants issued was $4,047,816 as estimated by
the Company using the Black-Scholes pricing model with the following
assumptions: risk free interest rate of 4.58%; volatility of 200%; estimated
life of two years; and dividend yield of 0%. The net proceeds were allocated
to the shares of common stock and the warrants based upon their relative fair
values and resulted in allocating $1,980,271 to the shares of common stock and
$1,926,937 to the warrants.

An investor may not exercise their warrants if the exercise of the warrant
would cause the investor to own more than 4.99% of the then issued and
outstanding common stock of the Company. If the closing bid price of the
Company's common stock is greater than $4.00 per share for five consecutive
trading days after October 1, 2005, the Company may call the warrants, in
whole or in part, for no consideration, which would require the investor to
either exercise the warrants within fifteen trading days or forfeit the
warrants.

Compensation to Board Members - On August 25, 2005, the company issued to a
Director 18,350 shares of restricted common stock for director services valued
at $31,745 or $1.73 per share, the quoted market value of the stock on the day
of this transaction.

The Company emerged from bankruptcy in 2004 without settling a claim for
compensation by John Sindt, the president and chairman of the board of
directors, for services rendered during the period the Company was in
bankruptcy.  At the date the Company emerged from bankruptcy, the Company
acknowledged that the claim existed but was unable to determine the range of
potential loss under the claim and did not record a liability at that date.
The board of directors determined the amount of the claim on November 24,
2004, and the Company settled all amounts due under the claim and in payment
of services received after the Company emerged from bankruptcy the claim was
settled, by issuing 1,200,000 shares of restricted common stock to Mr. John
Sindt.  The common stock issued was valued at $1,776,000, or $1.48 per share
based upon the market value of the common stock.  The Company recognized the
issuance of the common stock during November 2004 as a charge to operations
for compensation.

                                32

<PAGE>


            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - STOCK OPTION PLANS

On April 1, 1995, the Board of Directors and shareholders adopted an Omnibus
Stock Option Plan. Upon emergence from bankruptcy and confirmation of the plan
of reorganization, all previously outstanding stock options were cancelled.

On August 25, 2005, the Board of Directors of the Company approved and adopted
the 2005 Stock Incentive Plan (the Plan).  The Plan became effective upon its
adoption by the Board and shall continue in effect for ten years, unless
terminated.  This plan was approved by the stockholders of the Company on
November 22, 2005, after an affirmative vote by the stockholders at the
Company's Annual Stockholders Meeting. Under the Plan, the exercise price for
all options issued will not be less than the average quoted closing market
price of the Company's trading common stock for the thirty day period
immediately preceding the grant date plus a premium of ten percent.  The
maximum aggregate number of shares that may be awarded under the plan is
2,500,000.

On August 25, 2005 the Company granted options to employees to purchase an
aggregate 1,159,000 shares of common stock at an exercise price of $1.91 per
share. The options vest over three years on the employee's employment
anniversary. The options granted had an intrinsic value of $0 since the
exercise price exceeds the fair value of the underlying common stock on the
day of the grants. Information about all employee options outstanding is as
follows:

       For the years ended
       December 31,                   2005                    2004
     ----------------------------------------------------------------------
                                          Weighted-              Weighted-
                                           Average               Average
                                          Exercise               Exercise
                                Shares      Price      Shares    Price
     ----------------------------------------------------------------------
     Outstanding at beginning
     of year                          -  $      -          -    $      -
       Granted                1,159,000      1.91          -           -
     ----------------------------------------------------------------------
     Outstanding at end
     of year                  1,159,000  $   1.91          -    $      -
     ======================================================================

A summary of employee options outstanding and employee options exercisable
under the Company's plan is set forth below:

                               Outstanding                   Exercisable
                 -------------------------------------- -------------------
                                Weighted-
                                Average     Weighted-             Weighted-
                  Number of     Remaining   Average   Number of   Average
Range of           Options     Contractual  Exercise   Options    Exercise
Exercise Prices  Outstanding      Life      Price    Exercisable   Price
---------------------------------------------------------------------------
$   1.91         1,159,000        9.65      $ 1.91          -     $    -
---------------------------------------------------------------------------
                 1,159,000        9.65      $ 1.91          -     $    -
===========================================================================



                                33

<PAGE>


            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - LEASE COMMITMENT

Effective March 31, 2004, the Company agreed to sub-lease offices and a
manufacturing facility in which the Company's acquired equipment is located,
with monthly lease payments of $5,500 plus common area maintenance fees.  The
lease expired in September 2004.  During July 2004, the Company entered into a
new five-year lease agreement with average monthly payments including
prescribed common area fees of $8,718, with a 2% annual increase in lease
payments.  Rent expense over the term of the lease is recognized on a
straight-line basis over the term of the lease.  Rent expense of $101,821 and
$78,715 was charged to operations for the year ended December 31, 2005, and
for the period from February 24, 2004 through December 31, 2004, respectively.
Total future annual minimum rent payments as of December 31, 2005 are as
follows:

         ----------------------------
         2006               $ 103,388
         2007                 104,988
         2008                 106,619
         2009                  80,894
         ----------------------------
                            $ 395,889
         ============================

NOTE 13 - CONSULTING AGREEMENTS

On March 3, 2004, the Company entered into a twelve-month consulting agreement
with Summit Resource Group ("Summit") whereby Summit agreed to provide
consulting services for the Company related to investor relations, including
dealing with direct investor relations, broker/dealer relations and with the
investing public.  A 45-day written notice from either party is required to
terminate the agreement.  In consideration for the consulting services, the
Company issued Summit 100,000 common shares and warrants to purchase an
additional 650,000 common shares.  The warrants are exercisable for five years
from the date awarded at the following exercise prices: warrants to purchase
300,000 shares are exercisable at $0.70 per share and warrants to purchase
350,000 shares are exercisable at $0.80 per share.  In July 2005, the Company
fulfilled its obligation for registration rights with respect to the 650,000
common shares and underlying warrants by including the respective common
shares and warrants in the Company's SB-2 registration.

The Company valued the issuance of 100,000 common shares to Summit at
$114,680, or $1.15 per share, based on the quoted market value of the stock on
the date of the agreement.  The Company valued the warrants at $731,328,
estimated on the grant date using the Black-Scholes option-pricing model with
the following weighted-average assumptions: risk-free interest rate of 3.06%;
expected dividend yield of 0.0%; expected life of 5 years and estimated
volatility of 200%.  Consulting expense was charged to operations recognized
during the period from March 2004 through September 2004, the period over
which the warrants vested.

On July 20, 2005, the Company issued warrants to purchase 30,000 common shares
at $2.00 per share to an investor relations firm for services. The warrants
issued were valued at $41,300, or $1.38 per warrant. The Company estimated the
fair value of the warrants using the Black-Scholes option pricing model with
the following assumptions: risk free interest rate of 4.40%; volatility of
200%; estimated life of two years; and dividend yield of 0%. These warrants
were issued with a callable feature in which the Company has the right to call
the warrants at $2.00 per share if at any time after six months from the date
of issue; the closing price of the common stock is greater than $5.00 per
share for five consecutive trading days.  In July 2005, the Company fulfilled
its obligation for registration rights with respect to the 30,000 common
shares and underlying warrants by including the respective common shares and
warrants in the Company's SB-2 registration.


                                34


<PAGE>


            FLEXPOINT SENSOR SYSTEMS AND SUBSIDIARIES
                  (A Development Stage Company)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - FORGIVENESS OF DEBT

At December 31, 2003, Flexpoint Inc, a subsidiary of the Company, had an
accounts payable balance of $75,049. This balance had not been included in the
bankruptcy proceedings of the Company and the debt was aged beyond the statute
of limitations.  There had been no efforts made on the part of the vendors to
obtain payment. In 2004 the vendors were barred from collection under the
Statute of Limitations and the debt was considered forgiven.

NOTE 15 - RELATED PARTY MANUFACTURING CONTRACT

In September 2005 the Company entered into a manufacturing agreement with R&D
Products, LLC, a Utah limited liability company, doing business in Midvale,
Utah.  For the purpose of this contract, management considers R&D Products to
be a Related Party because a controlling member of R&D Products, LLC is also a
non-controlling interest shareholder of Flexpoint Sensor Systems, Inc.  R&D
Products has developed a mattress with multiple air chambers that use Bend
Sensors  and the Company has agreed to manufacture the Bend Sensors  for the
mattresses.  The initial order is for 300,000 Bend Sensors  to be used to
begin manufacture of 10,000 mattresses.  The realization of the manufacturing
and sales of the Bend Sensors  is dependent upon R&D Products selling either
their bed directly or licensing their technology to a third party.  There are
no guarantees that R&D will make such sales in such quantities to meet the
demands of this contract.

NOTE 16 - SUBSEQUENT EVENTS

In January 2006, the Company filed a complaint in the United States District
Court for the District of Utah in Salt Lake City against Michael W. Wallace
for possible Patent encroachment.

                                35

<PAGE>



     ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
              ON ACCOUNTING AND FINANCIAL DISCLOSURE

We have not had a change in or disagreement with our independent accountant
for the years ended December 31, 2004 and 2005

                ITEM 8A.  CONTROLS AND PROCEDURES

Our Chief Executive Officer and the Chairman of the Board, who acts in the
capacity of our principal financial officer, evaluated the effectiveness of
our disclosure controls and procedures as of the end of the period covered by
this report.  Based on that evaluation, they concluded that our disclosure
controls and procedures were effective.

Also, these executive officers determined that there were no changes made in
our internal controls over financial reporting during the fourth quarter of
2005 that have materially affected, or are reasonably likely to materially
affect our internal control over financial reporting.

                   ITEM 8B.  OTHER INFORMATION

None.


                             PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers are listed below, with their respective
ages, positions and biographical information.  Our bylaws provide that the
directors shall be divided into three classes.  A class of directors shall be
elected for a one-year term, a class of directors for a two-year term and a
class of directors for a three-year term.  At each succeeding annual meeting
of stockholders, successors to the class of directors whose term expires at
that meeting shall be elected for a three-year term.  Our executive officers
are chosen by our board of directors and serve at its discretion.  There are
no family relationships between or among any of our directors and executive
officers.

Name                 Age  Position Held                 Term of office
-------------------  ---- ----------------------------- ----------------------
John A. Sindt         61  Chairman of the Board and     Nov. 2005 to Nov. 2007
                          Principal Finance and
                          Accounting Officer
Clark M. Mower        59  President, CEO and Director   Nov. 2005 to Nov. 2006
Ruland J. Gill, Jr.   60  Director                      Nov. 2005 to Nov. 2008
B. Fred Atkinson, Jr. 57  Secretary/Treasurer
                          and Comptroller

John A. Sindt - Mr. Sindt has served as a director of the company since 1999
and served as President and Chief Executive Officer from 2001 to 2004.  He
served as Secretary/Treasurer from January 2005 through July 2005.  In
November 2005 he was elected to serve a two year term as director.   Mr. Sindt
is also the Chairman of the Board of Sensitron, our subsidiary.  He has been
employed since 1965 as a Salt Lake County, Utah Constable and he currently
heads that department.  He has also served as President, Corporate Secretary
and Director for the National Constables Association.  He has owned and
operated a successful chain of retail jewelry stores in Utah.

Clark M. Mower - Mr. Mower was appointed our President and CEO in January
2005.  He was appointed as Director, President and CEO of Sensitron in
February 2005.  In November 2005 he was elected to serve a one year term as
director.  He formerly served as Senior Vice President - Mergers and
Acquisitions - Merchant Energy Group for El Paso Energy Corporation (NYSE:
EP).  From August 2002 through 2004 he was the managing member of Polaris
Energy, LLC, a non-affiliated consulting company to energy related mergers and
acquisition.  From August

                                36


<PAGE>

2002 to July 2004 he was a management committee member for Saguaro Power
Company, a non-affiliated company operating a 100 megawatts power plant in
Henderson, Nevada.   Prior to that he served as President and Chief Executive
Officer of Bonneville Pacific Corporation (a public company) for eight years
until El Paso Corporation acquired Bonneville Pacific Corporation in October
1999.  He is a director on the board of GeNOsys, Inc., a public  reporting
company.

Ruland J. Gill, Jr. - Mr. Gill is Vice President of Government Affairs and
Senior Attorney for Questar Corporation (NYSE: STR), where he has worked since
1973.  He was appointed as a Director of Sensitron in February 2005.  In
November 2005 he was elected to serve a three year term as director.  In
addition to his professional career, Mr. Gill has held several important
positions including President of the Utah Petroleum Association, and Trustee
of the Rocky Mountain Mineral Law Foundation.

B. Fred Atkinson, Jr. - Mr. Atkinson joined the company in June of 2005 as
Comptroller and was appointed Secretary/Treasurer of the company on July 12,
2005.  He has extensive experience in financial, accounting and operational
management for general corporate, retail and ISO 9000 and FDA manufacturing
entities.  From 2004 through 2005, he was employed as Corporate Controller for
Wasatch Product Development.  From 2001 to 2003 he was Controller and Finance
Manager for RP Sherrer West, Inc.  And from 1998 to 2001 he was Controller and
Chief Financial Officer for Sorensen Medical, Inc.  He received a Masters of
Business Administration in Finance from Concordia University.

AUDIT COMMITTEE FINANCIAL EXPERT

Our audit committee consists of Messrs. Atkinson and Gill, with Mr. Gill
serving as Chairman.  Management believes Mr. Atkinson qualifies as an audit
committee financial expert because of his extensive experience in finance.
Pursuant to NASD Rule 4200(a)(15), Mr. Atkinson is not independent of
management, but Mr. Gill is independent of management.

CODE OF ETHICS

We adopted a Business Ethics and Code of Conduct in November 2000.  Upon
written request we will provide a copy of the Business Ethics and Code of
Conduct to any person without charge.  Address your request to:

                   Shareholder Communications
                  Flexpoint Sensor Systems, Inc.
                   106 West Business Park Drive
                        Draper, Utah 84020


COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires our directors,
executive officers and persons who own more than five percent of a registered
class of our equity securities to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
our common stock.  Officers, directors and ten-percent or more beneficial
owners of our common stock are required by SEC regulations to furnish
Flexpoint Sensor with copies of all Section 16(a) reports they file and
provide written representation that no Form 5 is required.  Based upon a
review of these forms furnished to us during the fiscal year ended December
31, 2005, we believe Mr. Gill filed a Form 3 late and John A. Sindt filed two
Forms 4 late each related to one transaction; Mr. Mower and Mr. Atkinson each
filed late one Form 4 related to the issuance of options under our 2005 Stock
Incentive Plan.

                 ITEM 10.  EXECUTIVE COMPENSATION

The following table shows the compensation paid to our named executive
officers in all capacities during the past three fiscal years.

                                37


<PAGE>


                    SUMMARY COMPENSATION TABLE
                    --------------------------

                          Annual Compensation    Long Term Compensation

                                            Securities        All
Name and              Fiscal                underlying        Other
Principal Position    Year    Salary        options/SARs (#)  Compensation
-------------------   ------  -----------   ----------------  ------------
Clark M. Mower        2005    $   150,557     300,000         $         0
President, CEO        2004              0           0                   0
                      2003              0           0                   0

John A. Sindt         2005    $   128,660     180,000         $         0
Sr. VP and Chairman   2004              0           0           1,776,000 (1)
(Former CEO)          2003              0           0                   0

B. Fred Atkinson, Jr. 2005    $    46,382     100,000         $         0
Sec./Treas. and       2004              0           0                   0
comptroller           2003              0           0                   0


      (1) Represents the value of 1,200,000 common shares.


              OPTION/SAR GRANTS IN LAST FISCAL YEAR
              -------------------------------------

                        Individual Grants
                        -----------------

                                   Percent of
                  Number of        total
                  securities       options/SAR's
                  underlying       granted to       Exercise or
                  Options/SARs     employees in     base price    Expiration
Name              granted (#)      fiscal year      ($/sh)        date
-----             ---------------- ---------------  ------------  ----------
Clark M. Mower     300,000 (1)        25.2%         $  1.91       12/31/2015
John A. Sindt      180,000 (2)        15.1%            1.91       12/31/2015
B. Fred Atkinson,
 Jr.               100,000 (3)         8.4%            1.91        1/6/2015


(1)   100,000 shares vested December 31, 2005; and 100,000 shares vest on
      December 31, 2006; and 100,000 shares vest on December 31, 2007.
(2)   60,000 shares vest December 31, 2005; 60,000 vest December 31, 2006; and
      60,000 vest December 31, 2007
(3)   30,000 shares vest June 1, 2006; 35,000 vest June 1, 2007; and 35,000
      vest June 1, 2008.

We have not entered into employment contracts with our executive officers and
their compensation, if any, will be determined at the discretion of our board
of directors.

COMPENSATION OF DIRECTORS

We do not have any standard arrangement for compensation of our directors for
any services provided as a director, including services for committee
participation or for special assignments.  On August 25, 2005 our board of
directors authorized the issuance of 18,350 shares of restricted common stock
to Ruland J. Gill, Jr. in consideration for services rendered as a member of
our board of directors.  These shares were valued at $31,745.


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ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                 AND RELATED STOCKHOLDER MATTERS

SECURITIES UNDER EQUITY COMPENSATION PLANS

The following table lists the securities authorized for issuance under any
equity compensation plans approved by our shareholders and any equity
compensation plans not approved by our shareholders.  This chart also includes
individual compensation arrangements.


               EQUITY COMPENSATION PLAN INFORMATION
               ------------------------------------
                                                            Number of
                                                            securities
                                                            remaining
                                                            available for
                                                            future issuance
                                                            under equity
                 Number of securities   Weighted-average    compensation
                 to be issued upon      exercise price of   plans (excluding
                 exercise of out-       outstanding         securities
                 standing options,      options, warrants   reflected
Plan category    warrants and rights    and rights          in column (a))
                        (a)                (b)                  (c)
---------------- ---------------------- ------------------- ---------------
Equity
compensation
plans
approved by
security holders     1,159,000            $ 1.91              1,341,000
---------------- ---------------------- ------------------- ---------------
Equity
compensation
plans
not approved
by security
holders               680,000               1.75                      0
---------------- ---------------------- ------------------- ---------------
Total               1,839,000             $ 1.85              1,341,000
---------------- ---------------------- ------------------- ---------------

Consulting Agreements

On March 3, 2004, Flexpoint Sensor entered into a consulting agreement with
Summit Resource Group.   Summit Resource Group agreed to provide consulting
services related to investor relations, including dealing with direct investor
relations and broker/dealer relations and the investing public.  The term of
the agreement is for a twelve month period and the agreement may be terminated
after the first 90 days by a 45-day written notice from either party.  We
agreed to pay Summit Resource Group 100,000 restricted common shares, valued
at $114,680, and warrants to purchase 650,000 common shares, valued at
$731,328.  Warrants to purchase 150,000 shares at $0.70 vested at the
execution of the agreement, warrants to purchase 150,000 shares at $0.70 per
share vest on May 1, 2004, and warrants to purchase 350,000 shares at $0.80
per share vest on September 1, 2004.  The warrants expire five years after the
vesting date and have demand registrations rights.  If the agreement is
terminated by either party, then the warrants to purchase 350,000 shares at
$0.80 per share will vest pro rata through the date of termination, as a
percentage of the days outstanding from March 3, 2004 through September 1,
2004.  We registered the underlying common shares of the warrants in August
2005.

2005 Stock Incentive Plan

On August 25, 2005, our Board adopted the Flexpoint Sensor Systems, Inc. 2005
Stock Incentive Plan (the "Plan").  The purposes of the Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to employees, directors and
consultants, and to promote the success of our business.  In August 2005 we
granted stock options to purchase 1,159,000 shares of common stock at $1.91
per share to eleven persons.

The Plan became effective upon its adoption by the Board and shall continue in
effect for a term of ten (10) years, unless terminated.  The maximum aggregate
number of shares of common stock that may be sold under the Plan is 2,500,000
shares.  The term of each option and its exercise price shall be stated in an
option agreement; provided that the term does not exceed ten (10) years from
the date of grant.  The plan provides that a grant of a stock option to an
employee shall have an exercise price of no less than 110% of the fair market
value per share on the date of grant.  As a condition of the grant, vesting or
exercise of an option granted under the Plan, the participant shall be
required to satisfy any applicable federal, state, local or foreign
withholding tax obligations that may arise in connection with the grant,
vesting or exercise of the option or the issuance of shares.


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<PAGE>


The Plan is administered by our Compensation Committee and the Board may from
time to time increase the size of any Compensation Committee and appoint
additional members, remove members (with or without cause) and appoint new
members in substitution, fill vacancies and/or remove all members of the
committee.  The Compensation Committee may be composed of
employee/director(s), non-employee/director(s) and/or major stockholder(s) of
the company who are not a director.

Non-statutory stock options may be granted to employees, directors and
consultants who have the capacity to contribute to the success of the company.
Incentive stock options may be granted only to employees, provided that
employees of affiliates shall not be eligible to receive incentive stock
options.

Investors Stock Daily, Inc.

On July 21, 2005, we granted warrants to purchase 30,000 shares of common
stock to Investors Stock Daily, Inc. in consideration for investor relations
services.  The warrants had a fair value of $1.38 per warrant and had an
exercise price of $2.00 with a call feature.  The warrants expire July 20,
2007.  The exercise price and number of shares for these warrants are subject
to change of control and price-based anti-dilution protection. If the closing
price of our common stock is greater than $5.00 per share for five consecutive
trading days, then we have the right to call the warrants, forcing the
investor to exercise the warrant.  We granted registration rights for these
warrants and registered the 30,000 shares underlying the warrants in August
2005.

BENEFICIAL OWNERSHIP

The following table lists the beneficial ownership of our outstanding common
stock by our management and each person or group known to us to own
beneficially more than 5% of our outstanding common stock.  Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities.  Based on
these rules, two or more persons may be deemed to be the beneficial owners of
the same securities.  Except as indicated by footnote, the persons named in
the table below have sole voting power and investment power with respect to
the shares of common stock shown as beneficially owned by them.  The
percentage of beneficial ownership is based on 22,992,887 shares of common
stock outstanding as of February 23, 2006, plus any shares which each of the
following persons may acquire within 60 days by the exercise of rights,
warrants and/or options.

                    CERTAIN BENEFICIAL OWNERS
                    -------------------------

Name and address of                                                Percentage
beneficial owners               Number of shares                   of class
------------------------------  --------------------------------- -----------
First Equity Holdings Corp.         5,742,858 (1)                     25.0%
2157 S. Lincoln Street
Salt Lake City, Utah 84106

(1) Includes 600,000 shares held by an officer of First Equity Holdings Corp.

                            MANAGEMENT
                           -----------

Name and address of                                 Warrants/    Percentage
beneficial owners               Number of shares     Options      of class
------------------------------- ------------------ ------------- ------------
John A. Sindt                       1,422,425 (1)      60,000          6.4%
106 West Business Park Drive
Draper, Utah 84020

Clark M. Mower                        550,000         250,000 (2)      3.4%
106 West Business Park Drive
Draper, Utah 84020


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<PAGE>


Ruland J. Gill, Jr.                   235,017         216,667 (3)      2.0%
106 West Business Park Drive
Draper, Utah 84020

Directors and officers              2,207,442         526,667         11.6%
as a group

(1)   Represents 1,202,266 held by Mr. Sindt, 28,572 held jointly with his
      spouse and he has investment power with respect to 191,567 shares.
(2)   Represents warrants to purchase 150,000 shares and options to purchase
      100,000 shares.
(3)   Represents warrants to purchase 216,667 shares.


     ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following information summarizes transactions we have either engaged in
during the last two years, or propose to engage in, involving our executive
officers, directors, more than 5% stockholders, or immediate family members of
these persons.

John A. Sindt, our Chairman of the Board and Secretary/Treasurer agreed to
compromise his claims in bankruptcy by surrendering his right to receive:
..      Any options granted to him prior to bankruptcy;
..      Any possible minority ownership claim in any subsidiary of Flexpoint
       Sensor;
..      5,000,000 common shares for accrued wages through March 2001;
..      800,000 super-voting preferred shares that were authorized to be issued
       to him in April 2001; and
..      Accrued wages of $300,000 through December 31, 2003.

In February 2004, we emerged from bankruptcy without settling a claim for
compensation by John A. Sindt for services rendered during the period we were
in bankruptcy.  At the date we emerged from bankruptcy, we acknowledged that
the claim existed but were unable to determine the range of potential loss
under the claim and did not record a liability at that date.  Our board of
directors determined the amount of the claim on November 24, 2004 and on that
date we settled all amounts due under the claim and in payment of services
received after we emerged from bankruptcy, by issuing 1,200,000 shares of our
restricted common stock to Mr. Sindt.  We valued the common stock issued at
$1,776,000, or $1.48 per share, based upon the quoted market value of the
common stock and recognized the value as a charge to operations for
compensation during November 2004.  These transactions between Flexpoint
Sensor and our officer have been negotiated between related parties without
"arms length" bargaining and, as a result, the terms of these transactions may
be different than transactions negotiated between unrelated persons.

During the period from February 24, 2004 through December 31, 2004, we have
relied on loans from First Equity Holdings Corp., a more than 10% shareholder,
to fund our operations.  During that period we borrowed $198,000 from First
Equity Holdings at 12% interest.  The initial terms of this note payable
required payment of the principal and interest by December 31, 2004; however,
the terms were amended to extend the due date to March 31, 2005.  As of March
31, 2005, we had repaid the $198,000 note, plus interest, to First Equity
Holdings Corp.

                        ITEM 13.  EXHIBITS
No.      Description.
2.1      Order Confirming Plan, dated February 24, 2004 (Incorporated by
         reference to exhibit 2.1 for Form 8-K filed March 5, 2004)
2.2      Debtor's Plan of Reorganization, dated January 14, 2004 (Incorporated
         by reference to exhibit 2.2 for Form 8-K filed March 5, 2004)
2.3      Asset Purchase Agreement between Flexpoint Sensor and Flexpoint
         Holdings, LLC, dated March 31, 2004 (Incorporated by reference to
         exhibit 2.3 of Form 10-QSB, filed May 3, 2004)
3.1      Certificate of Incorporation of Nanotech Corporation (Incorporated by
         reference to exhibit 3.1 of Form 10-SB registration statement, filed
         June 17,1994.)



                                41

<PAGE>


3.2      Certificate of Amendment to Certificate of Incorporation of Nanotech
         Corporation (Incorporated by reference to exhibit 3.1 of Form 8-K,
         filed April 9, 1998)
3.3      Certificate of Amendment to Certificate of Incorporation of
         Micropoint Inc. (Incorporated by reference to exhibit 3.3 of Form
         10-QSB, filed May 3, 2004)
3.4      Restated bylaws of Flexpoint Sensor (Incorporated by reference to
         exhibit 3.4 of Form 10-QSB, filed May 3, 2004)
4.1      Common stock purchase warrant of Investors Stock Daily, Inc., dated
         July 26, 2005
10.1     Credit Line Agreement between Flexpoint Sensor and Broad Investment
         Partners, LLC, dated January 14, 2004 (Incorporated by reference to
         exhibit 10.1 for Form 8-K filed March 5, 2004)
10.2     Lease Agreement between Flexpoint Sensor and F.G.B.P., L.L.C., dated
         July 12, 2004 (Incorporated by reference to exhibit 10.2 of Form
         10-QSB, filed November 15, 2004, as amended)
10.3     Consulting Agreement between Flexpoint Sensor and Summit Resource
         Group, dated March 3, 2004 (Incorporated by reference to exhibit 10.3
         of Form 10-QSB, filed May 3, 2004)
10.4     Manufacturing Agreement between Flexpoint Sensor and R&D Products,
         Inc., dated September 28, 2005 (Incorporated by reference to exhibit
         10.1 of Form 8-K, filed October 3, 2005)
20.1     Flexpoint Sensor Systems, Inc. 2005 Stock Incentive Plan
         (Incorporated by reference to Schedule 14A, filed October 27, 2005)
20.2     Audit Committee Charter (Incorporated by reference to Schedule 14A,
         filed October 27, 2005)
21.1     Subsidiaries of Flexpoint Sensor Systems, Inc.
31.1     Chief Executive Officer Certification
31.2     Principal Financial Officer Certification
32.1     Section 1350 Certification


         ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

ACCOUNTANT FEES

The following table presents the aggregate fees billed for each of the last
two fiscal years by our principal accountant, Hansen Barnett & Maxwell,
Certified Public Accountants, in connection with the audit of our financial
statements and other professional services rendered by that firm.

                               2005              2004
                            ---------         ---------
      Audit fees            $ 100,789         $  51,113
      Audit-related fees            0                 0
      Tax fees                      0                 0
      All other fees        $       0         $       0


Audit fees represent the professional services rendered for the audit of our
annual financial statements and the review of our financial statements
included in quarterly reports, along with services normally provided by the
accountant in connection with statutory and regulatory filings or engagements.
Audit-related fees represent professional services rendered for assurance and
related services by the principal accountant that are reasonably related to
the performance of the audit or review of our financial statements that are
not reported under audit fees.

Tax fees represent professional services rendered by the principal accountant
for tax compliance, tax advice, and tax planning.  All other fees represent
fees billed for products and services provided by the principal accountant,
other than the services reported for the other categories.

PRE-APPROVAL POLICIES

Our audit committee makes recommendations to our board of directors regarding
the engagement of an auditor.  Before the auditor renders audit and non-audit
services our board of directors approves the engagement.  Our audit committee
does not rely on pre-approval policies and procedures.


                                42


<PAGE>


                            SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                    FLEXPOINT SENSOR SYSTEMS, INC.


                                    /s/ Clark M. Mower
Date: March 14, 2006           By: _______________________________________
                                    Clark M. Mower, President


In accordance with Section 13 or 15(d) of the Exchange Act, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.




Date: March 14, 2006                /s/ Clark M. Mower
                                    ______________________________________
                                    Clark M. Mower
                                    President, Chief Executive Officer and
                                    Director


Date: March 14, 2006                /s/ John A. Sindt
                                     _______________________________________

                                    John A. Sindt
                                    Chairman of the Board, and
                                    Principal Finance and Accounting Officer


Date: March 14, 2006                /s/ B. Fred Atkinson, Jr.
                                    _________________________________________
                                    B. Fred Atkinson, Jr.
                                    Secretary/Treasurer and Comptroller



Date: March 14, 2006                /s/ Ruland J. Gill, Jr.
                                    _________________________________________
                                    Ruland J. Gill, Jr.
                                    Director



                                43

<PAGE>