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

                          FORM 10-KSB/A
                         Amendment No. 1

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

        For the fiscal year ended December 31, 2004


[ ]     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 pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock

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. [  ]

State issuer's revenue for its most recent fiscal year: $345,433

As of March 24, 2005, Flexpoint Sensor Systems, Inc. had 19,998,202 shares of
common stock outstanding.  The market value of the shares of voting common
stock held by non-affiliates on that date was approximately $19,431,739.

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]


<PAGE>


                        TABLE OF CONTENTS

                             PART II

Item 6.  Management's Discussion and Analysis or Plan of Operation.........3
Item 7.  Financial Statements..............................................9
Item 8A. Controls and Procedures..........................................40

                             PART III

Item 13. Exhibits.........................................................40
Signatures................................................................41



                         EXPLANATORY NOTE

This annual report has been amended to include all required financial
statements for each of the two fiscal years preceding the date of the
presented audit balance sheet.


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.




                                2

<PAGE>


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

EXECUTIVE OVERVIEW

We have had minimal operations since September 2000 and were forced to seek
bankruptcy protection in July 2001. On February 24, 2004, our Chapter 11
bankruptcy reorganization plan was confirmed by the bankruptcy court.  As a
result, Flexpoint Sensor is considered a new entity for financial reporting
purposes with a date of emergence from bankruptcy of February 24, 2004.  We
are a development stage company focused on obtaining financing and seeking
manufacturing contracts for the design and engineering of our Bend Sensor
technology and equipment.

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").  We have also include the audited financial statements for the
periods prior to the confirmation of our bankruptcy reorganization plan,
including the year ended December 31, 2003 (the "2003 year"), and a short
period from January 1, 2004 through February 23, 2004 (the "2004 short
period").

We recorded revenue of $345,433 for the 2004 interim period, but we recorded
an accumulated deficit of $4,510,726 and used cash from operations of $535,404
for that period.  We have met our short-term cash needs after confirmation of
our bankruptcy reorganization plan with proceeds from related party notes and
from a convertible note payable.  Management anticipates that the private
offering we initiated in January 2005 will fund operations for the next six to
nine months.  However, we will require additional financing and will likely
rely on debt financing, loans from related parties, and private placements of
our common stock for additional funding.

During the fourth quarter of 2004 we have concentrated our efforts on our
customers and increased the number of personnel to keep pace with our
increased operating commitments.  In late 2004 we restructured our management
team and brought in an experienced group of executive level management
personnel to direct the growth of our business operations.

During the fourth quarter of 2004 negotiations for potential automotive
applications using our BendSensor(TM) technology increased, but we have not
entered into a major contract for the sale of our products.  We are also
developing new products that we may sell directly into the market through a
sales network that we are currently establishing.

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 to one
year.  Accordingly, we cannot guarantee that we will realize significant
revenues or that we will become profitable within the next twelve months.

LIQUIDITY AND CAPITAL RESOURCES

Our revenues are not to a level to support our operations and for the 2004
interim period we recorded net cash used in operating activities of $535,404.
Net cash used in operating activities for the 2003 year was $7,351.

For the next twelve months, management anticipates that we will rely on
revenues, debt financing, notes from related parties, and private placements
of our common stock to fund our on-going operations.  In addition, as we enter
into new technology agreements, 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.


                                3

<PAGE>


FINANCING

After confirmation of our bankruptcy reorganization plan, we relied on a $1.5
million convertible line of credit from Broad Investment Partners (executed as
part of our bankruptcy reorganization) to fund our operations.  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 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.  The conversion right was granted
on the date we emerged from bankruptcy when our common stock was trading at an
average $1.00 per share.  We considered the difference between the conversion
right and market value of our common stock to be a beneficial conversion
option for which we amortized and recognized as interest expense through March
31, 2004.

In January of 2005 we initiated a private offering pursuant to Rule 506 of
Regulation D.  We offered up to 3,150,000 units at $1.50 per unit.  The
maximum offering price of the private offering was $4,725,000, if all the
units were sold.  We closed the private offering on March 31, 2005, and
realized net proceeds of $3,907,208 and sold 2,836,335 units to purchasers and
140,000 units were issued to the placement agent.

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 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  products and the technology consisted of
the software algorithms that interpret data provided by the sensor technology.
 Flexpoint Holdings, LLC was a Utah limited liability company formed to
acquire and hold the assets that one of Flexpoint Sensor's creditors caused to
be seized during 2001 and sold at public auction during 2002.

To acquire the equipment and technology, 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 a appraised fair value of $4,302,643, with the
fair value of the property and equipment at $1,248,732 and the proprietary
technology at $1,645,577.

COMMITMENTS AND CONTINGENCIES

Our principal commitments consist of our total current liabilities, discussed
in more detail below in "Results of Operations," 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 $497,710 as of December 31, 2004.

During the 2004 interim period we have 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 more than 10% shareholder of Flexpoint
Sensor, for $198,000 at 12% interest, and we also had an unsecured note
payable to Persimmon LLC for $212,958.  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 March
25, 2005, we had repaid the $198,000 note to First Equity Holdings Corp., plus
interest, and paid $186,768 of the note payable, plus interest, to Persimmon
LLC.


                                4


<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

None.

CRITICAL ACCOUNTING ESTIMATES

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 $5,634,000 and the total fair value was allocated between the value
of the patents and goodwill per the independent appraisal.  Patents were
allocated $277,586 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 for the interim period from emergence from
bankruptcy on February 24, 2004 through December 31, 2004, the 2004 short
period from January 1, 2004 through February 23, 2004, and the year ended
December 31, 2003.  These financial statements are included in this report at
Part II, Item 7, below.



                    SUMMARY OPERATING RESULTS

                                    Period from    Period from
                                    Feb. 24, 2004  Jan. 1, 2004
                                    through        through       Year ended
                                    Dec. 31, 2004  Feb. 23, 2004 Dec. 31, 2003
                                    -------------- ------------- -------------

Revenue                             $     345,433  $          -  $     30,220

Cost of revenue                           (86,605)            -         1,883

Amortization of proprietary technology    (96,082)            -             -

Gross profit                              162,746             -        28,337

Total operating expense                 3,179,917        18,161       112,860

Total other income (expense)           (1,568,823)            -       (29,730)

Total reorganization items                 75,268       571,951       (34,503)

Net income (loss)                      (4,510,726)      553,790      (148,756)

Net income (loss) per share         $       (0.24) $       0.01  $          -


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 2004 interim period and the 2003 year 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


                                5


<PAGE>

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 were included as revenue in the 2004 fourth
quarter.

For all periods operating expense primarily consisted of compensation and
consulting expense.  For the 2004 interim period compensation expense of
$1,776,000 was related to settlement of claims by the issuance of 1,200,000
shares of restricted common stock to an officer and director of the company.
Consulting expense represented $846,008 of the general and administrative
expense for the 2004 interim period.  This expense was related to the issuance
of 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.

Total other expense for the 2004 interim period was primarily related to the
interest on loans and a $1,500,000 beneficial conversion of convertible debt
into shares of common stock.  The total other expense for the 2003 year was
also related to interest on loans.

For the 2004 short period the total reorganization items related to
forgiveness of debt related to accounts payable by our subsidiary, Flexpoint,
Inc.  Flexpoint, Inc. was excluded from the bankruptcy proceedings and its
debts were not subject to compromise in the bankruptcy proceedings.  The
contractual interest on Flexpoint Inc.'s obligation was aged past the statute
of limitations and the vendors had not made efforts to obtain payment.
Accordingly, in 2004 debt of $75,049 was considered to be forgiven.

For the 2003 year, total reorganization expense was primarily related to
professional fees related to our bankruptcy proceedings.

As a result of the above, we recorded a net loss for the 2004 interim period,
while we recorded a net gain for the 2004 short period due to forgiveness of
debt.

     Balance Sheet

The charts below present a summary of our balance sheet at December 31, 2004.
Further details are presented in our audited financial statements included in
this report at Part II, Item 7, below.

                SUMMARY BALANCE SHEET INFORMATION

                                        Period from
                                        Feb. 24, 2004
                                        through
                                        Dec. 31, 2004
                                        -------------

      Cash                              $      54,358

      Total assets                          8,556,661

      Total current liabilities               547,806

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

      Total stockholders equity         $   8,008,855

Cash decreased from $185,696 at September 30, 2004 to $54,358 at December 31,
2004.  Our total assets at December 31, 2004 included total current assets of
$55,107, property and equipment valued at $1,311,139, patents and proprietary
technology of $1,827,501, goodwill of $5,356,414 and other assets of $6,500.


                                6


<PAGE>

Total current liabilities at December 31, 2004 included accounts payable of
$116,378, accrued liabilities of $20,470, and notes payable to related parties
of $410,958.

      Factors Affecting Future Performance

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

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

We are unable to fund our day-to-day operations from revenues.  We anticipate
proceeds from our recent private placement to fund the development of a
QS-9000 manufacturing facility.  However, we anticipate that sales will not
increase until late 2005 or early 2006.  In addition, if we decide to expand
our business activities outside the automotive market in 2005, we anticipate
needing more than approximately $1,000,000 in additional funding.  The lack of
revenues or funding for our continued growth may cause us to delay our
business plans.

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

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

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

We may not be equipped to successfully manage any future periods of rapid
growth or expansion, which could be expected to place a significant strain on
our managerial, operating, financial and other resources.  Our future
performance will depend, in part, on our ability to manage growth effectively,
which will require us to (i) improve existing and implement new financial
controls and systems, management information systems, operating,
administrative, financial and accounting systems and controls, (ii) maintain
close coordination among engineering,  programming, accounting, finance,
marketing, sales and operations, and (iii) attract and retain 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.

We have completed installation of our first production line. Based on
projected orders under the current and 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 are currently on schedule to
complete the line by the estimated date.  There can be no assurance that we
will successfully complete the second production line, that the production
lines will produce product in the volumes required or that the production
lines will satisfy the requirements of our customers.

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

The market for sensor devices is extremely competitive, and we expect that
competition will intensify in the future. Our primary competitors in the air
bag market are International Electronics and Engineering, Siemens, Robert
Bosch Corporation, Denso, Breed Technologies, TRW, Delphi, Autoliv, Takata and
Temic.  We believe that none of our competitors have a product that is
superior to our Bend Sensor  technology at this time.  However, many of our


                                7
<PAGE>


competitors and potential competitors have substantially greater financial,
technical and marketing resources, larger customer bases, longer operating
histories, greater name recognition and more established relationships than we
do.  These competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and devote substantially
more resources to developing new products and markets than we can.  There can
be no assurance that we will be able to compete successfully against current
or future competitors or that competitive pressures we face will not
materially adversely effect our business, operating results or financial
condition.

     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 is no assurance that
the protection provided by our patents will be broad enough to prevent
competitors from introducing similar products or that our patents, if
challenged, will be upheld by courts of any jurisdiction.  Patent infringement
litigation, either to enforce our patents or defend ourselves from
infringement suits, would be expensive and, if it occurs, could divert our
resources from other planned uses.  Patent applications filed in foreign
countries and patents in these countries are subject to laws and procedures
that differ from those in the U.S. and may not be as favorable to us.  We also
attempt to protect our confidential information through the use of
confidentiality agreements and by limiting access to our facilities.  There
can be no assurance that our program of patents, confidentiality agreements
and restricted access to our facilities will be sufficient to protect our
confidential information from competitors.

     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 airbag technology into
vehicles beginning in 2005 with the phase in to be completed by 2008.  These
proposals call for upgraded airbag system performance tests for passenger cars
and light trucks.  The new testing requirements are intended to improve the
safety of infants, children and out-of-position adults, and maximize the
protection of properly seated adults.  The National Highway Transportation and
Safety Administration tests are similar to conditions that we have already
been using to test our Sensor Mat System and we believe that our Sensor Mat
System will meet the standards as proposed.  There can be no assurance,
however, that our Sensor Mat System will meet the proposed National Highway
Transportation and Safety Administration standards or the standards will not
be modified.  In addition, automakers may react to these proposals and the
uncertainty surrounding these proposals by curtailing or deferring investments
in new technology, including our Bend Sensor, 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.

     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.
However, we are currently unaware of any insurmountable problems with ongoing
research and development that may prevent further development of an
application.


                                8

<PAGE>

                   ITEM 7. FINANCIAL STATEMENTS



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


                                                                   Page

   Report of Independent Registered Public Accounting Firm .............F-2

   Consolidated Balance Sheet - December 31, 2004 ......................F-3

   Consolidated Statement of Operations for the Period from
      February 24, 2004 (Date of Emergence from Bankruptcy)
      through December 31, 2004 ........................................F-4

   Consolidated Statement of Stockholders' Equity for the
      Period from February 24, 2004 (Date of Emergence from
      Bankruptcy) through December 31, 2004 ............................F-5

   Consolidated Statement of Cash Flows for the Period from
      February 24, 2004 (Date of Inception) through
      December 31, 2004.................................................F-6

   Notes to Consolidated Financial Statements...........................F-7



<PAGE> 9


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 sheet of Flexpoint
Sensor Systems, Inc. and subsidiaries (a development stage company) (the
Company) as of December 31, 2004 and the related consolidated statement of
operations, stockholders' equity, and cash flows for the period from February
24, 2004 (date of emergence from bankruptcy ) through December 31, 2004. 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 audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit 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
audit provides 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, 2004 and the results of
their operations and their cash flows for the period from February 24, 2004
(date of emergence from bankruptcy) through December 31, 2004, in conformity
with U.S. generally accepted accounting principles.



                                          /s/ Hansen, Barnett & Maxwell

                                         HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
January 11, 2005


                               F-2


<PAGE> 10


         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
                  (A Development Stage Company)
                    CONSOLIDATED BALANCE SHEET
                        DECEMBER 31, 2004


------------------------------------------------------------------------------
ASSETS

Current Assets
Cash                                                             $     54,358
Accounts receivable                                                       749
------------------------------------------------------------------------------
Total Current Assets                                                   55,107

Property and equipment, net of accumulated depreciation of $47,695  1,311,139
Patents and proprietary technology, net of accumulated
  amortization of $112,702                                          1,827,501
Goodwill                                                            5,356,414
Other assets                                                            6,500
------------------------------------------------------------------------------
Total Assets                                                     $  8,556,661
==============================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable                                                 $    116,378
Accrued liabilities                                                    20,470
Notes payable - related party                                         410,958
------------------------------------------------------------------------------
Total Current Liabilities                                             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;
  19,998,202 shares issued and outstanding                             19,998
Additional paid-in capital                                         11,768,255
Warrants outstanding                                                  731,328
Deficit accumulated during the development stage                   (4,510,726)
------------------------------------------------------------------------------
Total Stockholders' Equity                                          8,008,855
------------------------------------------------------------------------------

Total Liabilities and Stockholders' Equity                       $  8,556,661
==============================================================================


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

                               F-3


<PAGE> 11


         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
                  (A Development Stage Company)
               CONSOLIDATED STATEMENT OF OPERATIONS
    FOR THE PERIOD FROM FEBRUARY 24, 2004 (DATE OF EMERGENCE
            FROM BANKRUPTCY) THROUGH DECEMBER 31, 2004


------------------------------------------------------------------------------

Revenue                                                        $      345,433
Cost of revenue                                                       (86,605)
Amortization of proprietary technology                                (96,082)
------------------------------------------------------------------------------
Gross Profit                                                          162,746

General and administrative expense (including $2,622,008
  of noncash compensation expense)                                 (3,179,917)
Interest expense                                                   (1,568,823)
Forgiveness of debt                                                    75,268
------------------------------------------------------------------------------

Net Loss                                                       $   (4,510,726)
==============================================================================

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

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



    The accompanying notes are an integral these consolidated
                      financial statements.

                               F-4


<PAGE> 12
<TABLE>
<CAPTION>



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

                                                                                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-Note 3)    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
======================================================================================================



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

                                       F-5
</TABLE>
<PAGE> 13

         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
                  (A Development Stage Company)
               CONSOLIDATED STATEMENT OF CASH FLOWS
    FOR THE PERIOD FROM FEBRUARY 24, 2004 (DATE OF EMERGENCE
            FROM BANKRUPTCY) THROUGH DECEMBER 31, 2004


------------------------------------------------------------------------------

Cash Flows from Operating Activities:
Net loss                                                        $  (4,510,726)
Adjustments to reconcile net loss to net cash used
 in operating activities:
   Depreciation                                                        47,695
   Amortization of intangible assets                                  112,702
   Issuance of stock and warrants for services                      2,622,008
   Expenses paid by increase in convertible note payable               60,000
   Amortization of discount on note payable                         1,556,666
   Changes in operating assets and liabilities:
     Accounts receivable                                                 (749)
     Accounts payable                                                 (91,728)
     Accrued liabilities                                               18,978
     Deferred revenue                                                (343,750)
     Other assets                                                      (6,500)
------------------------------------------------------------------------------
Net Cash Used by Operating Activities                                (535,404)
------------------------------------------------------------------------------

Cash Flows from Investing Activities:
Payments for patents                                                  (15,479)
Purchase of equipment                                                (110,102)
Payment for acquisition of equipment and proprietary
 technology from Flexpoint Holdings, LLC                             (265,000)
------------------------------------------------------------------------------
Net Cash Used in Investing Activities                                (390,581)
------------------------------------------------------------------------------

Cash Flows from Financing Activities:
Proceeds from notes payable - related parties                         445,300
Principal payments on notes payable - related parties                 (50,342)
Proceeds from borrowings under convertible note payable               583,334
------------------------------------------------------------------------------
Net Cash Provided By Financing Activities                             978,292
------------------------------------------------------------------------------

Net Change in Cash                                                     52,307

Cash at Beginning of Period                                             2,051
------------------------------------------------------------------------------

Cash at End of Period                                           $      54,358
==============================================================================

Supplemental Cash flow Information:
------------------------------------------------------------------------------
Interest paid                                                   $       9,657
------------------------------------------------------------------------------

Supplemental Schedule of Non Cash Investing and Financing Activities:
------------------------------------------------------------------------------
Short-term advances of $102,000 were repaid from an increase
  in a convertible note payable.  Issuance of 1,600,000 shares
  of common stock valued at $1,931,309, assumption of a $698,000
  convertible note payable and a cash payment of $265,000 to
  Flexpoint Holdings, LLC, a company controlled by a shareholder,
  in exchange for equipment and proprietary technology with a
  value of $2,894,309.
The principal balance of a $1,500,000 convertible note payable
  was converted into 3,000,000 shares of common stock.
------------------------------------------------------------------------------



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


                               F-6


<PAGE> 14



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

NOTE 1 - NATURE OF BUSINESS

Nature of Operations - Flexpoint Sensor Systems, Inc. (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.

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.

Principles of Consolidation -  The accompanying consolidated financial
statements include the accounts of Flexpoint Sensor Systems, Inc. and its
90%-owned subsidiaries, Sensitron, Inc. and Flexpoint, Inc. Minority interests
in subsidiaries are carried at no value based on their historical cost.
Intercompany transactions and accounts have been eliminated in consolidation.

Business Condition - The Company is in the development stage and its efforts
are primarily focused on obtaining necessary capital to complete its
production facility and re-start operations following its emergence from
Chapter 11 bankruptcy proceedings.  The Company has an accumulated deficit of
$4,510,726 and used cash from operations of $535,404 for the period from
February 24, 2004 (date of emergence from bankruptcy) through December 31,
2004.

Through December 31, 2004, the Company met its short-term cash needs through
confirmation of its plan of reorganization, through proceeds from related
party notes payable and from a convertible note payable. On January 20, 2005,
the Company authorized a private placement offering of equity securities for
estimated proceeds of up to $4,140,000 and has issued securities for proceeds
of $3,554,502 (unaudited). Management may be required to issue equity
securities through additional private placement offerings. However, there can
be no assurance that such sources of financing, if any, will be completed as
planned or 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.

Accounts Receivable - The Company regularly reviews its accounts receivable
and makes provisions for potentially uncollectible balances.  Management
believed the Company has incurred no material impairments in the carrying
values of its accounts receivable.

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 $47,695 for the period from February 24, 2004 (date
of emergence from bankruptcy) through December 31, 2004.


                               F-7

<PAGE> 15


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


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 - 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. Impairment is recognized if the carrying amount
is not recoverable and the carrying amount exceeds the fair value of the
intangible asset. Upon emergence from bankruptcy, the Company recognized
patents valued at $279,147. The Company acquired proprietary technology valued
at $1,645,577. The values of the Company's intangible assets were established
through an independent appraisal. 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. Amortization of
patents and proprietary technology during the period from February 24, 2004
through December 31, 2004 was $112,702.

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.  If a triggering event occurs, 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 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.

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.

Share Based Compensation - The Company accounts for its share-based
compensation to employees and directors under APB 25, Accounting for Stock
Issued to Employees, and related interpretations. Under APB 25, compensation
related to stock options, if any, is recorded if an option's exercise price on
the grant date is less than the fair value of the Company's common stock on
the grant date, and amortized 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. As of December 31,
2004, the Company has a share-based employee compensation plan. As of December
31, 2004 no employee stock options have been granted under the Plan. Until
employee stock options are granted, pro forma disclosure of the fair value of
share-based compensation to employees would not be meaningful and is not
provided.


                               F-8

<PAGE> 16


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


The Company accounts for its share-based compensation 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 the fair value of the equity instruments issued. The measurement
date for these issuances is the earlier of the date at which a commitment for
performance by the recipient to earn the equity instruments is reached or the
date at which the recipient's performance is complete. Share-based
compensation to non-employees totaled $846,008 for the period from February
24, 2004 through December 31, 2004.

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.  At December 31, 2004, there were warrants to
purchase 650,000 shares of common stock that 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.

Recent Accounting Pronouncements - In December 2004, the FASB issued Statement
No. 123 (Revised 2004), Share-Based Payment ("Statement 123(R)"). Statement
123(R) revises Statement No. 123, Accounting for Stock-Based Compensation, and
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.
Statement 123(R) requires the recognition of the cost of employee services
received in exchange for stock options and awards of equity instruments based
on the grant-date fair value of such options and awards, over the period they
vest. Under the modified-prospective basis alternative, which has been
selected by the Company to adopt Statement 123(R),  the Company is required to
adopt Statement 123(R) on July 1, 2005 and the Company will the recognize
employee compensation from stock options and awards equal to their unamortized
grant-date fair value over their  remaining vesting period. As of December 31,
2004, no employee options have been granted under the Company's Plan.
Accordingly, the effect of adopting Statement 123(R) on options outstanding at
December 31, 2004 will not result in the recognition of additional after-tax
compensation during the year ending December 31, 2005.

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.


                               F-9

<PAGE> 17


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

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. (Note 7)

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.

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.

                               F-10

<PAGE> 18




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

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:

<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

On March 31, 2004, Flexpoint Sensor Systems, Inc. entered an asset purchase
agreement with Flexpoint Holdings, LLC, a company that was owned in part by
and controlled by a shareholder who owned less than 2% of the Company's stock
prior to the transaction. Under the terms of the agreement, the Company
acquired equipment and proprietary technology with an appraised fair value of
$4,302,643 in exchange for a cash payment of $265,000, the assumption of a
$698,000 convertible note payable, and the issuance of 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 a 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.

                               F-11

<PAGE> 19


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

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 fair values of the
proprietary technology and equipment were established by independent
appraisals. The Company allocated the consideration given pro rata to the
assets acquired based on their estimated appraised values. At March 31, 2004,
the allocated value of the assets acquired was as follows:


         -----------------------------------------
         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, 2004,
were as follows:

                             Gross Carrying   Accumulated    Net Carrying
                                 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 $16,620 for the period from February 24, 2004 through
December 31, 2004, and amortization related to proprietary technology was
$96,082 for the same period.  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 the succeeding five years ending
December 31, is as follows:

                       ---------------------------
                         2005        $ 149,844
                         2006          149,844
                         2007          149,844
                         2008          149,844
                         2009          149,844
                       ---------------------------

Goodwill - Intangible assets not subject to amortization as of December 31,
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.


                               F-12

<PAGE> 20


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

NOTE 6 -  NOTES PAYABLE - RELATED PARTY

The Company had unsecured notes payable to First Equity Holdings, a
shareholder with a 31.09% interest in the Company, and Persimmons, LLC, a
shareholder with a 1.74% interest in the Company. The notes bear interest at
12% per annum and have repayment terms which required payment of the principal
and interest by December 31, 2004. Under amended terms of the notes, payment
of the entire principal and interest is due to the shareholders by the
extended due date of March 31, 2005. The principal balance of the notes 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. As of March 25, 2005 the Company
had repaid the $198,000 note payable to First Equity Holdings plus related
accrued interest and had paid $186,768 of the note payable to Persimmon LLC
plus related accrued interest (unaudited).

NOTE 7 - CONVERTIBLE NOTE PAYABLE

Under the plan of reorganization, Broad Investment Partners, LLC (the
"lender") agreed to provide financing to 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. The terms of the convertible note payable
provided that interest accrued on the $1,500,000 outstanding balance at 10%
per annum and that the principal and accrued interest were 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 - 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, 2004, including
temporary differences and operating loss carryforwards that arose prior to
reorganization from bankruptcy, are as follows:

                               F-13

<PAGE>   21

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


      -----------------------------------------------------
      Operating loss carry forwards           $  9,255,417
      Goodwill                                   1,997,942
      Property and equipment                       489,055
      Patents and proprietary technology           730,035
      -----------------------------------------------------
      Total Deferred Tax Assets                 12,472,449
      Valuation allowance                      (12,472,449)
      -----------------------------------------------------
      Net Deferred Tax Asset                  $          -
      =====================================================

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. 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 period from February 24, 2004 (date emergence from
bankruptcy) through December 31, 2004:

     ------------------------------------------------------------
     Tax at statutory rate (34%)                   $  (1,533,647)
     Non-deductible expenses                                (612)
     Change in valuation allowance                     1,683,113
     State tax benefit, net of federal tax effect       (148,854)
     ------------------------------------------------------------
     Provision for Income Taxes                    $          -
     ============================================================

NOTE 9 - COMMON STOCK ISSUED FOR COMPENSATION

The Company emerged from bankruptcy 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 on that date the
Company settled all amounts due under the claim, and in payment of services
received after the Company emerged from bankruptcy, by issuing 1,200,000
shares of restricted common stock. 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.

NOTE 10 - STOCK OPTION PLAN

On April 1, 1995, the Board of Directors and shareholders adopted an Omnibus
Stock Option Plan (the (Plan().  Under the terms of the Plan, as amended in
October 1997, Flexpoint may grant options to employees, directors and
consultants to purchase up to 719,643 shares of common stock.  Incentive or
non-qualified options may be granted under the Plan. Options granted under the
Plan are exercisable over periods determined by the Board of Directors, not to
exceed 10 years from the date of grant. Options generally vest from
immediately to five years. Generally, the only condition for exercise of
options granted under the Plan is that the employees remain employed through
the date the options are exercised or vested. As of the date of the
confirmation of the plan of reorganization, all previously outstanding stock
options were cancelled. No stock options have been issued under the Plan since
the Company emerged from bankruptcy.

                               F-14

<PAGE> 22


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

NOTE 11 - 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 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.  From February 24, 2004  through December 31, 2004, $78,715
was charged to operations as rent expense. Total future minimum lease payments
as of December 31, 2004 are as follows:


         ----------------------------
         2005               $ 101,821
         2006                 103,388
         2007                 104,988
         2008                 106,619
         Thereafter            80,894
         ----------------------------
                            $ 497,710
         ============================


NOTE 12 - CONSULTING AGREEMENT

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 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. The Company granted Summit
certain registration rights with respect to the 650,000 common shares
underlying the warrants including an obligation for all related registration
costs.

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.

NOTE 13 - 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.

                               F-15

<PAGE> 23


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


NOTE 14 - SUBSEQUENT EVENTS (UNAUDITED)

During January 2005, the Company opened a private placement offering for a
maximum of 3,150,000 shares of the Company's common stock for net proceeds of
$4,140,000, or $1.50 per share, in units with warrants to purchase 3,150,000
shares of the Company's common stock at an exercise price of $3.00 per share.
The warrants issued as part of the unit have a two year exercise term
beginning six months after the closing of the private placement offering. If
the closing bid price of the Company's common stock is greater than $4.00 per
share for five consecutive trading days after the initial six months from
closing, the Company may call the warrants in whole or in part, forcing the
investor to exercise the warrant within fifteen trading days or forfeit the
warrant. Through March 15, 2005 the Company issued 2,369,668 units for
proceeds of $3,554,502. Also, the investor may not exercise the 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.





                               F-16


<PAGE> 24

         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
                  (A Development Stage Company)
                  Index to Financial Statements

                                                                        Page

Report of Independent Registered Public Accounting Firm.................F-17

Consolidated Statements of Operations for the Period from January 1,
  2004 through February 23, 2004, for the year ended December 31,
  2003 and for the period from January 5, 1995 (Date of Inception)
  through February 23, 2004.............................................F-18

Consolidated Statements of Stockholders' Deficit for the Period
  from January 5, 1995 (Date of Inception) through December 31, 2002,
  for the year ended December 31, 2003, and for the period from
  January 1, 2004 through February 23, 2004.............................F-19

Consolidated Statements of Cash Flows for the Period from January 1,
  2004 through February 23, 2004, for the year ended December 31, 2003
  and for the period from January 5, 1995 (Date of Inception) through
  February 23, 2004.....................................................F-22

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


<PAGE> 25




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 ACCOUNTANTS


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

We have audited the accompanying consolidated statements of operations,
stockholders' deficit, and cash flows of Flexpoint Sensor Systems, Inc. and
subsidiaries (a development stage, debtor-in-possession company) for the
period from January 1, 2004 through February 23, 2004, for the year ended
December 31, 2003, and for the period from January 5, 1995 (date of inception)
through February 23, 2004. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with 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 consolidated financial statements of Flexpoint Sensor
Systems, Inc. and subsidiaries referred to above present fairly, in all
material respects, the results of their operations and their cash flows for
the period from January 1, 2004 through February 23, 2004, for the year ended
December 31, 2003 and for the period from January 5, 1995 (date of inception)
through February 23, 2004, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has suffered losses from continuing
operations and has had negative cash flows from operating activities for the
period from January 1, 2004 through February 23, 2004, for the year ended
December 31, 2003 and for the period from January 5, 1995 (date of inception)
through February 23, 2004.  In addition, the Company filed petitions for
relief under Chapter 11 of the federal bankruptcy laws.  These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to those matters are also described in
Note 1. The financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might result should the Company be
unable to continue as a going concern.

                                     /s/ Hansen, Barnett & Maxwell
                                     HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
January 11, 2005

                               F-17

<PAGE> 26
<TABLE>
<CAPTION



         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
               (A Company in the Development Stage)
            (Debtor-in-Possession as of July 3, 2001)
              CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                        For the Period
                                         For the Period                  from January
                                              from                       5, 1995 (Date
                                         January 1, 2004     For the     of Inception)
                                             through       Year Ended       through
                                           February 23,    December 31,  February 23,
                                               2004            2003           2004
                                          -------------- -------------- --------------

                                       <c>            <c>            <c>
Sales                                     $           -  $      30,220  $   3,850,489
Cost of Goods Sold                                    -          1,883      1,902,996
--------------------------------------------------------------------------------------

Gross Profit                                          -         28,337      1,947,493
--------------------------------------------------------------------------------------

Operating Expenses
General and administrative expenses              18,161        112,860     13,016,605
Research and development                              -              -      8,759,918
Contract and manufacturing activity exit costs        -              -      2,373,327
--------------------------------------------------------------------------------------
Total Operating Expenses                         18,161        112,860     24,149,850
--------------------------------------------------------------------------------------

Loss From Operations                            (18,161)       (84,523)   (22,202,357)
--------------------------------------------------------------------------------------

Other Income and (Expenses)
Interest expense                                      -        (29,730)    (2,286,974)
Interest from amortization of debt discount           -              -     (6,877,033)
Interest income                                       -              -         82,031
Other income (expense)                                -              -       (214,420)
--------------------------------------------------------------------------------------
Total Other Income and (Expense)                      -        (29,730)    (9,296,396)
--------------------------------------------------------------------------------------

Loss from Continuing Operations                 (18,161)      (114,253)   (31,498,753)
--------------------------------------------------------------------------------------

Reorganization Items - Income (Expense)
Loss on disposal of assets                            -        (13,145)      (720,261)
Forgiveness of liabilities                      655,790              -      1,422,855
Professional fees                               (83,839)       (34,503)      (236,644)
--------------------------------------------------------------------------------------
Total Reorganization Items                      571,951        (34,503)       465,950
--------------------------------------------------------------------------------------

Discontinued Operations
Loss from discontinued Tamco operations               -              -       (315,566)
Gain on disposal of Tamco                             -              -        125,103
--------------------------------------------------------------------------------------
Loss from Discontinued Operations                     -              -       (190,463)
--------------------------------------------------------------------------------------
Minority Interest in Loss of
 Consolidated Subsidiaries                            -              -        200,000
--------------------------------------------------------------------------------------

Net Income (Loss)                               553,790       (148,756)   (31,023,267)
--------------------------------------------------------------------------------------

Preferred Dividends                                   -              -       (693,551)
--------------------------------------------------------------------------------------
Income (Loss) Applicable to Common
  Shareholders                           $      553,790  $    (148,756) $ (31,716,818)
======================================================================================

Basic and Diluted Income (Loss) Per Common Share:
Loss from Continuing Operations          $            -  $           -
=======================================================================

Net Income (Loss)                        $         0.01  $           -
=======================================================================
Weighted Average Number of Common
 Shares Used in Per Share Calculation        76,534,709     76,534,709
=======================================================================


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

                               F-18


</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>


FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
(Debtor-in-Possession as of July 3, 2001)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT


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

                                 <c>      <c>        <c>          <c>        <c>          <c>          <c>
Balance January 5, 1995 (Date
 of Inception)                            -  $       -            -  $       -  $         -  $         -  $          -


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


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


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


1998:
Issuance of 30,303 warrants for
  services                                -          -            -          -       22,727            -        22,727
Issuance for cash, $4.00 per share        -          -      288,841        289    1,155,073            -     1,155,362
Conversion of notes payable, $0.80
  per share                               -          -      248,833        249      199,751            -       200,000
Conversion of debt, $0.61 per share       -          -       69,602         69       42,759            -        42,828
Acquisition of Nanotech Corporation,
  $0.50 per share                         -          -    6,000,000      6,000    2,977,275            -     2,983,275
Exercise of options, $0.16 per share      -          -       14,500         15        2,296            -         2,311



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

                                       F-19





</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>

FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
(Debtor-in-Possession as of July 3, 2001)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)

                                                                                    Deficit
                                                                                  Accumulated
                           Preferred Stock         Common Stock       Additional  During the                    Total
                         ------------------- -----------------------   Paid-in    Development    Unearned   Stockholders'
                          Shares    Amount      Shares     Amount      Capital       Stage     Compensation    Deficit
 ------------------------------------------------------------------------------------------------------------------------

                      <c>      <c>        <c>          <c>        <c>          <c>          <c>           <c>
1998:
Exercise of warrants,
 $0.00 per share               -  $       -       30,303  $      30  $       (30) $         -  $          -  $          -
Issuance for receivable
 from shareholder              -          -      393,438        394    1,573,356            -             -     1,573,750
Compensation related to
 grant of stock options        -          -            -          -       45,375            -             -        45,375


1999:
Issuance for cash, $4.00
 per share                     -          -      158,258        158      632,867            -             -       633,025
Issuance of convertible
 preferred stock and
 134,000 warrants for
 cash                        536    326,738            -          -      134,000            -             -       460,738
Conversion of common
 shares into convertible
 preferred stock and
 559,551 warrants          2,238  1,398,886     (489,523)      (490)  (1,398,396)           -             -             -
Amortization of
 preferred stock
 discount as preferred
 dividend                      -    693,551            -          -            -     (693,551)            -             -
Issuance of common
 shares and 476,600
 warrants for cash,
 $2.00 per share, net
 of offering costs             -          -      476,600        477      940,723            -             -       941,200
Conversion of convertible
 preferred stock into
 common stock and
 147,000 warrants, $2.00
 per share                  (336)  (294,000)     147,000        147      293,853            -             -             -
Beneficial conversion
 option of 8%
 convertible promissory
 notes                         -          -            -          -      404,062            -             -       404,062
Conversion of 8%
 convertible
 promissory notes into
 common stock, $1.70
 per share                     -          -      508,825        509      864,492            -             -       865,001
Compensation related to
 grant of stock options        -          -            -          -      369,825            -      (369,825)            -
Amortization of unearned
 compensation                  -          -            -          -            -            -       233,350       233,350
Exercise of options for
 cash, $0.16 to $0.47
 per share                     -          -      919,094        919      306,521            -             -       307,440
Issuance of 508,825
 warrants for cash             -          -            -          -    1,265,900            -             -     1,265,900
Issuance of 45,000
 warrants for interest         -          -            -          -      109,800            -             -       109,800
Grant of 100,000 warrants
 for services                  -          -            -          -      185,000            -             -       185,000
Exercise of warrants for
 cash, $0.77 per share         -          -      237,510        238      182,545            -             -       182,783
Exercise of warrants
 for services, $0.77
 per share                     -          -       29,250         29       22,494            -             -        22,523
Issuance in settlement
 of lawsuit, $1.75 per
 share                         -          -      100,000        100      174,900            -             -       175,000


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

                                       F-20

</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>



FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
(Debtor-in-Possession as of July 3, 2001)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)

                                                                                      Deficit
                                                                                    Accumulated
                            Preferred Stock         Common Stock       Additional   During the                    Total
                        ------------------- -----------------------     Paid-in     Development   Unearned   Stockholders'
                           Shares    Amount      Shares     Amount      Capital       Stage      Compensation    Deficit
--------------------------------------------------------------------------------------------------------------------------

                     <c>      <c>        <c>          <c>        <c>          <c>          <c>           <c>
2000:
Issuance of warrants
 for cash                     -  $        -            -  $       -  $ 3,039,202  $         -  $          -  $  3,039,202
Beneficial conversion
 options of notes payable     -           -            -          -    1,076,218            -             -     1,076,218
Contingent beneficial
 conversion option of
 debentures                   -           -            -          -      579,851            -             -       579,851
Conversion of preferred
 stock, $3.50 per share  (1,194) (1,044,749)     298,500        298    1,044,451            -             -             -
Conversion of promissory
 notes, $1.70 per share       -           -      120,588        121      204,879            -             -       205,000
Conversion of debentures,
 $1.00 per share              -           -      703,555        703      702,852            -             -       703,555
Conversion of debentures,
 $0.50 per share              -           -      606,400        606      302,594            -             -       303,200
Conversion of debentures,
 $0.001 per share             -           -   50,000,000     50,000            -            -             -        50,000
Exercise of stock options
 for cash, $0.16 to
 $4.00 per share              -           -       30,235         31        8,432            -             -         8,463
Stock issued for services,
  $1.19 per share             -           -      450,000        450      533,925            -             -       534,375
Warrants issued for
 services                     -           -            -          -      434,400            -             -       434,400
Issuance for services,
 $0.09 per share              -           -       85,250         85        7,911            -             -         7,996
Issuance of common shares
 and warrants in
 settlement of lawsuit,
 $0.28 per share              -           -        7,500          9        4,193            -             -         4,202
Compensation related to
 grant of stock options       -           -            -          -      156,137            -      (156,137)            -
Amortization of unearned
 compensation                 -           -            -          -            -            -       257,482       257,482


2001:
Issuance for services,
 $0.05 per share              -           -      155,371        155        7,614            -             -         7,769
Issuance for services,
 $0.01 per share              -           -    5,000,000      5,000      395,000            -             -       400,000
Forfeiture of stock
 options by terminated
 employees                    -           -            -          -      (35,130)           -        35,130             -
Cumulative net loss for
 the period from January
 5, 1995 (date of
 inception) through
 December 31, 2002            -           -            -          -            -  (31,428,301)            -   (31,428,301)
--------------------------------------------------------------------------------------------------------------------------
Balance - December
 31, 2002                 1,244   1,080,426   76,534,709     76,535   22,078,206  (32,121,852)            -    (8,886,685)
Net loss                      -           -            -          -            -     (148,756)            -      (148,756)
--------------------------------------------------------------------------------------------------------------------------
Balance - December
 31, 2003                 1,244   1,080,426   76,534,709     76,535   22,078,206  (32,270,608)            -    (9,035,441)
Net income                    -           -            -          -            -      553,790             -       553,790
--------------------------------------------------------------------------------------------------------------------------
Balance - February
 23, 2004                 1,244 $ 1,080,426   76,534,709  $  76,535  $22,078,206 $(31,716,818) $          -  $ (8,481,651)
==========================================================================================================================


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

                                       F-21
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>



                  FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
                       (A Company in the Development Stage)
                     (Debtor-in-Possession as of July 3, 2001)
                 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


                                                                               For the Period
                                                                                 January 5,
                                                 For the Period                  1995 (Date
                                                 January 1, 2004   For the      of Inception)
                                                    Through       Year Ended      Through
                                                  February 23,    December 31,   February 23,
                                                      2004            2003          2004
-----------------------------------------------------------------------------------------------

                                              <c>            <c>            <c>
Cash Flows From Operating Activities
 Net income (loss)                               $     553,790  $    (148,756) $ (31,023,267)
 Adjustments to reconcile net loss to net cash
 used by operating activities:
  Loss on disposition of assets                              -              -        729,623
  Contract and manufacturing activity exit costs             -              -      2,373,327
  Depreciation and amortization                              -          2,703      1,731,489
  Amortization of debt discount and loan costs               -              -      7,467,232
  Amortization of unearned compensation                      -              -        536,207
  Stock compensation issued for services                     -              -      2,103,790
  Expenses paid by increase in short-term advance      102,000              -        102,000
  Write off of patent expenses                               -              -        101,718
  Forgiveness of liabilities                          (655,790)             -     (1,422,855)
  Changes in operating assets and liabilities:
    Accounts receivable                                      -              -        130,363
    Inventory                                                -              -        (95,000)
    Other assets                                             -              -       (259,315)
    Accounts payable                                         -         34,542        719,328
    Accrued liabilities                                      -         29,160      1,106,574
    Accrued liabilities subject to compromise                -        100,000        200,000
    Deferred revenue                                         -        (25,000)       368,837
----------------------------------------------------------------------------------------------
 Net Cash Provided by (Used in)
 Operating Activities                                        -         (7,351)   (15,129,949)
----------------------------------------------------------------------------------------------

Cash Flows From Investing Activities
 Payments to Flexpoint prior to acquisition                  -              -       (268,413)
 Cash paid to acquire Tamco                                  -              -        (25,000)
 Proceeds from sale of available-for-sale securities         -              -        455,082
 Net cash received in Nanotech acquisition                   -              -      1,492,907
 Payments to purchase equipment                              -              -     (3,058,193)
 Issuance of note receivable                                 -              -        (12,507)
 Payments for patents                                        -              -       (146,430)
 Other                                                       -              -        207,745
----------------------------------------------------------------------------------------------
 Net Cash Provided by (Used in)
 Investing Activities                             $          -  $           -  $  (1,354,809)
----------------------------------------------------------------------------------------------
                                                                                   (Continued)



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


                                       F-22
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>

                  FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
                       (A Company in the Development Stage)
                     (Debtor-in-Possession as of July 3, 2001)
                       CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                               For the Period
                                                                                 January 5,
                                                 For the Period                  1995 (Date
                                                 January 1, 2004    For the    of Inception)
                                                    Through       Year Ended      Through
                                                  February 23,    December 31,  February 23,
                                                      2004            2003          2004
                                                 -------------- -------------- --------------

                                              <c>            <c>            <c>
Cash Flows From Financing Activities
 Proceeds from issuance of preferred stock       $           -  $           -  $     460,738
 Proceeds from issuance of common stock                      -              -      6,040,555
 Cash payments to officers to repurchase stock               -              -        (50,000)
 Proceeds from issuance of warrants                          -              -      1,809,202
 Collection of receivables from shareholders                 -              -      1,963,750
 Proceeds from borrowings                                    -              -      6,055,460
 Principal payments of debt                                  -              -       (874,790)
 Proceeds from related party notes                           -          5,000      1,600,208
 Payment of capital lease obligation                         -              -        (94,149)
 Principal payments of related party notes                   -         (4,000)      (424,165)
---------------------------------------------------------------------------------------------
 Net Cash Provided by (Used in)
 Financing Activities                                        -          1,000     16,486,809
---------------------------------------------------------------------------------------------

Net Change In Cash                                           -         (6,351)         2,051

Cash at Beginning of Period                              2,051          8,402              -
---------------------------------------------------------------------------------------------

Cash at End of Period                            $       2,051  $       2,051  $       2,051
=============================================================================================



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


                                       F-23
</TABLE>

<PAGE> 32

         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
               (A Company in the Development Stage)
            (Debtor-in-Possession as of July 3, 2001)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - The Company is a development stage enterprise engaged
principally in designing, engineering, and manufacturing sensor technology and
equipment using flexible potentiometer technology.

Through April 1998, the Company operated through Sensitron, Inc, a Utah
Corporation, at which time it changed its name to Micropoint, Inc.  In June
1999, the name was changed to Flexpoint Sensor Systems, Inc.

Petition for Relief Under Chapter 11 - On July 3, 2001, Flexpoint Sensor
Systems, Inc. (the "Company") filed petitions for relief under Chapter 11 of
the federal bankruptcy laws in the United States Bankruptcy Court for the
District of Utah. Under Chapter 11, certain claims against the Company in
existence prior to the filing of the petitions for relief under the federal
bankruptcy laws were stayed while the Company continued business operations as
debtor-in-possession. On February 24, 2004, the Company's plan of
reorganization was confirmed by the U.S. Bankruptcy Court and the Company
emerged from bankruptcy. The emergence from bankruptcy was accounted for using
fresh start accounting. The accompanying financial statements only reflect the
Company's transactions up to the date of emergence from bankruptcy.

The Company determined that there was insufficient collateral to cover the
interest portion of scheduled payments on its pre-petition debt obligations;
therefore, the debtor discontinued accruing interest on these obligations.
Contractual interest on those obligations as of February 23, 2004 and December
31, 2003 was $621,936, which was $592,206 in excess of reported interest
expense.

Principles of Consolidation -  The accompanying consolidated financial
statements include the accounts of Flexpoint Sensor Systems, Inc. and its
90%-owned subsidiaries, Sensitron, Inc. and Flexpoint, Inc. Intercompany
transactions and accounts have been eliminated in consolidation.

Nature of Operations - The Company is a development stage enterprise engaged
principally in designing, engineering, and manufacturing sensor technology and
equipment using flexible potentiometer technology.

Use of Estimates -  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements
and accompanying notes.  Actual results could differ from these estimates.

Business Condition -  The accompanying consolidated financial statements have
been prepared in conformity with generally accepted accounting principles,
which contemplate continuation of the Company as a going concern. However, the
Company has filed petitions for relief under Chapter 11 of the federal
bankruptcy laws in the United States Bankruptcy Court for the District of Utah
and has suffered losses from operations and has had negative cash flows from
operating activities during the period from January 1, 2004 through February
23, 2004 and for the year ended December 31, 2003. In addition, the Company
ceased its manufacturing activities and defaulted on major debt and lease
obligations.

                               F-24
<PAGE> 33


         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
               (A Company in the Development Stage)
            (Debtor-in-Possession as of July 3, 2001)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


All of these conditions raise substantial doubt about the Company's ability to
continue as a going concern. The Company's continued existence is dependent
upon its ability to obtain additional financing and establish business
arrangements that will enable the Company to generate profitable operations.
The Company is involved in discussions with possible financing sources and
business partners. However, no agreements have been reached and there is no
assurance that additional financing will be realized or business relationships
established.

Revenue Recognition - Revenue from the sale of products is recorded at the
time of shipment to the customers. Revenue from research and development
engineering contracts is recognized as the services are provided and accepted
by the customer.  Revenue from contracts to license 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.

As of February 23, 2004 and December 31, 2003, the Company had deferred
revenue of $343,750, consisting of $250,000 of prepaid royalties to be
deferred and recognized as royalty sales are reported to the Company by the
customer over the remaining term of the agreement, and $93,750 of deferred
sales related to software license rights sold to the customer that will be
amortized over the six year term of the contract.

Stock Based Compensation - The Company accounts for its stock-based
compensation issued to employees and directors under Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. Under
APB Opinion No. 25, compensation related to stock options, if any, is recorded
if an option's exercise price on the grant date is less than the fair value of
the Company's common stock on the grant date, and amortized 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, and related interpretations. Under SFAS No. 123,
stock-based compensation is determined as either the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable. The measurement date for these
issuances is the earlier of the date at which a commitment for performance by
the recipient to earn the equity instruments is reached or the date at which
the recipient's performance is complete.

At February 23, 2004 and December 31, 2003, the Company has a stock-based
employee compensation plan, which is described more fully in Note 4. There was
no stock-based compensation recognized for the period from January 1, 2004
through February 23, 2004 or for the year ended December 31, 2003, nor would
there have been any such compensation had it been determined under the
fair-value method for all awards; therefore, pro forma amounts for net loss
and basic and diluted loss per common share are not presented.


                               F-25

<PAGE> 34

         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
               (A Company in the Development Stage)
            (Debtor-in-Possession as of July 3, 2001)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Basic and Diluted Income (Loss) Per Share - Basic loss per common share from
continuing operations is computed by dividing loss from continuing operations
by the number of common shares outstanding during the period. Basic income
(loss) per common share applicable to common shareholders is calculated by
dividing income (loss) applicable to common shareholders by the number of
common shares outstanding during the period.  Diluted income (loss) per share
is calculated to give effect to stock warrants and options using the treasury
stock method and convertible preferred stock using the if-converted method.
Stock warrants and options, and convertible preferred stock were not included
in diluted income (loss) per share during loss periods when those potentially
issuable common shares would decrease the loss per share.  The effects of
4,569,187 potentially issuable common shares at February 23, 2004 and December
31, 2003, were excluded from the calculation of diluted loss per share.

Recently Enacted Accounting Standards - In January 2003, the FASB issued
Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities,
an Interpretation of ARB No. 51. FIN 46 provides guidance on the
identification of entities for which control is achieved through means other
than through voting rights ("variable interest entities" or "VIEs") and how to
determine when and which business enterprise should consolidate the VIE (the
"primary beneficiary"). This new model for consolidation applies to an entity
in which either (1) the equity investors do not have a controlling financial
interest or, (2) the equity investment at risk is insufficient to finance that
entity's activities without receiving additional subordinated financial
support from other parties. In addition, FIN 46 requires that both the primary
beneficiary and all other enterprises with a significant variable interest in
a VIE make additional disclosures. The provisions of FIN 46 become effective
for the company as of December 31, 2003.  The Company does not have an
interest in a variable interest entity and does not expect the provisions of
FIN 46 to have a material effect on its future, interim or annual financial
statements.

NOTE 2 - CONTINGENT LIABILITIES

Delphi Automotive Systems Supply Agreement - The Company 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 the Company to be used directly for Delphi
programs.  As of December 31, 2000, the Company had received loan payments of
$1,700,000 from Delphi.

In August 2000, Delphi notified the Company of its intent to terminate the
Supply Agreement. However, the Company believes that Delphi is not entitled to
terminate the agreement or has not followed the appropriate contractual
provisions for termination of the Supply Agreement. As a result, the Company
significantly reduced its workforce and operating costs in order to conserve
resources and sought protection under the United States Federal bankruptcy
laws.

Delphi has made a claim to the bankruptcy court against the Company of
$1,700,000.  Litigation of the claim is estimated to begin after the
confirmation date of the Company's bankruptcy reorganization.


                               F-26

<PAGE> 35

         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
               (A Company in the Development Stage)
            (Debtor-in-Possession as of July 3, 2001)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - STOCKHOLDERS' EQUITY

Preferred Stock - During the year ended December 31, 1999, 4,500 shares of
preferred stock were designated as Series A Convertible Preferred Stock
("Series A Preferred") with a stated value of $875.  The Series A Preferred
will rank, with respect to rights on liquidation, senior to all classes of
common stock and each other class of capital stock or series of preferred
stock established after the date designated by the Board of Directors. The
Series A Preferred has no stated dividend rate and no dividends will be
payable thereon unless declared by the Board of Directors. Each share of
Series A Preferred outstanding is entitled to 250 votes. The Series A
Preferred shares are entitled to a preference in liquidation over the common
shares equal to $875 per preferred share.

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

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

During the year ended December 31, 2000, 1,194 shares of Series A Preferred
were converted into 298,500 shares of common stock, respectively.  All shares
of preferred stock will be cancelled pursuant to the bankruptcy plan of
reorganization, if is executed.

Super Voting Preferred Stock - On April 13, 2001, the Company authorized a
class of stock designated as Series 2001 Super-Voting Preferred, with a par
value of $0.001, each share of the Super-Voting Preferred having 100 votes per
share, with voting rights to expire July 1, 2004.  The stock will not pay
dividends and will not participate in liquidation.  The stock is redeemable
for $0.001 per share.

NOTE 4 - STOCK OPTIONS

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


                              F- 27

<PAGE> 36

         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
               (A Company in the Development Stage)
            (Debtor-in-Possession as of July 3, 2001)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of stock options as of February 23, 2004 and December
31, 2003 and changes during the periods ended on those dates are presented
below:


                                February 23, 2004       December 31, 2003
                            -------------------------- -----------------------
                                         Weighted-                Weighted-
                                          Average                  Average
                            Shares    Exercise Price   Shares   Exercise Price
------------------------------------------------------------------------------
Outstanding at beginning
 of year                    555,000    $   1.28        555,000   $      -
Expired                           -           -              -          -
------------------------------------------------------------------------------
Options outstanding at
 end of year                555,000    $   1.28        555,000   $   1.28
==============================================================================
Options exercisable at
 end of year                555,000    $   1.28        555,000   $   1.28
==============================================================================

The following table summarizes information about stock options outstanding at
February 23, 2004 and December 31, 2003:

                               Outstanding                   Exercisable
                 -------------------------------------- ----------------------
                                Weighted-
                                Average        Weighted              Weighted
                                Remaining      Average                Average
                   Number      Contractual     Exercise   Number     Exercise
Exercise Prices  Outstanding  Life in Years     Price    Exercisable   Price
------------------------------------------------------------------------------
$   0.77          325,000         3.67         $   0.77    325,000    $  0.77
$   2.00          230,000         1.37         $   2.00    230,000    $  2.00
------------------------------------------------------------------------------
$0.77-2.00        555,000         2.72         $   1.28    555,000    $  1.28
==============================================================================

NOTE 5 - STOCK PURCHASE WARRANTS

From 1995 through 1999, the Company issued warrants to equity investors in
connection with equity offerings. During 2000, Series C and Series D
convertible notes and other notes payable were issued for an aggregate
principal balance of $405,000 together with warrants to purchase 220,588
common shares with exercise prices of $1.70 to $2.25 and expiring during 2003.
The proceeds from the notes were allocated between the convertible notes and
the warrants based upon their relative fair values.  The estimated fair value
of the warrants of $241,176 was determined using the Black-Scholes option
pricing model with the following weighted-average assumptions: dividend yield
of 0%; volatility of 125.7%; risk-free interest rate of 6.8%; and estimated
life of 3 years. The warrants were allocated $213,785 of the net proceeds of
the convertible notes payable, $110,644 was allocated to the beneficial
conversion option of the convertible notes, and $80,572 was allocated to the
convertible notes payable. The resulting $324,428 discount on the promissory
was amortized through the date the notes were convertible and resulted in
amortization expense of $324,428 during the year ended December 31, 2000.



                              F- 28

<PAGE> 37

         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
               (A Company in the Development Stage)
            (Debtor-in-Possession as of July 3, 2001)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2000, warrants were issued to a note holder for consideration for an
extension of terms and also issued warrants for services to outside legal
counsel, and to others for services. Warrants issued carried an exercise price
equal to the estimated fair value of the underlying shares on each issuance
and expired from July 2004 through August 2004. The fair value of warrants
issued for services were estimated on the date of issuance using the
Black-Scholes option-pricing module. The Board of Directors estimated the fair
value of the underlying common shares when there was no active trading market
for the Company's common shares, into which the warrants were convertible. The
estimated fair value of the warrants closely approximated the estimated fair
value of the underlying shares at each of the issuance dates. Pursuant to the
bankruptcy plan of reorganization, if executed, warrants outstanding would be
cancelled. Warrants issued for services from 1995 through 2000 were as
follows:


------------------------------------------------------------------------------
            Number of                           Exercise   Fair    Expense
Year        Warrants    Consideration           Price      Value   Recognized
-----------------------------------------------------------------------------
1995           22,750   Legal services          $ 0.77    $ 0.77   $   17,518
1996            6,500   Legal services            0.77      0.77        5,005
1997          910,000   Director services         1.15      1.15    1,046,500
1999          100,000   Consulting services       1.85      1.85      185,000
2000          240,000   Services                  2.00      1.81      434,400
2000           10,000   Litigation settlement     1.50      0.21        2,100
------------------------------------------------------------------------------


The following table summarizes information about warrants outstanding at
February 23, 2004 and December 31, 2003:

          --------------------------------------------------------
                                            Weighted-Average
                            Warrants        Remaining Contractual
          Exercise Prices   Outstanding     Life in Years
          --------------------------------------------------------
          $1.50 - $1.79        389,747         0.18
          $2.05 - $2.50      2,980,747         0.33
          $3.15 - $3.44        335,000         0.56
          --------------------------------------------------------
          $1.50 - $3.44      3,705,494         0.34
          ========================================================

NOTE 6 - INCOME TAXES

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 period from  For the year ended
                                        January 1, 2004 to      December 31,
                                         February 23, 2004          2003
------------------------------------------------------------------------------
Tax at statutory rate (34%)               $      188,289       $   (50,577)
Non-deductible expenses                           37,894            37,894
Benefit of operating loss carryforward          (255,599)                -
Increase in valuation allowance                   11,141            17,592
State tax benefit, net of federal tax effect      18,275            (4,909)
-----------------------------------------------------------------------------
Provision for Income Taxes                $            -       $         -
=============================================================================


                               F-29

<PAGE> 38

         FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
               (A Company in the Development Stage)
            (Debtor-in-Possession as of July 3, 2001)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Capital Leases - During the year ended December 31, 2000, the Company entered
into capital lease arrangement for certain equipment with an original cost of
$66,852.  As of February 23, 2004 and December 31, 2003, these capital lease
obligations are in default and payment of the full amount was due.  In January
2001, the lessor sued the Company for the accelerated lease payments of
$84,950, plus accrued interest, which was $95,644 as of February 23, 2004 and
December 31, 2003.  No additional action has been taken by the lessor. The
Company's subsidiary, Flexpoint Inc., has written off the $84,950 for these
lease obligations and has reflected a gain on the forgiveness of debt as of
February 23, 2004.

Rent expense for the periods ended February 23, 2004 and December 31, 2003 was
$0 and $2,103, respectively.







                               F-30

<PAGE> 39




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 significant
changes made in our internal controls over financial reporting during the
fourth quarter of 2004 that have materially affected, or are reasonably likely
to materially affect our internal control over financial reporting.

                             PART III

                        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.)
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)
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)
21     Subsidiaries of Flexpoint Sensor Systems, Inc. (Incorporated by
       reference to exhibit 21 of Form 10-KSB, filed February 18, 2004)
31.1   Chief Executive Officer Certification
31.2   Principal Financial Officer Certification
32.1   Section 1350 Certification


                                40



<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: 06/29/2005                 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.



                                     /s/ Clark M. Mower
Date: 06/29/2005                     _____________________________________
                                     Clark M. Mower
                                     President, Chief Executive Officer,
                                     Director

                                     /s/ John A. Sindt
Date: 06/29/2005                     _____________________________________
                                     John A. Sindt
                                     Secretary/Treasurer
                                     Chairman of the Board
                                     Principal Financial and Accounting
                                     Officer