UNITED STATES SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549  FORM
10-K  [X] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,
2008  [
 ] 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. (Exact name of
registrant as specified in its charter)  Delaware
(State or other jurisdiction of
incorporation)
87-0620425
(I.R.S. Employer Identification No.)106 West Business Park Drive, Draper,
Utah
(Address of principal executive offices)
84020
(Zip Code)Registrants telephone number, including area code:
  801-568-5111 Securities registered under Section 12(b) of the Exchange
Act:  None  Securities registered under Section 12(g) of the Exchange
Act:  Common Stock  Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.     Yes [   ]   No [X]  Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
    Yes [   ]   No [X]  Indicate by check mark whether the registrant (1) filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes [X]   No [  ]  Indicate by check mark if disclosure of delinquent filers
pursuant to item 405 of Regulation S-K 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-K
or any amendment to this Form 10-K.    [X]  Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company: Large accelerated filer [
 ]
Non-accelerated filer [
 ]
Accelerated filed [
 ]
Smaller reporting company
[X]  Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ]   No [X]


The aggregate market value of
the voting and non-voting common equity held by non-affiliates computed by
reference to the price at which the common equity was last sold, as of the last
business day of the registrants most recently completed second fiscal quarter
was $13,652,898.  The number of shares outstanding of the registrants
common stock, as of March 27, 2009, was 24,792,887.  Documents incorporated by reference:  None  TABLE OF CONTENTS  PART I Item 1.  Business 3 Item 1A.  Risk Factors 9 Item 2.  Properties 11 Item 3.  Legal
Proceedings 11 Item 4.  Submission of
Matters to a Vote of Security Holders 11  PART II Item 5.  Market for Registrants Common Equity,
Related Stockholder Matters and Issuer
Purchases of Equity Securities 12 Item 6.  Selected
Financial Data 13 Item 7.  Managements
Discussion and Analysis of Financial Condition and Results of Operations 13 Item 8.  Financial
Statements and Supplementary Data 18 Item 9.  Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure 33 Item 9A(T).  Controls and
Procedures 33 Item 9B.  Other
Information 34  PART III Item 10.  Directors,
Executive Officers and Corporate Governance 34 Item 11.  Executive
Compensation 35 Item 12.  Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters 37 Item 13.  Certain
Relationships and Related Transactions, and Director Independence 39 Item 14.  Principal
Accounting Fees and Services 39  PART IV Item 15.  Exhibits,
Financial Statement Schedules 40 Signatures 41        In this annual report
references to Company,Flexpoint,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.  PART I  ITEM 1.  BUSINESS  HISTORICAL DEVELOPMENT  Flexpoint Sensor Systems, Inc. was incorporated in the
state of Delaware in June 1992 as Nanotech Corporation.  In April 1998,
Nanotech acquired Sensitron, Inc., a Utah corporation (Sensitron), as a
wholly-owned subsidiary through a reverse triangular merger.  Nanotech also
acquired Sensitrons wholly-owned subsidiary, Flexpoint, Inc. As part of this
acquisition, Nanotech changed the company name to Micropoint, Inc.  In July
1999 Micropoint changed its name to Flexpoint Sensor Systems, Inc.  Flexpoint Sensor was forced to seek bankruptcy protection
on July 3, 2001, and filed a voluntary petition for reorganization pursuant to
Chapter 11 of the United States Bankruptcy Code.  (See Part I, Item 4
Legal Proceedings, below).  On February 24, 2004, the bankruptcy court
confirmed our Plan of Reorganization.  As a result of our reorganization,
we are now a development stage company with a date of emergence from bankruptcy
of February 24, 2004.  We used fresh-start reporting and all assets of
Flexpoint Sensor Systems, Inc. were restated to reflect their reorganization
value, which approximated the fair value at the date of reorganization.  The bankruptcy reorganization plan resulted in a 7-to-1
reverse stock split that was affected March 5, 2004.  All share and per
share amounts presented in this report reflect the shares remaining after the
reverse split.  The reorganization plan resulted in discharged debt of
$7,123,213, which included the issuance of 13,822,331 shares of stock for
creditor claims and conversion of $1,500,000 of notes payable and the
cancellation of 828,571 shares of common stock issued or issuable to an officer
during 2001.  Options, warrants or executor contracts for acquisition of
any common shares entered into prior to our petition for bankruptcy protection
were canceled upon confirmation of the reorganization plan. Outstanding
preferred stock and super-voting preferred stock were also canceled upon
confirmation.  BUSINESS OVERVIEW  Flexpoint Sensor Systems, Inc. (Flexpoint, or
Company) is a development stage company principally engaged in designing,
engineering and manufacturing bend sensor technology and equipment using its
patented Bend Sensor® technology, (a flexible potentiometer
technology). For the past three years we have been negotiating contracts,
manufacturing Bend Sensor®devices and making further improvements to
our technologies and processes.  We own eleven patents and have filed for
additional patents and are in the process of filing for more.  The Company
currently markets to a number of users and is in the process of furthering its
marketing effort for products that the Company can produce. In addition to the
sale of its products and services the Company may generate revenues through
licensing its technology for field of use or territory. If at all possible, each
license agreement will require either first right of refusal to manufacture, or
royalty provisions on each product application. We are currently concentrating
our marketing efforts on the automotive, medical and commercial/industrial
applications.  Management believes that the automotive sector offers the
largest potential for acquiring large, long-term contracts, but because of the
length of time required to successfully market and develop products for
automotive use, the realization of income takes longer to occur in this sector,
with substantial income coming as much as two to three years after agreements
have been successfully negotiated.  On September 11, 2008 R&D Products, LLC entered into
a long-term Licensing Agreement for their bed technology with a major medical
solutions provider (Licensee).  The Agreement provides the Licensee the
exclusive worldwide rights to R&Ds patented bed technology for medical
applications.  On that same day, R&D Products, the Licensee and
Flexpoint entered into a long-term joint manufacturing agreement for R&Ds
bed technology and related products.  The manufacturing agreement provides
for the Company    3   to
manufacture sensors for the bed technology and related products through 2018
with an option to renew each year thereafter.  Ramp up and production
schedules with specific quantities, dead lines and resource requirements are
still being outlined.  We anticipate that the volumes associated with this
contract should be sufficient to support our operations in the future, but the
Company will need additional financing to meet our short term cash requirement,
therefore, we are actively seeking financing and additional long-term
manufacturing contracts for the use of, design and engineering of, our Bend Sensor®flexible
potentiometer application.  During 2005 we raised funding through sales of our common
stock and during 2006 we completed installation of our first production line and
began further testing of our products.  Additional funding was obtained
through a series of private placements in 2007. In November 2008 we secured
$300,000 of short-term financing from related parties. The notes are due and
payable on May 31, 2009 with an annual interest rate of 10%.  The notes
also have a conversion option for restricted common shares at $.25 per share and
are secured by the Companys business equipment.  The same persons have
agreed to fund up to an additional $300,000 if needed under similar terms.  PRODUCTS  Bend Sensor®Technology  The Company owns the patent rights to our Bend
Sensor® technology through Sensitron, a wholly-owned subsidiary of
the Company. The Bend Sensor® is a flexible potentiometer bend sensor
product consisting of a coated substrate, such as plastic, that changes
electrical conductivity as it is bent.  Electronic systems can connect to
this sensor and measure in detail the amount of bending or movement that occurs.
 Certain applications of the Bend Sensor® potentiometer have
been patented (See Patents and Intellectual Property, below).  A typical potentiometer functions through the means of
metal contacts swiping or rubbing across a resistive element. Our Bend Sensor®
potentiometer is a single layer with no mechanical assembly that makes it more
reliable and significantly smaller, lighter in weight and usually less expensive
than mechanical potentiometers.  Management believes many sensor
applications can be improved using our technology and the use of our technology
will result in new products and new sensor applications.  We have developed the following
applications for the Bend Sensor® technology:  Medical Bed  Under the terms of our agreement with R&D Products
LLC, we have delivered prototypes of beds for use in medical and commercial
applications. As design changes and enhancements are approved, we anticipate
delivery of additional prototypes during the first quarter 2009.  The
electronics of the bed are able to record, based on our Bend Sensor®
technology input, the position of the person on the bed and how they are moved.
 The bed has the ability to roll a patient left or right to relieve
pressure areas as well as facilitate dressing changes.  This allows needed
adjustments to be made to meet the required standards of care and comfort.
 Adjustments are also programmable for customized patient care and may be
recorded for administrative use at later dates. R&D Products has licensed
the exclusive worldwide technology and patent rights for the bed which is
designed to manage pressure on the body using Flexpoint Sensor Systems Bend
Sensor® technology. Management believes this application of our
technology is sufficiently unique to provide a major source of future
revenues.  During 2007 and 2008 we have been in negotiations with
several Tier 1 suppliers and OEMs in the automotive industry on the following
products:  Pedestrian Impact Detection Sensor  In 2003, the European Parliament and the Council of
the European Union published a directive on pedestrian protection to reduce the
number of pedestrian deaths and injuries.  In October 2005 we completed the
initial stage of testing for our Pedestrian Impact Detection (PID) system with
Tier One suppliers and confirmed the systems ability to distinguish within
milliseconds between a human leg and an inanimate object.  During 2006 four
separate automotive suppliers/original equipment manufacturers tested the Bend
Sensor®device for use in pedestrian impact detection device.
 The tests proved that the Bend Sensor® device was able to
detect impact with a human leg and in the event of an accident, trigger a
desired safety response.  The device is also capable of differentiating
between a human leg and a steel post and can therefore alter the safety response
based on the appropriate safety protocols. The automobiles response can include
raising the hood or deploying an external air bag.  We believe the Bend
Sensor®devices advantages over the competition include reliability,
accuracy, and lower costs. This directive is being phased in over the next
several years.    4    We have also developed a crash sensor, which is a series
of sensors mounted in strategic places on the side and door panels to detect an
impact, as well as the speed, direction and force of the impact.  This
allows an onboard computer to deploy side air bags where needed.  In 2006 we enlisted a third party testing facility to
further validate our technology as required in our protocol for Stage II
development of our devices.  In June 2006 we announced our PID system was
tested by MGA Research and this research confirmed results of our internal
testing.  The system is placed in the vehicles front bumper to detect
crash impact.  Within milliseconds of contact, the system can differentiate
between a human leg and an inanimate object and trigger a safety response in
accordance with the manufacturers specifications.  Seat Belt Reminder  As a result of our testing in the pedestrian impact
detection market, we have developed and tested a Seat Belt Reminder (SBR) sensor
that alerts the occupant of an automobile to fasten his/her seatbelt.  We
are currently working with multiple manufacturers to potentially replace
existing devices in the marketplace with a system superior in performance and at
a lower price point.  The Passenger Presence Detection system is used to detect
if there is any object in the front passenger seat.  This device could be
used widely in the European market because there are specific requirements for
this type of application in Europe.  We are currently working with Tier 1
suppliers on this application.  This device could also be used as a seat
belt reminder with a potential market of 12 to 13 million vehicles in the U.S.
per year.  Theater Seats  Similar to a seat belt reminder, this devise monitors
cinema theaters paying customers and identifies available seats. We have
supplied a theater management firm with several next-generation prototype
sensors which have undergone extensive testing for this application. The theater
management group has installed some of our sensors in working theater seats to
complete the testing process. There are over 37,000 movie theater screens in the
U.S. and several times that throughout the world. It is estimated that theater
seats are replaced/refurbished about every seven years. Our system can be easily
implemented to new theater construction and also retrofitted into existing movie
theater complexes.  Emergency Vehicles  Intertek Industrial Corp., located in Jacksonville,
Florida is a leading supplier of quality seatbelt systems and safety devises to
the emergency vehicle market. Their Protek Passenger Awareness System uses our
Bend Sensor®technology to enhance the safety of passengers and
personnel in emergency vehicles. The system is installed in the seats of the
rear compartments of the emergency vehicle and provides the driver with constant
feedback as to the seated and secured status of passengers and personnel in
the rear of the vehicle. The system is currently installed in about 20
ambulances and is being tested for use in other types of emergency vehicles.
 In March 2009 Intertek issued another purchase order for an additional 30
units for their existing customers.  Flow Control Applications  Our flexible sensor has proven to be an extremely robust
and durable flow control switch.  The Bend Sensor® product
allows for the measurement of liquid and air flow, and has been tested to over
35 million cycles without failure.  When the Bend Sensor® device
is placed in a flow stream, it can measure if flow is occurring, or it can
measure the amount of flow that is occurring.  The fact that our design
incorporates a single layer flexible devise allows for it to operate in many
harsh environments. While other technologies are affected by dirt, dust, and
liquids, the Bend Sensor® product is able to operate under these
conditions.  We are currently working with a number of customers on various
flow applications.  Humidity Sensor  We have developed a new version of our patented Bend
Sensor® technology.  This sensor has proven to function as a
very accurate and low cost humidity sensor.  Environmental chamber testing
has been performed from 0% relative humidity to 100% relative humidity at a wide
range of temperatures.  Throughout all of the environmental conditions that
the sensors have been exposed to, they have continued to correlate very
accurately to humidity levels.  The resistance value of the Bend
Sensor® changes in direct response to    5   changes in humidity.
 Management believes there are many applications for our humidity sensor
and we expect to begin marketing this product upon completion of qualification
testing.  Other Applications  Management believes the potential market for our
technology includes using the technology to replace or upgrade existing devices
used in industrial control systems, medical equipment and instrumentation,
computer peripherals, automotive transmission equipment, commercial vending
equipment and other devices.  We have developed, or are developing:  · a vibration sensor,  · a steering wheel position device
that communicates to an automobile onboard computer the amount of rotation of
the steering wheel to assist the computer in stabilizing control over the
vehicle, and  · additional sensing devices for
medical equipment.  · Toys and video gaming devises
and  · Sports applications  We intend to further identify applications of our
technology in numerous fields and industries.  A core marketing strategy is
to seek applications of our technology for products used by customers that
emphasize functionality, reliability, quality, and user convenience.  BUSINESS STRATEGY  Management believes that our future success will depend
upon our ability to coordinate our product design, manufacturing, distribution
and service strategies in a long-term business model.  One sales strategy
is to offer a line of standard sensor products with corresponding hardware,
electronics and software to facilitate ease of implementation of our technology
into a customer's system.  The standard product line is expected to be sold
directly to the customer and through manufacturer's representatives and
distributors.  We have also expanded our product offering to include
substantially complete value-added assemblies.  Also, we continue to
consider licensing or partnership arrangements. We anticipate selling primarily
to original equipment manufacturers initially in the United States and
eventually worldwide.  For the international customers, we plan to
contract, sell and distribute our products through various manufacturer
representatives and distributors.  Since our intended customers are typically technology
companies, the design phase of the sales cycle is extremely important and
considerably longer than other industries.  The original equipment
manufacturers typically approach us with a conceptual product and request that
we assist in the engineering, design and produce a working prototype for which
we generate limited revenues.  The prototype will then be tested in the
environment in which the ultimate product will be placed.  During this
process, the potential customer is in constant contact with our application and
electrical engineers. Customers also meet with internal sales and support
individuals to discuss marketing and distribution strategies for the perceived
end consumer products.  In the long term, we will attempt to add value by
expanding our sensor product line through licensing, strategic agreements,
and/or acquisition of other entities. It is anticipated that such
diversification of sensor products will enhance our ability to offer a full
sensor system solution to our customers. By adding circuit boards, enclosures,
etc., we have moved toward a more extensive product line while validating and
showing the versatility of our Bend Sensor® technology.  We
currently have three such value added fully developed products that will
directly compete with existing products in the automotive industry. We believe
our products provide greater reliability, more functionality and can be
implemented at a lower overall cost to the customer. We are in the process of
finalizing our marketing campaign for these products which will introduce them
on a worldwide stage during 2009. These product lines, when combined, could
create a much larger value added profit margin for the Company.  However,
there is no assurance that such profit margins will be achieved or that these
products will produce significant revenue in the near future.  MARKETING AND SALES  We intend to market our automotive products primarily to
original equipment manufacturers (OEMs), either directly or through Tier 1
suppliers. Other products will be marketed directly to manufactures or
distributors. Our primary marketing objectives are to generate demand for our
products, enhance name recognition and support OEMs and manufactures.  We
believe that the successful    6   use of our products by OEMs
and Tier 1 suppliers will create additional demand for higher quantities of our
existing products.  We also anticipate that the success of our existing
products will allow us to successfully introduce new products and applications
to the market.  We currently have a relationship with several Tier 1
suppliers in the automotive industry and believe that our relationship with
OEMs and Tier 1 suppliers will be an important part of our overall sales
strategy. We also have an agreement with a significant manufacturer of medical
bed mattresses. In the early stage of this strategy, we will likely be dependent
on a few OEMs and manufacturers and if we lose their business it will have a
significant adverse effect on our results of operations until alternative
distribution channels can be established.  We may consider contractual
commitments to OEMs and Tier 1 suppliers in exchange for fees and/or royalties.
 In addition, because we do not currently sell directly to end users, we
are dependent, in part, on the OEMs for information about retail product sales.
 Accordingly, any rapid cessation of purchases or a switch to other
companies' products by end users may not be immediately evident to us, and could
result in increased product returns.  We also intend to market our products through the use of
our web site, and by developing a field sales force including direct marketing
employees in strategic areas and manufacturers representatives nationwide to
generate OEM and Tier 1 supplier customers.  As our market grows we
anticipate expanding our distribution network throughout the world.  There
can be no assurance that we will be successful in developing such a sales force
or in expanding our distribution network.  License and supply arrangements,
such as those discussed above, create certain risks for us, including:  · Reliance for sales of products on
other parties and, therefore, reliance on the other parties' marketing ability,
marketing plans and credit-worthiness;  · If our products are marketed under
other parties' labels, goodwill associated with use of the products may inure to
the benefit of the other parties rather than Flexpoint Sensor Systems and its
subsidiaries;  · We may have only limited protection
from changes in manufacturing costs and raw materials costs; and  · If we are reliant on other parties
for all or substantially all of our sales, we may be limited in our ability to
negotiate with such other parties upon any renewals of their agreements.  MANUFACTURING AND DISTRIBUTION  Automobile manufacturers and Tier 1 suppliers require all
manufactured parts used in their automobiles to be manufactured in ISO/TS-16949
certified facilities.  IS0/TS-16949 is a Quality Management System that
contains the particular requirements for the application of ISO 9001:2000 for
automotive production and relevant service part organization.  TS-16949 is
based on ISO requirements 9001:2000, but it contains additional requirements
that are particular to the automotive industry.  These additions are
considered automotive interpretations by the ISO community of accreditation
bodies and registrars.  TS-16949 is a common supplier quality standard for
Chrysler LLC Corporation, Ford Motor Company and General Motors Corporation.
 TS-16949 applies to suppliers of production materials, production and
service parts, heat treating, painting and plating and other finishing services.
 It does not, therefore, apply to all suppliers of the big three automotive
companies.  TS-16949 certification is necessary to assure potential
customers that we have the ability and resources to meet the quantities demanded
in a purchase agreement and that we are able to uphold the quality standards
required for consideration as an automotive supplier.  We were in the
process of qualifying our own manufacturing facility for TS-16949, but we
determined that it was necessary that we had the required manufacturing
capabilities now.  As a result, in February 2005 we entered into a
Cooperative Agreement with The Bergquist Company, a Minnesota corporation that
is a qualified automotive manufacturer.  The agreement provides that the
companies will cooperate with one another to produce Bend Sensor®technology applications for the automotive industry.  This
cooperative agreement provides us with the means to deliver a finished product
to market. Since 2005 we have identified several other manufacturers who have
the required certifications and who have expressed interest in entering into
similar agreements should we be unable to certify our existing facility in time
to meet the requirements of future automotive manufacturing agreements.  COMPETITION  The sensor business is highly competitive and competition
is expected to continue to increase.  We will compete directly with firms
that have longer operating histories, more experience, substantially greater
financial resources, greater size, more substantial research    7   and development and marketing
organizations, established distribution channels and are better situated in the
market.  We do not have an established long term customer base and are
likely to encounter a high degree of competition in developing a larger customer
base.  To management's knowledge, technology similar to our
technology is currently in production by other competitors. Management believes
that our products will be sufficiently distinguishable from the existing
products so that it will not compete directly with existing sensor products.
 Certain force transducer sensors and fiber optic sensors are comparable to
our Bend Sensor® technology; however, management believes that the
force transducer sensor is not as reliable as our Bend Sensor®
technology and that the fiber optic sensors are not as cost effective as our
Bend Sensor® technology.  As this new area grows, additional
manufacturers may attempt to introduce similar products and competition could
intensify.  In the medical electronics field, our competitors are the
numerous potentiometer manufacturers.  In the auto seat field our
competitors are the numerous capacitive, piezo, infrared, fsr and ultrasonic
sensor manufacturers.  Such competitors may use their economic strength and
relationships to influence the market to continue to buy their existing
products.  One or more of these competitors could use their resources to
improve their current products or develop new products that may compete more
effectively with our products.  New competitors may emerge and may develop
products and capabilities which compete directly with our products.  No
assurance can be given that we will be successful in competing in this
industry.  We intend to compete by offering products that have
enhanced features, ease of use, functionality, compatibility, reliability,
comparable price, quality and support.  Management also believes our
intellectual property provides an advantage over our competitors.  Although
management believes that our products will be well received in our markets
because of innovative features, performance characteristics and cost-effective
pricing, there can be no assurance that comparable or superior products
incorporating more advanced technology or other features or having better price
or performance characteristics will not be introduced by competitors with
greater resources than ours.  PATENTS AND INTELLECTUAL PROPERTY  We regard certain of our designs as proprietary and
attempt to protect them with patents and by restricting disclosure of the
designs as trade secrets.  We have nine issued patents for our Bend
Sensor® technology and have filed three additional patent
applications, and are in the process of preparing one additional patent for new
types of sensors using our technology. Sensitron owns eight United States
patents and one foreign patent related to the Bend Sensor®
technology.  Patents do expire and it will be necessary for us to file
patents in the United States and in various foreign countries for each
application we develop so that it is protected from competition.  The
earliest patent will expire in October 2009; however, we have improved these
technologies and expect to file new patents based on the enhancements.  We
must file patents on any technology for which we develop enhancements which
contain material improvements to the original technology.  We are aware of
three potentially conflicting patents which we believe will not affect our
current or planned use of our technology.  There can be no assurance that the protection provided by
patents and patent applications, if issued, will be broad enough to prevent
competitors from introducing similar products or that such patents, if
challenged, will be upheld by the courts of any jurisdiction.  Patent
infringement litigation, either to enforce our patents or defend us from
infringement suits, are expensive and could divert resources from other planned
uses.  For example, we determined that it was necessary to file a patent
encroachment action in January 2006 (See Legal Proceedings, below).  Patent applications filed in foreign countries and
patents in those countries are subject to laws and procedures that differ from
those in the United States.  Patent protection in foreign countries may be
different from patent protection under United States laws and may not be as
favorable to us.  We also attempt to protect our proprietary information
through the use of confidentiality agreements and by limiting access to our
facilities.  There can be no assurance that our program of patents,
confidentiality agreements and restricted access to our facilities will be
sufficient to protect our proprietary technology.  Management believes that because of the rapid pace of
technological change in our markets, legal protection of our proprietary
information is less significant to our competitive position than factors such as
continuing product innovation in response to evolving industry standards,
technical and cost-effective manufacturing expertise, effective product
marketing strategies and customer service.  Without legal protection;
however, it may be possible for third parties to commercially exploit the
proprietary aspects of our products.        8   RESEARCH AND DEVELOPMENT  Although we hold the patent to the basic Bend
Sensor® technology, as well as other applications, there will be
other competitors working to develop competing technologies.  To stay on
the forefront of the technology, and to serve the needs of the customer, we will
need to aggressively pursue improvements to existing systems and develop new
systems as well.  For the year ended December 31, 2008 we spent $500,086 in
research and development, primarily enhancing specific applications for the
automotive, medical and industrial industries with our Bend Sensor®
technology, and testing Bend Sensor® applications for and in new
products.  Compared to $484,987 spent on research and development for the
year ended December 31, 2007 related to development engineering for the medical
bed technology, new product development resulting in new patents and testing of
products for marketable applications.  Also, we believe that our coatings for the Bend
Sensor® product are difficult to duplicate.  We must develop new
coatings to fit emerging customer needs and to stay ahead of the competition.
 There can be no assurance that we will be successful in developing new
coatings.  While we expect that future research and development efforts, if
any, will lead to the filing of additional patent applications, there can be no
assurance that any additional patent filings will be forthcoming.  EMPLOYEES  As of the date of this filing we have 8 full time
employees and employ no sub-contractors.  Our employees are not presently
covered by any collective bargaining agreement.  We have not experienced
any work stoppages and believe that our relations with our employees are good.   ITEM 1A. RISK FACTORS  Factors Affecting Future Performance  We have a history of losses and may never become
profitable.  We are currently unable to fund our day-to-day operations
from revenues and the lack of revenues has impeded our continued growth and has
caused some delay in our business development.  We have generated operating
capital from our private placements completed in March 2005 and June and
September 2007 that have funded our operations for the past three years.
  For the 2008 twelve month period we had negative cash flows from
operating activities of $1,177,735 and we dont expect that revenues in 2009
will be sufficient to support our operations. In addition, with the
economic downturn in the automotive industry we will need to further expand our
business activities outside the automotive market over the next twelve to
eighteen months, and we therefore; anticipate needing to raise an additional
$1.0 to $1.5 million in funding. We may be required to rely on debt financing,
further loans from related parties, and private placements of our common stock
for our additional cash needs. Such funding sources may not be available or the
terms of such funding sources may not be acceptable to the company. If the
Company is unable to find such funding it could have a material adverse effect
on our ability to continue as a going concern  We may not have adequate experience to successfully
manage anticipated growth.  Since emerging from bankruptcy we restructured our
management team and brought in an experienced group of executive level
management personnel to direct the growth of our business operations.
 However, we may not be equipped to successfully manage any possible future
periods of rapid growth or expansion, which could be expected to place a
significant strain on our managerial, operating, financial and other resources.
 Our future performance will depend, in part, on our ability to manage
growth effectively, which will require us to:  · improve existing, and implement new,
financial controls and systems, management information systems, operating,
administrative, financial and accounting systems and controls,  · maintain close coordination between
engineering, programming, accounting, finance, marketing, sales and operations,
and  · attract and retain additional
qualified technical and marketing personnel.     9   There is intense competition
for management, technical and marketing personnel in our business.  The
loss of the services of any of our key employees or our failure to attract and
retain additional key employees could have a material adverse effect on our
ability to continue as a going concern.  We may not have adequate manufacturing capacity to
meet anticipated manufacturing contracts.  Based on projected business development, we will need to
complete a second production line and have it installed and approved during
2011.  The second manufacturing line is expected as a result of anticipated
increased manufacturing demand and improved manufacturing efficiencies.  We
have completed installation of our first production line and anticipate
qualifying our manufacturing facility for ISO/TS-16949 certification as the
Company successfully obtains additional manufacturing contracts during 2009 and
2010.  However, we cannot assure you that we will satisfy ISO/TS-16949
qualification or that the production lines will produce product in the volumes
required or that the production lines will satisfy the requirements of our
automotive customers.  Our success is dependent on our intellectual property
rights which are difficult to protect.  Our future success depends on our ability to protect our
intellectual property.  We use a combination of patents and other
intellectual property arrangements to protect our intellectual property.
 There can be no assurance that the protection provided by our patents will
be broad enough to prevent competitors from introducing similar products or that
our patents, if challenged, will be upheld by courts of any jurisdiction.
 Patent infringement litigation, either to enforce our patents or defend
ourselves from infringement suits, will be expensive and could divert our
limited resources from other planned uses.  Patent applications filed in
foreign countries and patents in these countries are subject to laws and
procedures that differ from those in the U.S. and may not be as favorable to us.
 We also attempt to protect our confidential information through the use of
confidentiality agreements and by limiting access to our facilities.  There
can be no assurance that our program of patents, confidentiality agreements and
restricted access to our facilities will be sufficient to protect our
confidential information from competitors.  Research and development may result in problems which
may become insurmountable to full implementation of production.  Customers request that we create prototypes and perform
pre-production engineering, research and development. As a result, we are
exposed to the risk that we may find problems in our designs that are
insurmountable to fulfill production.  In that event, we will be unable to
recover the costs of the pre-production engineering, research and development.
 However, we are currently unaware of any insurmountable problems with
ongoing engineering, research and development that may prevent further
development of an application and products.  Economic uncertainties will delay or eliminate new
technological investments  Due to the current downturn in the global economy and
financial uncertainties, automakers and other potential customers could delay,
significantly curtail or altogether eliminate any further investment in new
technology including, the Bend Sensor® technology, until the global
financial markets and economies stabilize. Due to our limited cash resources any
delays in bringing our products and technology to market could have a material
adverse effect on our ability to continue as a going concern  Because we are significantly smaller than the majority
of our competitors, we may lack the financial resources needed to capture
increased market share.  The market for sensor devices is extremely competitive,
and we expect that competition will intensify in the future. There can be no
assurance that we will be able to compete successfully against current or future
competitors or that competitive pressures we face will not materially adversely
affect our business, operating results or financial condition.  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
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.         10   Ongoing industry
consolidation among worldwide automotive parts suppliers and financial
difficulties of U.S. auto makers may limit the market potential for our
products.  In the automotive parts industry, there has been a trend
of consolidation through business combinations and acquisitions of complementary
technologies among worldwide suppliers as these suppliers seek to build stronger
customer relationships with automobile manufacturers.  Automobile
manufacturers look to Tier 1 suppliers (major suppliers) to provide fully
engineered systems and pre-assembled combinations of components rather than
individual components.  This trend of consolidation of suppliers may result
in fewer Tier 1 suppliers and thus limit the marketing opportunities for our
Bend Sensor®technology.  In addition, in recent months large U.S. auto
makers have announced plans to close plants and reduce their work force, some
Tier 1 suppliers are in bankruptcy or in financial difficulty, and two
automobile manufacturers have reported increased financial difficulties.
 These industry trends may limit the market for our products in these
industries.  Failure to achieve and maintain effective internal
controls in accordance with Section 404 of the Sarbanes-Oxley Act could lead to
loss of investor confidence in our reported financial information.  Pursuant to Section 404 of the Sarbanes-Oxley Act of
2002, we are required to furnish a report by our management on our internal
control over financial reporting.  If we cannot provide reliable financial
reports or prevent fraud, then our business and operating results could be
harmed, investors could lose confidence in our reported financial information,
and the trading price of our stock could drop significantly. We cannot assure
you as to our independent auditors conclusions at December 31, 2009 with
respect to the effectiveness of our internal control over financial reporting.
 There is a risk that our independent auditors will not be able to conclude
at December 31, 2009 that our internal controls over financial reporting are
effective as required by Section 404 of the Act.  ITEM 2.   PROPERTIES  We lease approximately 11,639 square feet of office and
manufacturing space from F.G.B.P., L.L.C.   The lease term is for five
years, commencing on October 1, 2004 and terminating on September 30, 2009.
 This facility has executive offices and space for research and development
and manufacturing.  The average monthly payments over the term of the lease
are $8,979, including common area maintenance and a 2% annual increase.
 Due to the current economic conditions management is in the process of
renegotiating the Companys lease for a lower monthly payment and possibly
smaller overall square footage to meet our current needs, prior to the lease
termination date in 2009. Management is working toward qualifying this
manufacturing facility for TS-16949 certification.  The building is located
in a business park in Draper, Utah consisting primarily of high tech
manufacturing firms and it is located adjacent to Utahs main interstate.  ITEM 3.  LEGAL PROCEEDINGS  On January 20, 2006, Sensitron, Inc. filed a complaint in
the United States District Court for the District of Utah, Central Division,
against Michael W. Wallace, d/b/a Pure Imagination, seeking patent rights for a
patent and patent application that Mr. Wallace filed with the United State
Trademark and Patent Office.  Mr. Wallace assisted Sensitron with the
development of certain software to be used in combination with our Bend
Sensor® technology related to the SEAT MAT system. The complaint
alleges that Mr. Wallace failed to deliver the source code to Sensitron and
failed to list our employees and previous employees as co-inventors on the
patent he obtained and for his pending application for a patent.  Sensitron
is seeking a copy of the source code and ownership of the patent and/or
correction of the patent and patent application to add the appropriate
co-inventors.  Sensitron is also seeking unspecified damages along with its
costs and attorneys fees.  As of December 31, 2008, this action is pending
in the United States District Court.  On July 3, 2001, Flexpoint Sensor Systems, Inc. filed a
voluntary petition for reorganization pursuant to Chapter 11 of the United
States Bankruptcy Code.  The petition was filed in the United States
Bankruptcy Court for the District of Utah, File No. 01-29577JAB.  On
February 24, 2004 the bankruptcy court confirmed our Plan of Reorganization. In
our bankruptcy proceeding we objected to the $1,700,000 claim made by Delco
Electronics, Inc. (Delphi).  We believe that Delphi is precluded by the
terms of the agreement from any financial recovery due to its breach of the
sponsorship agreement.  Other potential claims are breach of contract,
breach of fiduciary duties owed to Flexpoint, Inc. pursuant to the contract, and
intentional and negligent interference with Flexpoint, Inc.s contractual and
business relationship with General Motors.  As of this date, neither party
is actively pursuing this action.   ITEM 4.  SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS  We have not submitted any matter to a vote of our
security holders during the fourth quarter of 2008.    11     PART II  ITEM 5.  MARKET FOR REGISTRANTS
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY
SECURITIES  MARKET INFORMATION  Our common stock is listed on the Financial Industry
Regulatory Authority (FINRA) OTC Bulletin Board under the symbol FLXT.
 The following table lists the range for the high and low bid prices of our
common stock for each quarter for the years ended December 31, 2008 and 2007,
respectively, as reported by the OTC Bulletin Board.  Over-the-counter
market bid quotations reflect inter-dealer prices, without retail mark-up,
mark-downs or commissions, and may not necessarily represent actual
transactions.  2008

2007Fiscal Quarter
Ended
High
Low

High
LowMarch 31
June 30
September 30
December 31
$ 
1.10
0.90
0.85
0.45
$
 0.75
0.70
0.41
0.22

$  
1.55
1.42
1.38
1.27
$ 
 0.85
1.00
0.95
0.75  Our shares are subject to Section 15(g) and Rule 15g-9 of
the Securities and Exchange Act, commonly referred to as the penny stock rule.
 The rule defines penny stock to be any equity security that has a market
price less than $5.00 per share, subject to certain exceptions.  The rule
provides that any equity security is considered to be a penny stock unless that
security is:  · Registered and traded on a national
securities exchange meeting specified criteria set by the SEC; · Issued by a registered investment
company; or · Excluded from the definition on the
basis of share price or the issuers net tangible assets.  These rules may restrict the ability of broker-dealers to
trade or maintain a market in our common stock and may affect the ability of
shareholders to sell their shares.  Broker-dealers who sell penny stocks to
persons other than established customers and accredited investors must make a
special suitability determination for the purchase of the security.
 Accredited investors, in general, include individuals with assets in
excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together
with their spouse, and certain institutional investors.  The rules require
the broker-dealer to receive the purchasers written consent to the transaction
prior to the purchase and require the broker-dealer to deliver a risk disclosure
document relating to the penny stock prior to the first transaction.  A
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current quotations for the
security.  Finally, monthly statements must be sent to customers disclosing
recent price information for the penny stocks.  HOLDERS  As of March 27, 2009, we had 465 stockholders of record
of our common stock, which does not include street accounts of securities
brokers.  DIVIDENDS  We have not paid cash or stock dividends and have no
present plan to pay any dividends.  We intend to retain any earnings to
finance the operation and expansion of our business and the payment of any cash
dividends on our common stock is unlikely.  However, our board of directors
may revisit this matter from time to time and may determine our earnings,
financial condition, capital requirements and other factors allow the payment of
dividends.  RECENT SALES OF UNREGISTERED SECURITIES  None.    12      ISSUER PURCHASE OF SECURITIES  None.   ITEM 6.  SELECTED FINANCIAL
DATA  Not applicable.  ITEM 7.  MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  EXECUTIVE OVERVIEW  Flexpoint Sensor Systems, Inc. is a development stage
company engaged principally in acquiring equipment and technology, obtaining
financing and seeking manufacturing contracts.  Our planned operations have
not commenced to a commercial level and include designing, engineering,
manufacturing and selling sensor technology and products featuring our Bend
Sensor® technology and equipment.  We emerged from Chapter 11 bankruptcy on February 24,
2004 and since that time we have leased a manufacturing facility, purchased
necessary equipment to establish a production line, negotiated contracts,
manufactured and improved Bend Sensor® technology devices and
conducted testing on those devices.  Our goal is to qualify our production
line and facility as an ISO/TS 16949 production line and facility as it is
required for manufacturing automotive and related parts. This qualification will
increase the marketability of our products to automotive Tier 1 and parts
suppliers.  We are finally maturing from a research and development
only company into a manufacturing and production company. During 2007 and
through 2008 we further developed and enhanced the design of products for
several Tier 1 automotive customers.  We have completed advanced testing
and have signed a Joint Development Agreement with Auto Electronic Corporation
AEC of Korea, a provider of automobile related components for the past 26
years to various manufactures. AEC has a strong relationship with Hyundai  Kia
Motors, as well as other manufacturers and Tier 1 suppliers. As part of the
agreement AEC intends to introduce and promote new and existing applications
using our Bend Sensor® technology to automobile manufactures and
parts suppliers including Hyundai  Kia, the worlds sixth largest automobile
manufacturer.  Other potential automotive applications using our Bend
Sensor® technology have been developed and negotiations are in
process with other Tier 1 suppliers.  On September 11, 2008 the Company entered into a
long-term joint manufacturing agreement with R&D Products, LLC and its
Licensee under a licensing agreement for R&Ds bed technology and related
products.  The agreement provides the Licensee with the exclusive
worldwide rights to R&Ds patented bed technology for medical applications.
 The manufacturing agreement allows for the Company to manufacture sensors
for the bed technology and related products through 2018 with an option to renew
each successive year thereafter. Ramp up and production schedules with specific
quantities dead lines and resource requirements are still being outlined. We
anticipate that some production will be achieved in 2009, but we dont
anticipate significant revenue from this agreement until 2011 and beyond when we
should be in full production.  We are also continuing to develop new products that we
may sell or license to an industrial control company.  Finalizing additional long-term, revenue generating,
production contracts with other customers remains our greatest challenge because
our on-going business is dependent on the types of revenues and cash flows
generated by such contracts. Cash flow and cash requirement risks are closely
tied to and are dependent upon our ability to attract significant long-term
production contracts.  We must continue to obtain funding to operate and
expand our operations so that we can deliver our unique Bend Sensor®
and Bend Sensor® related technologies and products to the market.
 Management believes that even though we are making positive strides
forward with our business plan we will still need to raise additional operating
capital in 2009.  Accordingly, we cannot guarantee that we will realize
significant revenues or that we will become profitable during 2009 or 2010.     13   The widespread credit crisis
and unprecedented increases in retail fuel prices during the last half of 2008
has reduced consumer purchasing power and resulted in an overall down turn in
consumer confidence. These factors have contributed to lower consumer spending
and investments by companies and have resulted in a world wide slowing of the
global economy. While all sectors of the economy are experiencing difficult
times, the automotive industry is particularly challenged. Worldwide automakers
are seeing double digit declines in profits. This trend is expected to continue
through 2009 and not only affect the automobile manufacturer but also the Tier 1
and after market suppliers.  Because the Company has concentrated most of its
marketing efforts on the automotive industry the downturn in this industry and
the economy as whole might further delay our efforts in securing a long-term
production contract. The economic down turn might also be to our advantage. Our
Bend Sensor® is lighter in weight, has fewer moving parts than
conventional sensing devices, is more versatile and due to its unique design is
more cost effective. Product and design changes in the automotive industry are
slow, averaging two to three years before actually being incorporated into a
commercially viable automotive platform. Because we are not currently under
production in an auto application, we believe we are poised to provide the next
generation of sensing devises to the industry. With the cost of fuel the auto
industry will be looking to develop more fuel-efficient and alternative-fuel
type (green) vehicles that will need to be lighter in weight, less complicated
in design, and more cost effective to run and build. Due to the advanced
technology of the Bend Sensor® and its versatility of applications we
believe we can be a part of the changes needed in the automotive industry  LIQUIDITY AND CAPITAL RESOURCES  Our revenue is primarily from design contract, testing
and limited production services for prototypes and samples, and is not to a
level to support our operations.  Management anticipates that we may not
realize significant revenue within the next twelve months.  For the past
twelve months we have relied on proceeds from the private placements we
completed in March 2005 and June and September 2007 to satisfy our cash
requirements.  In the 2005 private placement we issued an aggregate of
2,836,335 units to purchasers and 140,000 units were issued to the placement
agent.  Each unit consisted of one share and one warrant to purchase one
share at an exercise price of $3.00.  We realized net proceeds of
$3,907,207 from this private placement.  In the 2007 private placements we
issued an aggregate of 1,500,000 shares of common stock at a price of $1.00 per
share.  Net proceeds of $1,500,000 were realized from the private
placements.  In November 2008 we secured $300,000 of short-term financing
from related parties. The notes are due and payable on May 31, 2009 with an
annual interest rate of 10% they also have a conversion option for restricted
common shares at $.25 per share.  The same related parties have agreed to
fund up to an additional $300,000 if needed under similar terms. To date we have
used the funds generated from these private placements and notes to fund
continuing operations and business development.  Management believes that our current cash burn rate is
approximately $85,000 per month and that the remaining proceeds from the private
placement, notes and accounts receivable will fund our operations for at least
the next three months.  Our auditors have expressed doubt about our ability
to continue as going concern and that we may not realize significant revenue or
become profitable within the next twelve to eighteen months.  We will
require additional financing to fund our long-term cash needs.  We may rely
on debt financing, additional loans from related parties and private placements
of common stock for additional funding.  However, we cannot assure you that
we will be able to obtain financing, or that sources of financing, if any, will
continue to be available, and if available, that they will be on terms favorable
to us.  We have also issued shares of our common stock to pay for
services rather than use our limited cash.  We expect that we will continue
to use our common stock to pay for services and agreements.  Any issuance
of common stock will likely be pursuant to exemptions provided by federal and
state securities laws.  The purchasers and manner of issuance will be
determined according to our financial needs and the available exemptions.
  We also note that if we issue more shares of our common stock our
shareholders may experience dilution in the value per share of their common
stock.  We also may receive additional funds in the future from
warrants outstanding. As of December 31, 2008 we have outstanding warrants to
purchase an aggregate of 350,000 shares that expire September 1, 2009.  If
exercised we may receive an additional $280,000 for those warrants.  For
example, on June 27, 2006 warrants to purchase 300,000 shares were exercised and
we received $210,000 in proceeds from that transaction.  Again, the warrant
holders have total discretion as to if the warrants are exercised.  We believe that there will be some revenues from R&D
Products, LLC and their Licensee on the medical bed project during
pre-production and development for engineering, electrical design and
prototypes. However we dont believe that the fees generated during this period
will sufficiently cover all of our operating needs during 2009.  As we enter into new technology agreements in the future,
we must ensure that those agreements provide adequate funding for any
pre-production research and development and manufacturing costs.  If we are
successful in establishing agreements with adequate initial funding, management
believes that our operations for the long term will be funded by revenues,
licensing fees and royalties    14   related to these agreements.
 However, we have formalized only a few additional agreements during the
past year and there can be no assurance that the agreements will generate
sufficient revenues or be profitable in the future or that a desired
technological application can be successfully brought to market.  COMMITMENTS AND CONTINGENCIES  Our principal commitments at December 31, 2008 consist of
our operating lease and total current liabilities of $443,268 which includes
short-term notes payable of $300,000.  The operating lease has average
monthly payments of $8,979, including common area maintenance and a 2% annual
increase and expires September 30, 2009.  The total future minimum payments
under this lease as of December 31, 2008 were $80,894. Due to the current
economic conditions we are in the process of negotiating with the existing
landlord for a lower lease rate and possibly less square footage. Should we be
unsuccessful in our negotiations we are also exploring the option of moving to a
different location.  Our total current liabilities include accounts payable of
$34,072 related to normal operating expenses, including health insurance,
utilities, production supplies and travel expense.  Accrued liabilities at
December 31, 2008, were $159,196 and were related to payroll tax liabilities,
accrued legal, audit and tax expenses, investor relations consulting, accrued
lease expense and accrued Paid Time Off, a combination vacation-sick leave
policy. Of the $159,196 accrued liabilities, $100,000 is due to related parties
who have agreed to accept stock in lieu of cash for services rendered.  In January 2006 we initiated a legal action for patent
encroachment and at that time we anticipated that this legal action would result
in legal costs of approximately $100,000; however, the cost of this action has
been higher than anticipated and we now estimate that this legal action will
result in legal costs of approximately $270,000. Management is in negotiations
with the defendant of this litigation in an attempt to settle the dispute
without incurring additional legal expenses. However, management believes it is
critical to resolve this issue to protect our patents and will divert a portion
of our financial resources to continue pursuing this matter legally or through a
negotiated settlement.  OFF-BALANCE SHEET ARRANGEMENTS  None.  CRITICAL ACCOUNTING ESTIMATES  The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes.
 Estimates of particular significance in our financial statements include
goodwill and the annual tests for impairment of goodwill and valuing stock
option compensation.  We annually test long-lived assets for impairment or when
a triggering event occurs.  We use a fair-value-based test that is applied
at the overall company level.  The test compares the fair value of the
company to the carrying value of its long-lived assets. This test requires
various judgments and estimates. The fair value of the company is determined
using the present value of expected future revenues. That fair value is compared
against the value of long-lived assets carried on the financial records.
 An impairment of long-lived assets is measured as the excess of the
carrying amount of long-lived assets over the determined fair value.  Our
impairment test at September 30, 2008 projected that long-lived assets were
carried on the books at a greater value than their fair value, indicating an
impairment of $246,764 compared to the $299,798 charged at December 31, 2007.
 We have therefore written down our long-lived assets by the indicated
amount for 2008 and 2007 respectively, and will continue to test for impairment
on a regular basis.  In the future, should the test indicate carrying
values in excess of fair value, additional charges will be required.  We account for stock options under Statement of Financial
Accounting Standards No. 123(R), effective January 1, 2006.  Statement
123(R) requires that recognition of the cost of employee services received in
exchange for stock options and awards of equity instruments be based on the
grant-date fair value of such options and awards and is recognized as an expense
in operations over the period they vest.  The fair value of the options we
have granted is estimated at the date of grant using the Black-Scholes American
option-pricing model.  Option pricing models require the input of highly
sensitive assumptions, including expected stock volatility.  Also, our
stock options have characteristics significantly different from those of traded
options, and changes in the subjective input assumptions can materially affect
the fair value estimate.  Management believes the best input assumptions
available were used to value the options and that the resulting option values
are reasonable.  For the years ended December 31, 2008 and 2007 we
recognized    15   $237,299 and $578,649,
respectively, of stock-based compensation expense for our stock options and
there was approximately $80,887 of unrecognized compensation cost related to
employee stock options that will be recognized over approximately 1.58
years.  During September 2006, we changed accounting estimates
related to potential forfeitures of options granted under our 2005 Stock
Incentive Plan from 0% to 7% in order to more closely reflect actual forfeitures
to date.  The effect of this change was a reduction in net loss of $78,572
for the 2006 year. During 2007, based on further analysis of forfeitures, the
estimate for potential forfeitures was increased to 15% for grants awarded in
August 2005, 10% for grants awarded in February 2006, and 30% for awards made
during 2007.  RESULTS OF OPERATIONS  The following discussions are based on the consolidated
operations of Flexpoint Sensor and its subsidiary, Sensitron, and should be read
in conjunction with our audited financial statements for the years ended
December 31, 2008 and 2007.  These financial statements are included in
this report at Part II, Item 8, below.  SUMMARY OF
OPERATING RESULTSDec. 31,
2008

Dec. 31,
2007Design, contract and
testing revenue
$        
               
          175,858

$ 
   
                   
           31,495Total operating costs and
expenses
(2,173,225)

(2,515,837)Net other income
(expense)
(3,595)

25,873Net loss
$   
        
              
  (2,000,962)

$ 
                        
   (2,458,469)Basic and diluted loss per
common share
$  
                   
                (0.08)

$
   
                     
            (0.10)  Our revenue for the 2008 and 2007 years was primarily
from design & development engineering, prototype products, sample products
and testing services.  Revenue from research and development engineering
and prototype product contracts is recognized as the services are provided and
accepted by the customer.  Revenue from contracts to license technology to
others is deferred until all conditions under the contract are met and then the
sale is recognized as licensing royalty revenue over the remaining term of the
contract.  Revenue from the sale of a product is recorded at the time of
shipment to the customer.  Management anticipates that revenue will
increase as we fulfill our obligations under the R&D manufacturing agreement
and finalize additional production contracts.  Total operating costs and expenses decreased for 2008
when compared to 2007.  Included in 2008 and 2007 operating costs and
expenses were charges of $246,764 and $299,798, respectively taken for the
impairment of long-lived assets.  Administrative and marketing expenses
decreased to $1,275,820 for 2008 compared to $1,566,991 for 2007 primarily due
to reductions in compensation expense recognized according to SFAS No. 123(R)
for share-based option compensation.  Research and development expense,
cost of revenue and amortization of patents and proprietary technology expenses
remained relatively the same for 2008 and 2007.  Total net other expense in 2008 includes a $10,000
non-cash interest expense associated with the beneficial conversion feature of
the notes payable to related parties, and interest earned on cash deposits
primarily from private placement offerings.  In 2007 the Company recognized
total net other income of $25,873 which was primarily the result of interest
income from the proceeds of the private placement offering, which were deposited
in a savings account and sublease, rental income from Handstands, Inc. during
2007. The decrease in interest income in 2008 was due to the usage of cash from
savings to fund operations.  As we continued to mature from a research and development
company into an engineering design and production company revenues in 2008
increased as development and engineering work were accelerated.  While it
is expected the additional investment made in 2009 for product and system
development will result in further generation of revenues, there is no guarantee
that operating losses will reduce in the short term.   [Table follows]     16      The chart below presents a summary of our consolidated
balance sheets at December 31, 2008 and 2007.  SUMMARY OF
BALANCE SHEET INFORMATIONYear ended
Dec. 31,
2008

Year ended
Dec. 31, 2007Cash and cash
equivalents
$
     
         178,157

$
     
         1,058,135Total current assets
251,442

1,092,292Total assets
7,103,754

8,463,974Total current
liabilities
443,268

99,825Deficit accumulated during
the development stage
(13,253,013)

(11,252,051)Total stockholders
equity
$     
       6,660,486

$
      
       8,364,149  Cash and cash equivalents decreased in 2008 compared to
2007.  The decrease is the net result of cash used to fund operations.
 Until our revenue increases, our cash and assets will decrease as we fund
our operations.  We will need to raise additional operating capital during
the first half of 2009. This will be done by issuing stock, securing additional
loans from related parties, or through the licensing of our technology. We
anticipate needing to raise an additional $1.0 to $1.5 million in funding.  Our non-current assets decreased at December 31, 2008
compared to 2007 due to the charges taken for impairment of our long-lived
assets of $246,764 and $299,798 respectively, and the corresponding adjustments
to depreciation and amortization.  These assets include, after adjustments,
property and equipment valued at $560,161, patents and proprietary technology of
$929,237, goodwill of $5,356,414, and deposits of $6,500 for the leased
facility.  Total current liabilities increased at December 31, 2008,
as a result of  $300,000 in short-tem notes payable to related parties and
accrued liabilities of $159,196 , which was partially offset by the recognition
of the $50,000 of deferred revenue deposits at the end of 2007 for services
 performed during 2008.     17   ITEM 8.
 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A
Development Stage Company)  INDEX TO FINANCIAL STATEMENTS  Page  Report of
Independent Registered Public Accounting Firm 19  Consolidated
Balance Sheets  December 31, 2008 and 2007 20  Consolidated Statements of Operations for the Years Ended
December 31, 2008 and 2007 and for the Cumulative Period from
February 24, 2004 (Date
of Emergence from Bankruptcy) through December 31, 2008 21  Consolidated Statements of Stockholders Equity for the
Period from February 24, 2004 (Date of Emergence from
Bankruptcy) through December
31, 2008 22  Consolidated Statements of Cash Flows for the Years Ended
December 31, 2008 and 2007 and for the Cumulative Period
from February 24, 2004 (Date
of Emergence from Bankruptcy) through December 31, 2008 23  Notes to
Consolidated Financial Statements 24               18   HANSEN,
BARNETT& MAXWELL, P.C. A
Professional Corporation CERTIFIED
PUBLIC ACCOUNTANTS 5
Triad Center, Suite 750 Salt
Lake City, UT 84180-1128 Phone:
(801) 532-2200 Fax:
(801) 532-7944 www.hbmcpas.com  REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Stockholders and the Board
of Directors Flexpoint Sensor Systems, Inc.  We have audited the accompanying
consolidated balance sheets of Flexpoint Sensor Systems, Inc. and subsidiaries
(a development stage company) (the Company) as of December 31, 2008 and 2007 and
the related consolidated statements of operations, stockholders equity, and
cash flows for the years then ended and for the cumulative period from February
24, 2004 (date of emergence from bankruptcy) through December 31, 2008.
 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 audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.  In our opinion, the financial
statements referred to above present fairly, in all material respects, the
consolidated financial position of Flexpoint Sensor Systems, Inc. and
subsidiaries as of December 31, 2008 and 2007 and the results of their
operations and their cash flows for the years then ended and for the cumulative
period from February 24, 2004 (date of emergence from bankruptcy) through
December 31, 2008 in conformity with U.S. generally accepted accounting
principles.  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 consolidated financial
statements, the Company is in the development stage, has not earned any
appreciable revenue, has suffered net losses and has had negative cash flows
from operating activities during the years ended December 31, 2008 and 2007 and
for the cumulative period from February 24, 2004 (date of emergence from
bankruptcy) through December 31, 2008. These matters raise substantial doubt
about the Company's ability to continue as a going concern.  Management's
plans in regard to these 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, P.C.  HANSEN,
BARNETT & MAXWELL, P.C.  Salt Lake City, Utah March 25, 2009     19   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A
Development Stage Company) CONSOLIDATED BALANCE SHEETS   December
31,2008

2007ASSETSCurrent AssetsCash and cash equivalents
$ 
       178,158

$   
    1,058,135Accounts receivable
32,551

6,933Inventory
10,016

-Deposits and prepaid expenses
30,717

27,224Total Current Assets
251,442

1,092,292Long-Term Deposits
6,500

6,500Property and Equipment,net of accumulated
depreciationof $29,984 and $0
560,161

792,535Patents and Proprietary Technology,net of
accumulatedamortization of $31,748 and
$0
929,237

1,216,233Goodwill
5,356,414

5,356,414Total Assets
$   
   7,103,754

$    
   8,463,974LIABILITIES AND STOCKHOLDERS' EQUITYCurrent LiabilitiesAccounts payable
$   
       34,072

$      
      15,588Accrued liabilities
159,196

34,237Deferred revenue
-

50,000Convertible notes payable to related party, net of
discount of$50,000
250,000

-Total Current Liabilities
443,268

99,825Stockholders' EquityPreferred 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;24,792,887 shares and 24,792,887
shares issued and outstanding
24,792

24,792Additional paid-in capital
17,851,493

17,791,493Warrants and options outstanding
2,037,214

1,799,915Deficit accumulated during the development
stage
(13,253,013)

(11,252,051)Total Stockholders' Equity
6,660,486

8,364,149Total Liabilities and Stockholders'
Equity
$    
  7,103,754

$   
    8,463,974         The
accompanying notes are an integral part of these financial statements      20   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A
Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS    For theCumulativePeriod fromFebruary 24,2004 (Date ofEmergence fromBankruptcy)For the Years
throughEnded December 31,
December 31,2008
2007
2008Engineering, Contract and Testing
Revenue
$     
    175,858

$    
     31,495

$   
       667,162Operating Costs and ExpensesAmortization of patents and proprietary
technology
137,022

152,968

707,624Cost of revenue
13,533

11,093

126,877Administrative and marketing expense
1,275,820

1,566,991

9,208,216Research and development expense
500,086

484,987

1,956,042Impairment of long-lived assets
246,764

299,798

546,562Total Operating Costs and Expenses
2,173,225

2,515,837

12,545,321Other Income and (Expenses)Interest expense
(13,286)

-

(1,589,340)Interest income
9,691

21,831

131,400Sublease rent income
-

3,564

11,340Other income
-

478

478Gain on forgiveness of debt
-

-

71,268Net Other Income (Expense)
(3,595)

25,873

(1,374,854)Net Loss
$  
   (2,000,962)

$ 
   (2,458,469)

$   
(13,253,013)Basic and Diluted Loss Per Common
Share
$       
       (0.08)

$    
         (0.10)Basic and Diluted Weighted-AverageCommon Shares Outstanding
24,792,887

24,003,846          The
accompanying notes are an integral part of these financial statements    21


FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A
Development Stage Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY For
the Period from February 24, 2004 (Date of Emergence from Bankruptcy) through December 31, 2008  DeficitWarrants
AccumulatedAdditional
and
During the
TotalCommon Stock
Paid-in
Options
Development
Stockholders'Shares
Amount
Capital
Outstanding
Stage
EquityBalance-February
24, 2004 (Date of Emergence from Bankruptcy)
14,098,202
$   14,098
$     4,952,166
$
              -
$
                  -
$   4,966,264Beneficial
debt conversion option
-
-
1,500,000
-
-
1,500,000Conversion
of note payable, March 31 and May 19, 2004, $.50 per share
3,000,000
3,000
1,497,000
-
-
1,500,000Issuance
for consulting services, March 3, 2004, $1.15 per share
100,000
100
114,580
-
-
114,680Stock
based compensation from 650,000 warrants issued on March 3, 2004 for
consulting services
-
-
-
731,328
-
731,328Issuance
for acquisition of equipment and proprietary technology from Flexpoint
Holdings, LLC,a
company controlled by a stockholder, March 31, 2004, $ 1.21 per
share
1,600,000
1,600
1,929,709
-
-
1,931,309Issuance
for compensation, November 24, 2004, $1.48 per share
1,200,000
1,200
1,774,800
-
-
1,776,000Net
loss
-
-
-
-
(4,510,726)
(4,510,726)Balance-December
31, 2004
19,998,202
19,998
11,768,255
731,328
(4,510,726)
8,008,855Issuance
of common stock at $ .77 per share and 2,836,335 warrants at $0.61 per
warrant for cash,net
of $347,294 cash offering costs, 140,000 common shares and 140,000
warrants,January through March 2005
2,976,335
2,976
1,977,294
1,926,937
-
3,907,207Issuance
of 30,000 warrants at $1.38 per warrant for services, July 2005
-
-
-
41,300
-
41,300Issuance
of common stock at $ 1.73 per share, as compensation to a director of the
Company forservices,  August 2005
18,350
18
31,727
-
-
31,745Net
loss
-
-
-
-
(1,770,020)
(1,770,020)Balance -
December 31, 2005
22,992,887
22,992
13,777,276
2,699,565
(6,280,746)
10,219,087Stock-based
employee compensation from stock options
-
-
-
827,718
-
827,718Exercise
of warrants, $0.70 per share, for cash, June 2006
300,000
300
547,480
(337,780)
-
210,000Net
loss
-
-
-
-
(2,512,836)
(2,512,836)Balance -
December 31, 2006
23,292,887
23,292
14,324,756
3,189,503
(8,793,582)
8,743,969Issuance
of common stock at $ 1.00 per share - June 2007
1,000,000
1,000
999,000
-
-
1,000,000Issuance
of common stock at $ 1.00 per share - September 2007
500,000
500
499,500
-
-
500,000Stock-based
employee compensation from stock options
-
-
-
578,649
-
578,649Expiration
of warrants, July through September 2007
-
-
1,968,237
(1,968,237)
-
-Net
loss
-
-
-
-
(2,458,469)
(2,458,469)Balance -
December 31, 2007
24,792,887
24,792
17,791,493
1,799,915
(11,252,051)
8,364,149Stock-based
employee compensation from stock options
-
-
-
237,299
-
237,299Stock-based
conversion feature on notes payable
-
-
60,000
-
-
60,000Net
loss
-
-
-

(2,000,962)
(2,000,962)Balance -
December 31, 2008
24,792,887
$ 24,792
$    17,851,493
$ 2,037,214
$ (13,253,013)
$   6,660,486  The accompanying notes are
an integral part of these financial statements


FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A
Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS   For the CumulativePeriod fromFebruary 24, 2004(Date of EmergenceFor the Years

from Bankruptcy)Ended December 31,

through2008

2007

December 31, 2008Cash Flows from Operating Activities:Net loss




$
    (2,000,962)

$
    (2,458,469)

$   (13,253,013)Adjustments to reconcile net loss to net cash used
inoperating activities:Depreciation



137,825

165,566

673,314Amortization of patents and proprietary
technology
137,022

152,968

707,624Impairment of long-lived assets


246,764

299,798

546,562Issuance of common stock and warrants for
services
-

-

2,695,053Expenses paid by increase in convertible note
payable
-

-

60,000Amortization of discount on note payable

-

-

1,556,666Stock-based compensation expense for
employees
237,299

578,649

1,643,666Non-cash interest expense on convertible notes
payable
10,000

-

10,000Changes in operating assets and liabilities:Accounts receivable



(25,618)

(5,670)

(32,551)Inventory




(10,016)

-

(10,016)Deposits and prepaid expenses


(3,493)

5,584

(37,217)Accounts payable



18,485

(7,761)

(174,034)Accrued liabilities



124,959

9,250

156,704Deferred revenue



(50,000)

50,000

(343,750)Net Cash Used in Operating Activities

(1,177,735)

(1,210,085)

(5,800,992)Cash Flows from Investing Activities:Payments for the purchase of equipment

-

-

(197,574)Payments for patents



(2,242)

-

(45,868)Payment for acquisition of equipment and
proprietarytechnology from Flexpoint Holdings, LLC

-

-

(265,000)Net Cash Used in Investing Activities


(2,242)

-

(508,442)Cash Flows from Financing Activities:Net proceeds from issuance of common stock and
warrants
-

1,500,000

5,617,207Principal payments on notes payable - related
parties
-

-

(460,300)Proceeds from notes payable - related
parties

-

-

445,300Proceeds from borrowings under convertible note
payable
300,000

-

883,334Net Cash Provided by Financing
Activities

300,000

1,500,000

6,485,541Net Change in Cash and Cash
Equivalents

(879,977)

289,915

176,107Cash and Cash Equivalents at Beginning of
Period
1,058,135

768,220

2,051Cash and Cash Equivalents at End of
Period

$
         178,158

$
      1,058,135

$
         178,158Supplemental Cash Flow Information:Cash paid for interest



$
                107

$
                   -

$
           16,995   The accompanying notes are
an integral part of these financial statements   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) is located in Salt Lake City,
Utah and is a development stage company. The Companys development stage
activities to date have included acquiring equipment and technology, obtaining
financing and seeking manufacturing contracts. The Companys planned operations,
which have not yet commenced at a commercial level, are in designing,
engineering, manufacturing and selling sensor technology and equipment using
flexible potentiometer technology. Through December 31, 2008, the Company had
not begun any commercial manufacturing.  Principles of Consolidation The accompanying consolidated financial statements include the accounts
of Flexpoint Sensor Systems, Inc. and its wholly owned subsidiaries, Sensitron,
Inc., Flexpoint, Inc. and Flexpoint International, LLC.  Intercompany
transactions and accounts have been eliminated in consolidation.  Use of Estimates The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting periods.  Actual results could
differ from those estimates.  Cash and Cash Equivalents Cash and cash equivalents are considered to be cash and a highly liquid
security with original maturities of three months or less. The cash and
equivalents of $178,158 represent cash on deposit in various bank accounts with
two separate financial institutions.  Accounts Receivable Trade accounts receivable are recorded at the time product is shipped or
services are provided including any shipping and handling fees. Due to the
limited amount of transactions collectability of the trade receivables are
reasonably assured, therefore the Company has not created an allowance for
doubtful accounts. Contracts associated with design and development engineering
require a deposit of 50% of the quoted price prior to the commencement of work.
The deposit is considered deferred income until the entire project is completed
and accepted by the customer, at which time the entire contract price is billed
to the customer and the deposit applied. As the Companys revenues and customer
base increase, an allowance policy will be established.  Inventories Inventories are stated at the lower of cost or market. Cost is
determined by using the first in, first out (FIFO) method.  Business Condition 
The Company suffered losses of $2,000,962 and $2,458,469 and used cash in
operating activities of $1,177,735 and $1,210,085 during the years ended
December 31, 2008 and 2007, respectively.  At December 31, 2008, the
Company had an accumulated deficit of $13,253,013. The Company is in the
development stage and has not earned any appreciable revenue during the period
from February 24, 2004 (date of emergence from bankruptcy) through December 31,
2008. These matters raise substantial doubt about the Company's ability to
continue as a going concern. 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.  On September 11, 2008, R&D
Products, LLC entered into a long-term Licensing Agreement for their bed
technology with a major medical solutions provider (Licensee). The Agreement
provides the Licensee the exclusive worldwide rights to R&Ds patented bed
technology for medical applications. On that same day, R&D Products, the
Licensee and Flexpoint entered into a long-term joint manufacturing agreement
for R&Ds bed technology and related products. The manufacturing agreement
allows for the Company to manufacture sensors for the bed technology and related
products through 2018 with an option to renew each year thereafter. Production
schedules with specific quantities, deadlines and resource requirements are
still being outlined.  The Company may not make significant
progress towards initiating its manufacturing obligations under the R&D
contract for its sensor technology in the Medical Bed application within the
next six to nine months and the Company may not realize significant revenues or
become profitable within the next twelve to eighteen months. Reaching profitable
operations will require the Company to obtain additional financing. Through
December 31, 2008, the Company met its short-term cash needs through proceeds
from common stock and warrants issued in a $3,980,207 private placement offering
during 2005 and two private placements totaling $1,500,000 in 2007. The Company
may be required to rely on debt financing, loans from related parties, and
private placements of common stock. However, there can be no assurance that
plans to obtain financing will be completed, or that such sources of financing,
if any, will continue to be available, and if available, that they will be on
terms favorable to the Company.    24   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  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 trade-in, sale or retirement of property and equipment,
the related cost and accumulated depreciation are removed from the accounts and
any gain or loss is recognized.  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.  The Company recognized $246,764 and
$299,798 of impairment expense for the years ended December 31, 2008, and 2007,
respectively.  The analysis compared the present value of projected
revenues for the next three years against the carrying value of the long-lived
assets.  The result of the valuation analysis showed an impairment of
long-lived assets, as their carrying values exceeded the present value of the
projected revenues.  The resultant impairment charges are identified as a
line item in the consolidated statement of operations and were applied ratably
on the balance sheet to each class of property and equipment and patents and
proprietary technology.  Impairment tests will be conducted on a regular
basis and, should they indicate a carrying value in excess of fair value,
additional charges may be required.  Intangible Assets 
Costs to obtain or develop patents are capitalized and amortized over the
remaining life of the patents, and technology rights are amortized over their
estimated useful lives. The Company currently has the right 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, which range from 5 to 15 years.  An
impairment charge is recognized if the carrying amount is not recoverable and
the carrying amount exceeds the fair value of the intangible assets as
determined by projected discounted net future cash flows.  The impairment
analysis at December 31, 2008 and December 31, 2007, resulted in an impairment
charge, as stated in the above section, which was ratably applied to the
property and equipment and the intangible assets.  Research and
Development  Research and development costs are recognized as expense
during the period incurred, which is until the conceptual formulation, design,
and testing of a process is completed and the process has been determined to be
commercially viable.  Goodwill  Goodwill
represents the excess of the Companys 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 using a fair value approach. A fair-value-based test is applied at the
overall Company level. The test compares the fair value of the Company to the
carrying value of its net assets. This test requires various judgments and
estimates. The fair value of the Company is determined using the market value of
the Companys common stock. The fair value of the Company is allocated to the
Companys assets and liabilities based on their fair values with the excess fair
value allocated to goodwill. An impairment of goodwill is measured as the excess
of the carrying amount of goodwill over the determined fair value.  No
impairment of goodwill was recognized during the years ended December 31, 2008
or 2007.  Revenue Recognition Revenue is recognized when persuasive evidence of an arrangement exists,
services have been provided or goods delivered, the price to the buyer is fixed
or determinable and collectibility is reasonably assured. Revenue from the sale
of products is recorded at the time of shipment to the customers.  Revenue
from research and development engineering contracts is recognized as the
services are provided and accepted by the customer.  Revenue from contracts
to license technology to others is deferred until all conditions under the
contracts are met and then recognized as licensing royalty revenue over the
remaining term of the contracts.  Stock-Based
Compensation  In December 2004, the FASB issued Statement No. 123R
(Revised 2004), Share-Based Payment (SFAS No.123R).  SFAS No. 123R
supersedes APB 25 and requires the recognition of the cost of employee services
received in exchange for stock options and awards of equity instruments based on
the grant-date fair value of such options and awards, over the period they vest.
 Under APB 25, no compensation was recorded in earnings for the Companys
stock-based options granted under the 2005 Stock Incentive Plan (the Plan).
 Under SFAS No. 123R, all share-based compensation is measured at the grant
date, based on the fair value of the award, and is recognized as an expense in
operations over the requisite service period.  On January 1, 2006, the
Company adopted the provisions of SFAS No. 123R, for its share-based
compensations plans and began recognizing the unvested portion of employee
compensation from stock options and awards equal to the unamortized grant-date
fair value over the remaining vesting period.  Furthermore, compensation
costs will also be recognized for any awards issued, modified, repurchased, or
canceled after January 1, 2006.  For the years ended December 31, 2008 and
2007, the Company recognized expense for stock-based compensation under SFAS No.
123R of $237,299 and $578,649, respectively.    25   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  Basic and Diluted Loss Per
Share Basic and diluted loss per share is computed by dividing net
loss by the weighted-average number of common shares outstanding during the
period.  Diluted loss per share is computed by dividing net loss by the
weighted-average number of common shares and common equivalents outstanding
during the period.  At December 31, 2008 and 2007, there were warrants
outstanding to purchase 350,000 shares of common stock which expire September 1,
2009. These warrants were not included in the computation of diluted loss per
share as their effect would have been anti-dilutive, thereby decreasing loss per
common share.  Recent Accounting Pronouncements  In September 2006, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standard Number 157, Fair
Value Measurements, (SFAS 57) which defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. The provisions of SFAS No. 157
related to financial assets and financial liabilities were effective during
2008.  The Company has evaluated the impact of SFAS 157 on the financial
statements and believes that the changes in accounting principal had little or
no significant impact on the reporting of its financial position and results of
operations. With respect to certain nonfinancial assets and nonfinancial
liabilities, SFAS No. 157 is effective for fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years.  The
Company does not expect that the adoption of SFAS No. 157 with respect to
nonfinancial assets and nonfinancial liabilities will have a material impact on
its consolidated financial statements.  In April 2008, the FASB issued FASB Staff Position on
SFAS 142-3, Determination of the Useful Life of Intangible Assets (FSB FAS
142-3). FSP FAS 142-3 amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible
Assets. The intent of this FSP is to improve the consistency between the useful
life of a recognized intangible asset under FAS 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS No. 141(R) and
other generally accepted accounting principles. FSP FAS 142-3 is effective for
fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2008. The Company has not yet determined the effect on its
consolidated financial statements, if any, that will occur upon adoption of FSP
FAS 142-3.  In June 2008, the FASB ratified Emerging Issues Task
Force (EITF) Issue No. 07-5, Determining Whether an Instrument (or an Embedded
Feature) Is Indexed to an Entity's Own Stock (EITF 07-5). EITF 07-5 provides
that an entity should use a two step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instrument's contingent exercise and settlement
provisions. It also clarifies on the impact of foreign currency denominated
strike prices and market-based employee stock option valuation instruments on
the evaluation. EITF 07-5 is effective for fiscal years beginning after December
15, 2008. The Company has not yet determined the effect on its consolidated
financial statements, if any, that will occur upon adoption of EITF 07-5.  In June 2008, the FASB ratified EITF Issue No. 08-3,
Accounting for Lessees for Maintenance Deposits Under Lease Arrangements (EITF
08-3). EITF 08-3 provides guidance for accounting for nonrefundable maintenance
deposits. It also provides revenue recognition accounting guidance for the
lessor. EITF 08-3 is effective for fiscal years beginning after December 15,
2008. The Company has not yet determined the effect on its consolidated
financial statements, if any, that will occur upon adoption of EITF 08-3.     26   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  NOTE 2  PROPERTY AND
EQUIPMENT  Depreciation is computed using the
straight-line method and is recognized over the estimated useful lives of the
property and equipment, which range from three to ten years.  Depreciation
expense was $137,825 and $165,566 for the years ended December 31, 2008 and
2007, respectively.  The company recognized impairment of $246,764 and
$299,798 for the years ended December 31, 2008 and 2007, respectively.
 Property and equipment at December 31, 2008 and 2007 consisted of the
following:  December 31,
2008

2007Machinery and equipment
$
               535,804

$
             718,806Office equipment
40,455

55,411Furniture and fixtures
13,470

17,761Software
416

557Total Property and Equipment
590,145

792,535Less: Accumulated depreciation
(29,984)

-Net Property and Equipment
$
               560,161

$
             792,535
   NOTE 3  GOODWILL AND INTANGIBLE
ASSETS  Intangible Assets 
The components of intangible assets at December 31, 2008 and 2007 were as
follows:  December 31 2008
Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
AmountPatents
$    
         161,901

$
       
   (5,160)

$
      
    156,741Proprietary Technology
799,082

(26,588)

772,494Total Amortizing Asset
$
       
     960,983

$  
       (31,748)

$    
       929,235December 31 2007
Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
AmountPatents
$     
        202,377

$     
               -

$   
        202,377Proprietary Technology
1,013,856

-

1,013,856Total Amortizing Asset
$      
    1,216,233

$
        
           -

$  
      1,216,233
  Patent amortization was $22,229 and $24,859 for the years
ended December 31, 2008 and 2007, and amortization related to proprietary
technology was $114,793 and $128,109 for the same periods respectively.
 Patent and proprietary technology amortization is charged to operations.
 The Company recognized impairment of $246,764 and $299,798 for the years
ended December 31, 2008 and 2007 respectively.  Estimated aggregate amortization
expense for each of the next five years is $126,993 each year.  Goodwill  Intangible assets not subject to
amortization as of December 31, 2008 and 2007 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.  The Company continues to evaluate the fair value of
its intangible assets using similar methods as those used by the valuation firm.    27   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  NOTE 4 INCOME
TAXES  There was no provision for, or
benefit from, income tax during the years ended December 31, 2008 and 2007
respectively.  The components of the net deferred tax asset as of December
31, 2008 and 2007, including temporary differences and operating loss carry
forwards that arose prior to reorganization from bankruptcy, are as follows:  December 31,
2008
2007Operating loss carry
forwards
$    
   5,673,772
$    
   5,005,777Property and equipment
71,055
43,475Patents and proprietary
technology
75,969
114,348Stock-based
compensation
613,087
524,575Total Deferred Tax
Assets
$   
  6,433,883
$    
  5,688,175Valuation allowance
(6,433,883)
(5,688,175)Net Deferred Tax
Asset
$
      
              -
$    
                 -
  Federal and state net operating
loss carry forwards at December 31, 2008 and 2007 were $15,211,185 and
$13,420,313, respectively. A portion of the net operating loss carry forwards
includes losses incurred prior to February 24, 2004, when a change of greater
than 50% in ownership of the Company occurred. As a result of the change of
ownership, only a portion of the net operating loss carry forwards incurred
prior to the change becomes available each year. The net operating loss carry
forwards begin to expire in 2020.  The following is a reconciliation
of the amount of benefit that would result from applying the federal statutory
rate to pretax loss with the provision for income taxes for the years ended
December 31, 2008 and 2007, respectively:  For the Years Ended
December 31,
2008
2007Tax at statutory rate
(34%)
$
      (680,327)
$
      (835,879)Non-deductible
expenses
650
879Change in valuation
allowance
745,708
916,130State tax benefit, net of
federal tax effect
(66,031)
(81,130)Provision for Income
Taxes
$
     
             -
$
   
               -
   NOTE 5  CONVERTIBLE NOTES
PAYABLE  In November 2008 the Company secured $300,000 of
short-term financing from three related parties. Each note is for $100,000 and
is due and payable on May 31, 2009 with an annual interest rate of 10%. The
notes are secured by business equipment. The notes also have a conversion
feature for restricted common shares at $.25 per share.  Each note was
signed separately on a different date. Due to this timing difference the market
price of the common stock associated with the conversion features on two of the
notes increased resulting in a beneficial conversion feature of $60,000, which
was recognized as a debt discount and increase to additional paid-in capital.
The calculation for the intrinsic value of the beneficial conversion feature
was the difference between the conversion price of the common stock and the
market value on the date the notes were executed multiplied by the number of
shares into which the notes may be converted. The discount will be amortized
from the date the notes were executed through May 31, 2009.  As of December
31, 2008, $10,000 of the debt discount was amortized and recognized as interest
expense.    28   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  NOTE 6 COMMON STOCK  Private
Placement of Common Stock and Warrants  From January 25, 2005 through
March 31, 2005, the Company issued 2,836,335 shares of common stock and warrants
to purchase 2,836,335 shares of common stock at $3.00 per share from October 1,
2005 through September 30, 2007 in a private placement offering. The Company
realized proceeds of $3,907,207, net of $347,294 of cash offering costs. As part
of this private placement, the Company also issued to the placement agent
140,000 shares of common stock and 140,000 warrants exercisable at $3.00 per
share for the agents services in connection with the offering. The fair value
of the warrants issued was $4,047,816 as estimated by the Company using the
Black-Scholes pricing model with the following assumptions: risk free interest
rate of 4.58%; volatility of 200%; estimated life of two years; and dividend
yield of 0%. The net proceeds were allocated to the shares of common stock and
the warrants based upon their relative fair values and resulted in allocating
$1,980,271 to the shares of common stock and $1,926,937 to the warrants.
 All outstanding warrants issued in this transaction have expired and were
never exercised. An investor
may not exercise the warrants if the exercise of the warrants would cause the
investor to own more than 4.99% of the then issued and outstanding common stock
of the Company. If the closing bid price of the Companys common stock is
greater than $4.00 per share for five consecutive trading days after October 1,
2005, the Company may call the warrants, in whole or in part, for no
consideration, which would require the investor to either exercise the warrants
within fifteen trading days or forfeit the warrants. Two
additional private placements of common stock were completed during 2007.
 The Company issued 1,500,000 shares of common stock resulting from these
transactions.  In the first transaction, completed in June 2007, the
Company realized $1,000,000 for the placement of 1,000,000 shares of common
stock at $1.00 per share.  In September 2007, the Company received an
additional $500,000 for the placement of 500,000 shares of common stock at $1.00
per share to related parties.  The cumulative $1,500,000 received by the
Company represented net proceeds from these transactions, as there were no fees
connected to either of the private placements.  SB-2 Registration 
On August 4, 2005, the Company registered 8,932,670 shares of common stock,
including 3,656,335 warrants to purchase common stock at some future date.
 The Company registered 5,952,670 shares related to the private placement
in March 2005, 30,000 warrants to purchase common stock held by Investors Stock
Daily, Inc., 650,000 warrants to purchase common stock held by Summit Resource
 Group, and an additional 2,300,000 shares held by certain investors.
 The Company filed a post effective amendment extending this registration
on October 10, 2006.  This registration statement is no longer
effective.  Exercise of Warrants On June 27, 2006,
the Company issued 300,000 shares of common stock upon the exercise of warrants
at $0.70 per share by Summit Resource Group. The Company received $210,000 from
the exercise of the warrants.  The following table summarizes the
activity of warrants outstanding for the years ended December 31, 2008 and
2007:  Warrants
Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
LifeOutstanding at December 31, 2006
3,356,335

2.76

0.89Expired
(3,006,335)

2.99

-Outstanding at December 31, 2007
350,000

0.80

1.17Expired
-

-

-Outstanding at December 31, 2008
350,000

0.80

1.17
     29   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  NOTE 7  STOCK OPTION
PLANS  On August 25, 2005, the Board of
Directors of the Company approved and adopted the 2005 Stock Incentive Plan (the
Plan). The Plan became effective upon its adoption by the Board and will
continue in effect for ten years, unless terminated.  This plan was
approved by the stockholders of the Company at their annual meeting of
shareholders on November 22, 2005. Under the Plan, the exercise price for all
options issued will not be less than the average quoted closing market price of
the Companys trading common stock for the thirty day period immediately
preceding the grant date plus a premium of ten percent.  The maximum
aggregate number of shares that may be awarded under the plan is 2,500,000
shares.  The Company utilized the
Black-Scholes option-pricing model for calculating the fair value for pro forma
disclosure purposes under SFAS No. 123 and has continued to use this model,
which is an acceptable valuation approach under SFAS No. 123R. This model
requires the input of subjective assumptions, including the expected price
volatility of the underlying stock. Projected data related to the
expected volatility and expected life of stock options is based upon historical
and other information, and notably, the Companys common stock has limited
trading history.  Changes in these subjective assumptions can materially
affect the fair value of the estimate, and therefore, the existing valuation
models do not provide a precise measure of the fair value of the Companys
employee stock options.  On August 25, 2005, the Company
granted options to employees to purchase an aggregate 1,159,000 shares of common
stock at an exercise price of $1.91 per share. These options vest over three
years on either the employees employment anniversary date or on the anniversary
date specified in the grant and expire 10 years from date of grant.  The
Company used the following assumptions in estimating the fair value of the
options granted on August 25, 2005: market value at time of issuance - $1.73;
expected term  8 years; risk-free interest rate  4.18%; dividend yield  0%;
and expected volatility  200%.  Using these assumptions, the options
grantedhave a weighted-average fair value
of $1.72 per share.  On February 27, 2006, the Company
granted employee options to purchase an aggregate 75,000 shares of common stock
at an exercise price of $2.07 per share. The options vest over three years on
the employees employment anniversary and expire 10 years from date of grant.
 The Company used the following assumptions in estimating the fair value of
the options granted on February 27, 2006: market value at time of issuance -
$2.00; expected term  7 years; risk-free interest rate  4.26%; dividend yield
 0%; and expected volatility  200%. Using these assumptions, the options
grantedhave a weighted-average fair value
of $1.99 per share. During September 2006, the Company
changed accounting estimates related to potential forfeitures of options under
the Plan from 0% to 7% in order to more closely reflect actual forfeitures to
date.  During 2007, based on further analysis of forfeitures, the estimate
for potential forfeitures was increased to 15% for grants awarded in August
2005, 10% for grants awarded in February 2006, and 30% for awards made during
2007.  On February 8, 2007, the Company
granted employee options to purchase an aggregate 382,000 shares of common stock
at an exercise price of $1.18 per share. The options vest on the anniversary of
the grant date and expire on August 25, 2015, which is 10 years from date of
Board approval of the Plan.  The Company used the following assumptions in
estimating the fair value of the options granted on February 8, 2007: market
value at time of issuance - $1.45; expected term  6 years; risk-free interest
rate  4.86%; dividend yield  0%; and expected volatility  200%. Using these
assumptions, the options grantedhave a
weighted-average fair value of $1.43 per share.  On June 4, 2007, the Company
granted an employee options to purchase an aggregate 300,000 shares of common
stock at an exercise price of $1.38 per share. The options vest on the
anniversary of the grant date and expire on August 25, 2015, which is 10 years
from date of Board approval of the Plan.  The Company used the following
assumptions in estimating the fair value of the options granted on June 4, 2007:
market value at time of issuance - $1.13; expected term  6 years; risk-free
interest rate  4.93%; dividend yield  0%; and expected volatility  200%.
Using these assumptions, the options grantedhave a weighted-average fair value of $1.11 per share.  On October 18, 2007, the Company granted an employee
options to purchase an aggregate 75,000 shares of common stock at an exercise
price of $1.26 per share. The options vest on the anniversary of the grant date
and expire on August 25, 2015, which is 10 years from date of Board approval of
the Plan.  The Company used the following assumptions in estimating the
fair value of the options granted on October 18, 2007: market value at time of
issuance - $1.09; expected term  6 years; risk-free interest rate  4.93%;
dividend yield  0%; and expected volatility  200%. Using these assumptions,
the options grantedhave a weighted-average
fair value of $1.08 per share.    30   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS   On August 8, 2008, the Company granted employee options
to purchase an aggregate 165,000 shares of common stock at an exercise price of
$.72 per share.  The options vest over three years beginning on the
anniversary of the grant date and expire on August 25, 2015, which is 10 years
from date of Board approval of the Plan.  The Company used the following
assumptions in estimating the fair value of the options granted on August 8,
2008; market value at time of issuance  $.70; expected holding period  5
years; risk-free interest rate  4.93%; dividend yield  0%; and expected
volatility  200%.  Using these assumptions, the options granted have a
weighted-average fair value of $.68 per share.  During the years ended December 31,
2008 and 2007, the Company recognized $237,299 and $578,649 of stock-based
compensation expense, respectively. The transitional effects of adoption of SFAS
123R was an increase in net loss and basic and diluted loss per share for the
year ended December 31, 2007 of $578,649 ($0.02 per share).  There were no
effects on cash flows from operating activities or financing activities from the
adoption. There were 1,192,000 and 1,607,000 employee stock options outstanding
at December 31, 2008 and 2007, respectively.  A summary of all employee
options outstanding and exercisable under the plan as of December 31, 2008, and
changes during the year then ended is set forth below:  Options
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
ValueOutstanding at the beginning of period
1,607,000
$
         1.66
-
$
             -Grant
165,000
0.72
-Expired
140,000
1.48
-Forfeited
200,000
1.38
-Outstanding at end of Year
1,432,000
.$
         1.61
6.68Exercisable at the end of Year
1,192,000
.$
         1.74
6.68
$
              -
   A summary of all employee options
outstanding and exercisable under the plan as of December 31, 2007, and changes
during the year then ended is set forth below:  Options
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
ValueOutstanding at the beginning of period
1,150,000
$
       1.92
-
$
              -Grant
757,000
1.27
-Expired
(90,000)
1.91
-Forfeited
(210,000)
1.53
-Outstanding at end of year
1,670,000
$
       1.66
7.68Exercisable at the end of the year
793,000
$
       1.92
7.67
$
              -
   As of December 31, 2008, there was approximately $80,887
of unrecognized compensation cost related to employee stock options that will be
recognized over a weighted average period of approximately 1.58 years.    31   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  NOTE 8  LEASE
COMMITMENT  Effective March 31, 2004, the
Company agreed to sub-lease offices and a manufacturing facility in which the
Companys acquired equipment is located, with monthly lease payments of $5,500
plus common area maintenance fees.  The lease expired in September 2004.
 During July 2004, the Company entered into a new five-year lease agreement
with average monthly payments including prescribed common area fees of $8,718,
with a 2% annual increase in lease payments.  Rent expense is recognized on
a straight-line basis over the term of the lease. The current lease expires
September 30, 2009.  With the recent downturn in the economy management is
in negotiations with the landlord to extend the lease at a lower rate and/or for
possibly less square footage. Because negotiations are in the preliminary stage
there is no estimate of what rent costs will be beyond September 30, 2009. Rent
expense of $106,619 and $110,678 was charged to operations for the years ended
December 31, 2008 and 2007, respectively. Total future annual minimum rent
payments as of December 31, 2008 are $80,894 for the year ended December 31,
2009, and  $0 thereafter.  NOTE 9  RELATED PARTY
MANUFACTURING CONTRACT  In September 2005, the Company
entered into a manufacturing agreement with R&D Products, LLC, a Utah
limited liability company, doing business in Midvale, Utah.  For the
purpose of this contract, management considers R&D Products to be a Related
Party because a controlling member of R&D Products, LLC owns a
non-controlling interest as a shareholder of Flexpoint Sensor Systems, Inc.
 R&D Products has developed a mattress with multiple air chambers that
uses the Companys Bend Sensor®and the Company has agreed to
manufacture the Bend Sensor® for the mattresses.  The initial
order was for 30,000 Bend Sensor®to be used to begin manufacture of
1,000 mattresses.  R&D Products deposited $50,000 with the Company in
the 4th quarter of 2007 related to this contract and another $50,000
was deposited during the first quarter of 2008.  Throughout 2008 Flexpoint
completed the engineering, electronic development and design of a Medical bed,
and delivered prototypes to R&D Products. With the delivery of the
prototypes and R&D signing off on the final engineering, Flexpoint
recognized the $100,000 deposited by R&D as income during the year.  On September 11, 2008 R&D Products, LLC entered into
a long-term Licensing Agreement for their bed technology with a major medical
solutions provider (Licensee). The Agreement provides the Licensee the exclusive
worldwide rights to R&Ds patented bed technology. On that same day
Flexpoint, R&D Products and the Licensee entered into a long-term joint
manufacturing agreement for R&Ds bed technology and related products. The
manufacturing agreement allows for the Company to manufacture sensors for the
bed technology and related products through 2018 with an option to renew each
year thereafter. Production schedules with specific quantities and dead lines
are still being outlined.  NOTE 10
 LEGAL PROCEEDINGS On January
20, 2006, Sensitron, Inc., the Companys wholly owned subsidiary, filed a
complaint in the United States District Court for the District of Utah, Central
Division, against Michael W. Wallace, d/b/a Pure Imagination, seeking patent
rights for a patent and patent application that Mr. Wallace filed with the
United States Trademark and Patent Office.  Mr. Wallace assisted Sensitron
with the development of certain software to be used in combination with our Bend
Sensor® technology related to the SEAT MAT system. The complaint alleges that
Mr. Wallace failed to deliver the source code to Sensitron and failed to list
our employees and previous employees as co-inventors on the patent he obtained
and for his pending application for a patent.  Sensitron is seeking a copy
of the source code and ownership of the patent or correction of the patent and
patent application to add the appropriate co-inventors. Sensitron is also
seeking unspecified damages along with its costs and attorneys fees.  As
of December 31, 2008, this action was still pending in the United States
District Court.  On July 3, 2001, Flexpoint Sensor
Systems, Inc. filed a voluntary petition for reorganization pursuant to Chapter
11 of the United States Bankruptcy Code.  The petition was filed in the
United States Bankruptcy Court for the District of Utah, File No. 01-29577JAB.
 On February 24, 2004, the bankruptcy court confirmed the plan of
reorganization. In the bankruptcy proceeding, the Company objected to the
$1,700,000 claim made by Delco Electronics, Inc. (Delphi) and asserted that
Delphi is precluded by the terms of the agreement from any financial recovery
due to its breach of the sponsorship agreement.  Other potential claims are
breach of contract, breach of fiduciary duties owed to Flexpoint, Inc. pursuant
to the contract, and intentional and negligent interference with Flexpoint,
Inc.s contractual and business relationship with General Motors.   As
of the report date, neither party is actively pursuing this action.     32   ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE  We have not had a change in or disagreement with our
independent accountant during the last three fiscal years.   ITEM 9A(T).  CONTROLS AND
PROCEDURES  As of the end of the period covered by this Annual
Report, we carried out an evaluation, under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures.  Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that information required to be disclosed is recorded, processed, summarized and
reported within the specified periods and is accumulated and communicated to
management, including our President and Secretary, to allow for timely decisions
regarding required disclosure of material information required to be included in
our periodic Securities and Exchange Commission reports.  Our disclosure
controls and procedures are designed to provide reasonable assurance of
achieving their objectives and our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures are effective
to a reasonable assurance level of achieving such objectives.  However, it
should be noted that the design of any system of controls is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.  In addition, we
reviewed our internal controls, and there have been no significant changes in
our internal controls or in other factors in the last year that has materially
affected or is reasonably likely to materially affect our internal control over
financial reporting.  Evaluation of Disclosure Controls and Procedures.
 Our management, with the participation of our Chief Executive Officer and
Chief 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, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures as of the end of the
period covered by this report were effective such that the information required
to be disclosed by us in reports filed under the Exchange Act is (i) recorded,
processed, summarized and reported within the time periods specified in the
Securities Exchange Commissions rules and forms and (ii) accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding
disclosure.  A controls system cannot provide absolute assurance, however,
that the objectives of the controls system are met, and no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within a company have been detected.  Managements Annual Report on Internal Control over
Financial Reporting.  Our management is responsible for establishing
and maintaining adequate internal control over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act).  Our internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes of accounting principles generally
accepted in the United States.  Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements.
 Therefore, even those systems determined to be effective can provide only
reasonable assurance of achieving their control objectives.  Our management, with the participation of our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
our internal control over financial reporting as of December 31, 2008.  In
making this assessment, our management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control  Integrated Framework.  Based on this evaluation, our
management, with the participation of the President and Secretary/Treasurer,
concluded that, as of December 31, 2008, our internal control over financial
reporting was effective.  This annual report does not include an attestation report
of our registered public accounting firm regarding internal control over
financial reporting. Managements report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only managements report in
this annual report.  Changes in internal control over financial
reporting.  There have been no changes in internal control over
financial reporting during the fourth quarter of 2008 that have materially
affected, or are reasonably likely to materially affect our internal control
over financial reporting.      33   ITEM 9B.
 OTHER INFORMATION  None.   PART III  ITEM 10.  DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE  DIRECTORS AND EXECUTIVE OFFICERS  Our directors and executive officers are listed below,
with their respective ages, positions and biographical information.  Our
bylaws provide that the directors shall be divided into three classes.  A
class of directors shall be elected for a one-year term, a class of directors
for a two-year term and a class of directors for a three-year term.  In
November 2005 our stockholders elected our current board of directors.  At
each succeeding annual meeting of stockholders, successors to the class of
directors whose term expires at that meeting shall be elected for a three-year
term.  Our executive officers are chosen by our board of directors and
serve at its discretion. There are no family relationships between or among any
of our directors and executive officers.  Name
Age
Position Held
Director Term of
OfficeClark M. Mower
62
President, CEO and
Director
From November 2005 until
next annual meetingJohn A. Sindt
64
Chairman of the Board
From November 2005 until
next annual meetingRuland J. Gill, Jr.
63
Director
From November 2005 until
next annual meetingThomas N. Strong
53
Controller  and Chief
Financial Officer
.  Clark M. Mower  Mr. Mower was appointed our President
and CEO in January 2005.  He was appointed as Director, President and CEO
of Sensitron in February 2005.  In November 2005 he was elected to serve a
one year term as director (or until the next annual meeting).  He formerly
served as Senior Vice President - Mergers and Acquisitions - Merchant Energy
Group for El Paso Energy Corporation (NYSE: EP).  From August 2002 through
2004 he was the managing member of Polaris Energy, LLC, a non-affiliated
consulting company to energy related mergers and acquisition.  From August
2002 to July 2004 he was a management committee member for Saguaro Power
Company, a non-affiliated company operating a 100 megawatts power plant in
Henderson, Nevada.  Prior to that he served as President and Chief
Executive Officer of Bonneville Pacific Corporation (a public company) for eight
years until El Paso Corporation acquired Bonneville Pacific Corporation in
October 1999.  He is a director on the board of GeNOsys, Inc., a public
reporting company.  John A. Sindt  Mr. Sindt has served as a director of the
company since 1999 and served as President and Chief Executive and Financial
Officer from 2001 to 2004.  He served as Secretary/Treasurer from January
2005 through July 2005.  In November 2005 he was elected to serve a two
year term as director (or until the next annual meeting). Mr. Sindt is also the
Chairman of the Board of Sensitron, our subsidiary.  He has been employed
since 1965 as a Salt Lake County, Utah Constable and he currently heads that
department.  He has also served as President, Corporate Secretary and
Director for the National Constables Association.  He has owned and
operated a successful chain of retail jewelry stores in Utah.  Ruland J. Gill, Jr. - Mr. Gill retired from Questar
Corporation (NYSE: STR) where he served as Vice President of Government Affairs
and Senior Attorney from 1973 until his retirement in 2008.  He was
appointed as a Director of Sensitron in February 2005.  In November 2005 he
was elected to serve a three year term as director (or until the next annual
meeting)  In addition to his professional career, Mr. Gill has held several
important positions including President of the Utah Petroleum Association, and
Trustee of the Rocky Mountain Mineral Law Foundation.  He is also a current
Board member of Prime Snax, a privately held company.  Thomas N. Strong  Prior to accepting the position of
Controller and Chief Financial Officer of Flexpoint in August 2008, Mr. Strong
was employed by Praxair Healthcare Services as a Regional Financial Analyst, and
part of his responsibilities with this provider of    34   medical gases and equipment
 was to direct that companys regional compliance with the Sarbanes-Oxley
Act of 2002.  From 2002 to 2005 he was employed as Regional Corporate
Controller for INVE America and Subsidiaries, an international agriculture and
aquaculture company responsible for the accounting, financial reporting and
treasury duties for all of North and South America. Mr. Strong has over 20 years
experience in the accounting field, primarily in controller positions.  AUDIT COMMITTEE  Our audit committee consists of Messrs. Mower and Gill,
with Mr. Gill serving as Chairman.  Our audit committee has a charter and
management believes Mr. Gill qualifies as an audit committee financial expert
because of his extensive experience in finance.   Based upon the
definition of independent director under NASDAQ Stock Market Rule 4200(a)(15),
Mr. Gill is independent of management.  However, Mr. Mower is not
independent of management.  CODE OF ETHICS  We adopted a Business Ethics and Code of Conduct in
November 2000.  Upon written request we will provide a copy of the Business
Ethics and Code of Conduct to any person without charge.  Address your
request to:  Shareholder Communications Flexpoint Sensor Systems, Inc. 106 West Business Park Drive Draper, Utah 84020  COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT  Section 16(a) of the Securities Exchange Act of 1934
requires our directors, executive officers and persons who own more than five
percent of a registered class of our equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of our common stock.  Officers, directors and
ten-percent or more beneficial owners of our common stock are required by SEC
regulations to furnish Flexpoint Sensor with copies of all Section 16(a) reports
they file and provide written representation that no Form 5 is required.
 Based upon a review of these forms furnished to us during the fiscal year
ended December 31, 2008, we believe that all required reports were filed as
required by the SEC.   ITEM 11.  EXECUTIVE
COMPENSATION  COMPENSATION DISCUSSION AND ANALYSIS  Compensation Objectives -- Our compensation philosophy is
to align executive compensation with the interests of stockholders, attract,
retain and motivate a highly competent team of executives, and link pay to
performance.  Base Salary -- Base salaries for our executives depend on
the scope of their responsibilities and their performance.  Base salary is
designed to compensate the executives for services rendered during the year.
 These salaries are compared to amounts paid to the executives peers
outside our Company.  As we have not yet established a Compensation
Committee, salary levels are typically reviewed annually by the Board of
Directors performance review process, with increases based on the assessment of
the performance of the executive.  Long-term Compensation -- The Board of Directors
determined that long-term incentive compensation would be in the form of stock
options granted.  We have a stock option plan and implemented which has
been approved by the shareholders to provide long-term compensation to directors
and employees of the company.  Perquisites  --  The only material perquisite
provided to our executive officers is reimbursement for use of a personal
automobile while engaged on company business.  Retirement Benefits --  As a development stage
company, we have no retirement benefits currently in place.  It is the
intent of the company to add such benefits at a future date.     35   Employee agreements  --
 We have not entered into employment contracts with our executive officers
and their compensation is determined at the discretion of our board of
directors.  Termination and Change of Control Payments -- The Company
does not currently have employment agreements with its executive officers and
there are no agreements providing for severance should a change of control take
place  SUMMARY COMPENSATION TABLE  The following table shows the compensation paid to our
principal executive officer, principal financial officer, and our most highly
compensated executive officer for the last three fiscal years:  Name and Principal Position
Year
Salary
($)
Option Awards (1)
($)
All Other Compensation
($)
Total
($)Clark M. Mower, President, CEO and Director
2008
2007
2006
$154,500
$154,500
$154,500
0
$143,389
0
0
0
0
$154,500
$297,889
$154,500John A. Sindt, Chairman.
2008
2007
2006
$
 12,000
$
 12,000
$123,600
0
0
0
0
0
0
$  12,000
$  12,000
$123,600Thomas N. Strong
Controller/CFO.
2008
2007
2006
$50,000 (2)
0
0
$82,090
0
0
0
0
0
$132,090
0
0                  (1) Represents value of options
granted computed in accordance with FAS 123R. (2) Represents compensation from Mr.
Strongs hire date of August 1, 2008.  OUTSTANDING EQUITY AWARDS  The following table shows outstanding equity awards
granted to the above named executive officers as of December 31, 2008.  OPTION AWARDSName
(a)
Number of Securities Underlying
Unexercised Options
(#)
Exercisable
(b)
Number of Securities Underlying
Unexercised Options
(#)
Unexercisable
(c)
Equity Inventive Plan Awards:
Number of Securities Underlying
Unexercised Unearned Options
(#)
(d)
Option Exercise Price
($)
(e)
Option Exercise
Date
(f)Clark M. Mower
CEO, President and
Director
300,000
100,000
0
0
$1.91
$1.18
12/31/15
8/25/15John A. Sindt, Principal Financial Officer and
Director
180,000
0
0
$1.91
12/31/15Thomas N. Strong
0
120,000 (1)
0
$.72
8/25/15  (1) Options for 40,000 shares vest on
August 1, 2009; options for 40,000 shares vest on August 1, 2010; options for
40,000 shares vest on August 1, 2011.    36   DIRECTOR COMPENSATION  We have paid $12,000 in compensation to our Chairman
during the fiscal year ended December 31, 2008.  We do not have any
standard arrangement for compensation of our directors for any services provided
as a director, including services for committee participation or for special
assignments.  ITEM 12.  SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS  SECURITIES UNDER EQUITY COMPENSATION PLANS  The following table lists the securities authorized for
issuance under any equity compensation plans approved by our shareholders and
any equity compensation plans not approved by our shareholders as of December
31, 2008.  This chart also includes individual compensation arrangements
described below.  EQUITY COMPENSATION PLAN INFORMATIONPlan category
Number of securities to be issued upon
exercise of outstanding options, warrants and rights
(a)
Weighted-average exercise price ofoutstanding options,
warrants and rights
(b)
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a))
(c)Equity compensation plans
 approved by security holders
1,432,000
$
1.61
1,068,000Equity compensation
plans
not approved by security
holders
350,000
$ 
0.80
0Total
1,782,000
$  1.45
1,068,000   2005 Stock Incentive Plan  On August 25, 2005, our Board adopted the Flexpoint
Sensor Systems, Inc. 2005 Stock Incentive Plan (the Plan).  The purposes
of the Plan are to attract and retain the best available personnel for positions
of substantial responsibility, to provide additional incentive to employees,
directors and consultants, and to promote the success of our business.  The Plan became effective upon its adoption by the Board
and shall continue in effect for a term of ten (10) years, unless terminated.
 The maximum aggregate number of shares of common stock that may be sold
under the Plan is 2,500,000 shares.  The term of each option and its
exercise price shall be stated in an option agreement; provided that the term
does not exceed ten (10) years from the date of grant.  The plan provides
that a grant of a stock option to an employee shall have an exercise price of no
less than 110% of the fair market value per share on the date of grant.  As
a condition of the grant, vesting or exercise of an option granted under the
Plan, the participant shall be required to satisfy any applicable federal,
state, local or foreign withholding tax obligations that may arise in connection
with the grant, vesting or exercise of the option or the issuance of shares.  The Plan is administered by our Compensation Committee
and the Board may from time to time increase the size of any Compensation
Committee and appoint additional members, remove members (with or without cause)
and appoint new members in substitution, fill vacancies and/or remove all
members of the committee.  The Compensation Committee may be composed of
employee/director(s), non-employee/director(s) and/or major stockholder(s) of
the company who are not a director.  Non-statutory stock options may be granted to employees,
directors and consultants who have the capacity to contribute to the success of
the company.  Incentive stock options may be granted only to employees,
provided that employees of affiliates shall not be eligible to receive incentive
stock options.    37    Consulting Agreement  On March 3, 2004, Flexpoint Sensor entered into a
consulting agreement with Summit Resource Group.   Summit Resource
Group agreed to provide consulting services related to investor relations,
including dealing with direct investor relations and broker/dealer relations and
the investing public.  The term of the agreement was for a twelve month
period.  We paid Summit Resource Group 100,000 restricted common shares,
valued at $114,680, and granted warrants to purchase 650,000 common shares,
valued at $731,328.  Warrants to purchase 150,000 shares at $0.70 vested at
the execution of the agreement, warrants to purchase 150,000 shares at $0.70 per
share vested on May 1, 2004, and warrants to purchase 350,000 shares at $0.80
per share vested on September 1, 2004.  The warrants expire five years
after the vesting date and have demand registrations rights.  We registered
the underlying common shares of the warrants in August 2005.  On June 27,
2006 warrants to purchase 300,000 shares were exercised by Summit Resource
Group.  BENEFICIAL OWNERSHIP  The following table lists the beneficial ownership of our
outstanding common stock by our management and each person or group known to us
to own beneficially more than 5% of our outstanding common stock.
 Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities.
 Based on these rules, two or more persons may be deemed to be the
beneficial owners of the same securities.  Except as indicated by footnote,
the persons named in the table below have sole voting power and investment power
with respect to the shares of common stock shown as beneficially owned by them.
 The percentage of beneficial ownership is based on 24,792,887 shares of
common stock outstanding as of March 2, 2009, plus any shares which each of the
following persons may acquire within 60 days by the exercise of rights, warrants
and/or options.  CERTAIN
BENEFICIAL OWNERSName and address of
beneficial owner
Amount and
nature
of
beneficial ownership
Percent of
classFirst
Equity Holdings Corp.      First Equity Holdings
Corp.
2157 S. Lincoln Street
Salt Lake City, Utah
84106
5,842,858
(1)
23.6 (1) Includes 600,000 shares held by an
officer of First Equity Holdings Corp.   MANAGEMENTName of beneficial owner
Amount and
nature
of
beneficial ownership
Percent of
classClark M. Mower
1,055,000
(1)
4.2John A. Sindt
1,611,326
(2)
6.5Ruland J. Gill, Jr.
191,470
(3)
Less than
1%Thomas N. Strong
2,500
Less than
1%Directors and officers as a
group
2,860,296
11.3  (1) Represents 655,000 shares and vested
options to purchase 400,000 shares. (2) Represents 1,233,338 held by Mr.
Sindt, 180,000 vested options and he has investment power with respect to
197,988 shares. (3) Represents 28,350 shares held by Mr.
Gill and 163,120 shares held in a family trust.     38    ITEM 13.  CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE  TRANSACTIONS WITH RELATED PARTIES  On November 10, 2008, we executed a promissory note to
First Equity Holdings Corp., a stockholder, in the principal amount of $100,000,
with 10% interest per annum.  First Equity Holdings Corp. beneficially owns
23.6% of our outstanding common stock.  The promissory note is due in full,
with accrued interest and fees on or before May 31, 2009 and is secured by a
portion of our business equipment.   If we fail to pay the amount due,
a late rate of interest of 15% applies to the outstanding balance.  In
addition, at the holders option, the amount due under the note may be converted
into our restricted common stock at $0.25 per share.  The terms of the
promissory note were similar to those made to two other investors.   In September 2007, Mr. Clark Mower, our President, Chief
Executive Officer and Director, and Mr. John Clayton, a major shareholder, each
purchased 100,000 shares of common stock through a private placement.  The
stock was issued at a price of $1.00 per share, consistent with the pricing of
the other participant in the private placement, with the earlier offering to a
non-related entity  DIRECTOR INDEPENDENCE  We believe Ruland J. Gill, Jr. in an independent
directors as defined under NASDAQ Stock Rule 4200(a)(15).  ITEM 14.  PRINCIPAL ACCOUNTING FEES
AND SERVICES  ACCOUNTANT FEES  The following table presents the aggregate fees billed
for each of the last two fiscal years by our independent registered public
accounting firm, Hansen Barnett & Maxwell, Certified Public Accountants, in
connection with the audit of our financial statements and other professional
services rendered by that accounting firm.  2008
2007Audit
fees
$ 35,360
$
26,051Audit-related
fees
0
0Tax related fees
$
  1,600
$
  1,600All other fees
0
0  Audit fees represent the professional services rendered
for the audit of our annual financial statements and the review of our financial
statements included in quarterly reports, along with services normally provided
by the accounting firm in connection with statutory and regulatory filings or
engagements.  Audit-related fees represent professional services rendered
for assurance and related services by the accounting firm that are reasonably
related to the performance of the audit or review of our financial statements
that are not reported under audit fees.  Tax fees represent professional services rendered by the
accounting firm for tax compliance, tax advice, and tax planning.  All
other fees represent fees billed for products and services provided by the
accounting firm, other than the services reported for the other categories.  PRE-APPROVAL POLICIES  Our audit committee makes recommendations to our board of
directors regarding the engagement of an auditor.  Before the auditor
renders audit and non-audit services our board of directors approves the
engagement.  Our audit committee does not rely on pre-approval policies and
procedures.      39   ITEM 15.
 EXHIBITS, FINANCIAL STATEMENT SCHEDULES  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)  3.1 Certificate of Incorporation of
Flexpoint Sensor, as amended (Incorporated by reference to exhibit 3.1 for Form
10-QSB, filed August 4, 2006)  3.2 Bylaws of Flexpoint Sensor, as amended
(Incorporated by reference to exhibit 3.4 of Form 10-QSB, filed May 3, 2004)  10.1 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)  10.2 Consulting Agreement between Flexpoint
Sensor and Summit Resource Group, dated March 3, 2004 (Incorporated by reference to exhibit 10.3 of Form
10-QSB, filed May 3, 2004)  10.3 Flexpoint Sensor Systems, Inc. 2005
Stock Incentive Plan (Incorporated by reference to Schedule 14A, filed October
27, 2005)  10.4 Promissory Note between Flexpoint
Sensor and First Equity Holdings Corp., dated November 14, 2008  20.2 Audit Committee Charter (Incorporated
by reference to Schedule 14A, filed October 27, 2005)  21.1 Subsidiaries of Flexpoint Sensor
Systems, Inc. (Incorporated by reference to exhibit 21.1 to Form 10-KSB filed
March 15, 2006)  31.1 Certification of Clark M. Mower
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  31.2 Certification of Thomas N. Strong
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  32.1 Certification pursuant to 18 U.S.C
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002            40   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.    Date: March
27, 2009 By: /s/ Clark M. Mower Clark M. Mower,
President  In accordance with Section 13 or 15(d) of the Exchange
Act, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.   Date:
 March 27, 2009 /s/ Clark M. Mower Clark M.
Mower President, Chief
Executive Officer and Director   Date:
 March 27, 2009 /s/ John A.
Sindt John A.
Sindt Chairman of the
Board,    Date:
 March 27, 2009 /s/Ruland J. Gill,
Jr. Ruland J. Gill,
Jr. Director    Date:
 March 27, 2009 /s/ Thomas N.
Strong Thomas N.
Strong Controller, Chief
Financial Officer     41