UNITED STATES SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549  FORM 10-KSB  [X] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,
2007  [
 ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Commission file number: No. 0-24368  FLEXPOINT SENSOR SYSTEMS, INC. (Name of small business issuer in its
charter)  Delaware
(State 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)Issuers
telephone number:  801-568-5111  Securities registered under Section 12(b) of the Exchange
Act:  None Securities registered under Section 12(g) of the Exchange
Act:  Common Stock  Check whether the issuer is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. [   ]  Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days.  Yes [X]  No [  ]  Check if disclosure of delinquent filers in response to
item 405 of Regulation S-B is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [  ]  Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ]   No [X]  State issuers revenue for its most recent fiscal year:
$31,495  As of April 11, 2008, Flexpoint Sensor Systems, Inc. had
24,792,887 shares of common stock outstanding.  The market value of the
shares of voting common stock held by non-affiliates on that date was
approximately $18,697,728  Check if the issuer has filed all documents and reports
required to be filed by Section 12, 13, 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.  Yes [X]
 No [  ]  Documents incorporated by reference: None.  Transitional Small Business Disclosure Format: Yes [
  ] No [X]   TABLE OF CONTENTS  PART I  Item 1.
 Description of Business 4  Item 2.
 Description of Property 11  Item 3.  Legal
Proceedings 12  Item 4.
 Submission of Matters to a Vote of Security Holders 12  PART II  Item 5.
 Market for Common Equity and Related Stockholder Matters 12  Item 6.
 Managements Discussion and Analysis or Plan of Operation 13  Item 7.
 Financial Statements 20  Item 8.  Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 34  Item 8A.
 Controls and Procedures 34  Item 8B.
 Other Information 35  PART III  Item 9.  Directors, Executive Officers, Promoters
and Control Persons, Compliance with Section
16(a) of the Exchange Act 35  Item 10.
 Executive Compensation 36  Item 11.  Security Ownership of Certain Beneficial
Owners and Management and
Related Stockholder Matters 39  Item 12.
 Certain Relationships and Related Transactions, and Director
Independence 41  Item 13.  Exhibits 41  Item 14.
 Principal Accountant Fees and Services 42  Signatures 43         2  In this annual report
references to Flexpoint Sensor, we, us, and our refer to Flexpoint
Sensor Systems, Inc. and its subsidiaries.  FORWARD LOOKING STATEMENTS  The Securities and Exchange Commission (SEC) encourages
companies to disclose forward-looking information so that investors can better
understand future prospects and make informed investment decisions.  This
report contains these types of statements.  Words such as may, will,
expect, believe, anticipate, estimate, project, or continue or
comparable terminology used in connection with any discussion of future
operating results or financial performance identify forward-looking statements.
 You are cautioned not to place undue reliance on the forward-looking
statements, which speak only as of the date of this report.  All
forward-looking statements reflect our present expectation of future events and
are subject to a number of important factors and uncertainties that could cause
actual results to differ materially from those described in the forward-looking
statements.   3  PART
I  ITEM 1.  DESCRIPTION OF
BUSINESS  HISTORICAL DEVELOPMENT  Flexpoint Sensor Systems, Inc. was incorporated in the
state of Delaware in June 1992 as Nanotech Corporation.  In April 1998,
Nanotech acquired Sensitron, Inc., a Utah corporation (Sensitron), as a
wholly-owned subsidiary through a reverse triangular merger.  Nanotech also
acquired Sensitrons wholly-owned subsidiary, Flexpoint, Inc.  As part of
this acquisition, Nanotech changed the company name to Micropoint, Inc.  In
July 1999 Micropoint changed its name to Flexpoint Sensor Systems, Inc.  Flexpoint Sensor was forced to seek bankruptcy protection
on July 3, 2001, and we filed a voluntary petition for reorganization pursuant
to Chapter 11 of the United States Bankruptcy Code.  (See Part I, Item 4
Legal Proceedings, below).  On February 24, 2004, the bankruptcy court
confirmed our Plan of Reorganization.  As a result of our reorganization,
we are now a development stage company with a date of emergence from bankruptcy
of February 24, 2004.  We used fresh-start reporting and all assets of
Flexpoint Sensor Systems, Inc. were restated to reflect their reorganization
value, which approximated the fair value at the date of reorganization.  The bankruptcy reorganization plan resulted in a 7-to-1
reverse stock split that was effected March 5, 2004.  All share and per
share amounts presented in this report reflect the reverse split.  The
reorganization plan resulted in discharged debt of $7,123,213, which included
the issuance of 13,822,331 shares of stock for creditor claims and conversion of
$1,500,000 of notes payable and the cancellation of 828,571 shares of common
stock issued or issuable to an officer during 2001.  Options, warrants or
executory contracts for acquisition of any common shares entered into prior to
our petition for bankruptcy protection were canceled upon confirmation of the
reorganization plan. Outstanding preferred stock and super-voting preferred
stock were also canceled upon confirmation.  BUSINESS OVERVIEW  We are a development stage company principally engaged in
designing, engineering, and manufacturing sensors technology and equipment using
flexible potentiometer technology.  We are actively seeking financing and
manufacturing contracts for the use of, design and engineering of, Bend Sensor®
technology and equipment using a flexible potentiometer technology.  Since
confirmation of our bankruptcy reorganization plan in March 2004 we have been
negotiating contracts, manufacturing Bend Sensor® technology devices and have
further developed our technologies, but have not yet commenced commercial
manufacturing.  During 2005 we raised funding through sales of our common
stock and during 2006 we have completed installation of our first production
line and began testing of our products.  Additional funding was obtained
through a series of private placements in 2007.  PRODUCTS  Bend Sensor® Technology  Sensitron owns the rights to our Bend Sensor® technology,
which is a flexible potentiometer bend sensor product consisting of a coated
substrate, such as plastic, that changes electrical conductivity as it is bent.
 Electronic systems can connect to this sensor and measure with fine detail
the amount of bending or movement that occurs.  Certain applications of the
Bend Sensor® 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 and lighter in weight than mechanical
potentiometers.  Management believes many sensor applications can be
improved using our technology and the use of our technology will result in new
products and new sensor applications.  4   We have developed the following
applications for the Bend Sensor® technology:  Pedestrian 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.  All new 2005 vehicles must
comply with special tests demonstrating they meet standards protecting
pedestrians against head and leg injuries in accidents.  In 2010, two
additional stringent tests will be imposed.  We have developed a Pedestrian Impact Detection system
that we believe will meet the requirements for cars in Europe.  In October
2005 we completed the initial stage of testing for the Pedestrian Impact
Detection system with Tier One suppliers and confirmed the systems ability to
distinguish within milliseconds between a human leg and an inanimate object.
 During 2006 four separate automotive suppliers/original equipment
manufacturers are testing the Bend Sensor® device for use in pedestrian impact
detection.  Thus far, testing has shown that the Bend Sensor® device is
able to detect impact with a human leg and in the event of an accident, trigger
a safety response.  The device is also capable of determining the
difference between a human leg and a steel post and can therefore alter the
automobiles response based on the appropriate safety response. The automobile
response can include raising the hood or deploying an external air bag.  We
believe the Bend Sensor® devices advantages over the competition include
reliability, accuracy, and lower costs.  Our sensors have gone through
several years of testing for this application.  Starting in 2006 we have focused our efforts on third
party testing of our technology as required in our protocol for Stage II
development of our technology.  In June 2006 we announced our Pedestrian
Impact Detection System was tested by MGA Research and this research confirmed
results of our internal testing.  This 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.  In June 2006 we also announced that we had entered into a
cooperative testing agreement with Faurecia Automotive (Faurecia).
 Faurecia is the second largest automotive supplier in Europe and it
supplies components to large automotive manufacturers, such as BMW, Toyota,
Ford, Chrysler LLC Corporation and others.  This agreement will allow both
companies to use their resources, knowledge and capabilities to develop a
working prototype of the Pedestrian Impact Detection System.  Medical Bed  We currently have working prototypes of beds for use in
medical applications.  The electronics of the bed are able to record, based
on our Bend Sensor® 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 remove pressure areas as well as facilitate dressing changes.
 Using our sensor technology on each of the individual chambers of the bed
allows an accurate automatic profile mapping of the position of the person and
immediately identifies the high pressure zones.  This allows needed
adjustments to be made to meet the required standards of care and comfort.
 Adjustments are also programmable for customized patient care and may be
recorded for administrative use at later dates.  Our Bend Sensor® Technology allows the medical bed to
record all information by measuring minute changes in surface deflection.
 These measurements are correlated and calibrated with intra-compartmental
air pressure changes to determine variances in surface pressure where the
patients body is in contact with the mattress.  Competitors products use
random adjustments and blindly move pressure zones.  Management believes
this application of our technology is sufficiently unique to provide a major
source of revenue.  On September 28, 2005, Flexpoint Sensor Systems, Inc.
entered into a manufacturing agreement with R&D Products, LLC, a Utah
limited liability company, doing business in Midvale, Utah.  For the
purpose of this contract,  5  management considers R&D
Products to be a related party because a controlling member of R&D products,
LLC is also a non-controlling interest shareholder of Flexpoint Sensor.
 R&D Products has developed a mattress with multiple air chambers that
use Bend Sensors® and we agreed to manufacture the Bend Sensors® for the
mattresses.  The initial term of the agreement is for a period of five
years and the term will renew automatically for one or more successive one-year
terms, unless either party provides written notice of non-renewal.  The
unit prices will be adjusted on an annual basis to reflect industry standard
price changes.  The initial order was for 30,000 Bend Sensors® to be used
to begin manufacture of 1,000 mattresses.  The realization of the
manufacturing and sales of the Bend Sensors® is dependent upon R&D Products
selling either their bed directly to customers or licensing their technology to
a third party.  There are no guarantees the R&D Products will complete
sales in such quantities to meet the demands of this contract.  R&D Products will deliver purchase orders for the
Bend Sensors® to us and may inspect the production of the Bend Sensors®.
 In addition, both parties have agreed to maintain the confidentiality of
proprietary information obtained from each other.  The agreement may be
terminated by either party for breach of the agreement by the other party or
dissolution of the other entity.  The rights under the agreement cannot be
assigned without prior written consent from the other party.  In December 2005 R&D Products reached a manufacturing
agreement with Powin Corporation to mass produce the medical SmartBed.
 Powin Corporation dedicated an 80,000 square foot manufacturing facility
to manufacture the SmartBed.  The SmartBed is a pressure neutralizing bed
using our Bend Sensor® Technology to precisely identify areas of the body where
high pressure skin contact is most vulnerable and redistributing pressure when
and where needed.  Our Bend Sensor® Technology allows the SmartBed to read
all information by measuring minute change in surface deflection.  These
measurements are correlated and calibrated with intra-compartmental air pressure
changes to calculate variances in surface pressure where the patients body is
in contact with the mattress.  Our production of the medical bed has been delayed as a
result of waiting for a final design and configuration of the medical bed from
R&D Products.  Flexpoint is prepared to produce the sensors under the
terms of the agreement as soon as R&D Products determines the final design
and configuration of the bed.  In October 2007 R&D Products paid
$50,000 toward the purchase of materials for the initial order of beds.
 Upon receipt of the $50,000 balance, we will finalize development work and
manufacture the initial order of beds under the agreement.  Subsequent to
year-end the second $50,000 payment was received,  and work is commencing
to produce the initial order.  Seat Belt Reminder  As a result of our testing in the pedestrian impact
detection market, we have starting testing a seat belt reminder 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.  Air Bag Applications  Automakers and regulators agree that smart air bag
systems are the solution to the rising concerns over the deaths of children and
small adults by air bags. Smart air bag systems are those that can detect not
only the presence of a seat occupant, but also the size and positioning of the
seat occupant.  This data is used to tailor the speed and force of the air
bag deployment to the seat occupancy conditions at the time of impact.
 Reliable analog seat sensors such as our Bend Sensor® technology are a key
component of a smart air bag system.  We have developed an Occupant Classification System that
uses a series of sensors in an automobile seat to sense whether an object on a
seat is a human being and whether it is a child or an adult.  By
automatically sensing and correctly categorizing a car's passengers, our sensors
can distinguish between an object, an infant car seat, a child or an adult
passenger.  This classification system is capable of deactivating an air
bag when a person under 60 pounds or a car seat is in the seat.  This
allows the air bag to deploy in a fashion so as to improve the safety of the
passenger.  Managements informal survey of this market has found that the
market opportunity for these applications is  6  substantial considering an
annual market of 19,000,000 vehicles in North America and 50,000,000 worldwide.
 We are in discussions with a Tier 1 supplier for implementation of this
device.  We will continue to work with this Tier 1 supplier to make sure
that we meet all requirements set forth by the government for the device  The Passenger Presence Detection system is used to detect
if there is any object in the front passenger seat.  This device could be
used widely in the European market because there are specific requirements for
this type of device in Europe.  We are currently working with three Tier 1
suppliers on this application.  This device could also be used as a seat
belt reminder with a potential market of 17,000,000 vehicles per year.  We have developed a crash sensor, which is a series of
sensors mounted in strategic places on the side and door panels to detect an
impact, as well as the speed, direction and force of the impact.  This
allows an onboard computer to deploy side air bags where needed.  Seat Heater and Seat Belt Reminder  In an effort to add more value to the Flexpoint Bend
Sensor® and capitalize on Flexpoints manufacturing expertise, we have been
developing a seat heater that would heat to the appropriate temperatures
utilizing the power levels available in an automobile.  We have developed a
prototype that has yielded good results.  The advantage to a printable
heater is that we can also include, on the same sheet of material, the Flexpoint
Bend Sensor® as a Seat Belt Reminder.  To our knowledge, this is a unique
combination.  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 design 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 type applications.  Flexpoint announced on November 28, 2006, a Joint
Development Agreement with Precision Pumping, to produce a production model flow
meter.  The production ready meter includes several features that are only
found on high-end systems, including a large digital display that shows and
collects real time data as well as a removable memory card to record all
measurements.  This card can be removed to download data providing
portability for analysis.  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 changes in humidity.  We expect to begin marketing this
new product upon completion of qualification testing.  Other Applications  Management believes the potential market for our
technology includes using the technology to replace or upgrade devices used in
industrial control systems, medical equipment and instrumentation, computer
peripherals, automotive transmission equipment, commercial vending equipment and
other devices.  We have developed, or are developing:  · a vibration sensor,  7   · a steering wheel position device that
communicates to an automobile onboard computer the amount of rotation of the
steering wheel to assist the computer in stabilizing control over the vehicle,
and  · sensing devices for medical
equipment.  We intend to further identify applications of our
technology in numerous fields and industries.  A core sales strategy is to
seek applications of our technology for products used by customers that
emphasize functionality, reliability, quality, and user convenience.  BUSINESS STRATEGY  Management believes that our future success will depend
upon our ability to coordinate our product design, manufacturing, distribution
and service strategies in a long-term business model.  One sales strategy
is to offer a line of standard sensor products with corresponding hardware and
software to facilitate ease of implementation of our technology into a
customer's system.  The standard product line is expected to be sold
directly to the customer and through manufacturer's representatives and
distributors.  We will seek to expand our product offering to include
substantially complete value-added assemblies.  We will also continue to
consider licensing or partnership arrangements. We anticipate selling primarily
to original equipment manufacturers initially in the United States and
eventually worldwide.  For the international customers, we plan to
contract, sell and distribute our products through various manufacturer
representatives and distributors.  Since our intended customers are typically technology
companies, the design phase of the sales cycle is extremely important.  We
anticipate that the original equipment manufacturers will typically approach us
with a conceptual product and request that we produce a prototype.  The
prototype will then be tested in the environment in which the ultimate product
will be placed.  During this process, customer contact with our application
engineers and internal sales support individuals will be critical for a
successful design to result.  In the long term, we will attempt to add value by
expanding our sensor product line through licensing, strategic agreements,
and/or acquisition of other entities. It is anticipated that such
diversification of sensor products will enhance our ability to offer sensor
"system" solutions to our customer.  Eventually, by adding circuit boards,
enclosures, etc., management expects to move toward a more extensive product
line.  These product lines, when combined, could create a much larger value
added profit margin.  There is, however, no assurance that such profit
margins will be achieved.  MARKETING AND SALES  We intend to market our products primarily to original
equipment manufacturers (OEMs), either directly or through Tier 1 suppliers.
 Our primary marketing objectives are to generate demand for our products,
enhance name recognition and support OEMs.  We believe that the successful
use of our products by OEMs and Tier 1 suppliers will create additional demand
for a higher quantity of existing products.  We also anticipate that the
success of our existing products will allow us to successfully introduce new
products to the market.  We intend to support OEMs and Tier 1 suppliers through
our network of sales representatives and our in-house sales force.  We have
one in-house sales representative and intend to develop sales representative
networks in the Midwest where the major industrial controls manufacturers are
located.  We will also seek to generate interests and explore additional
applications to our technology through attendance and participation at trade
shows and publicity in trade magazines.  We believe that our relationship with OEMs and Tier 1
suppliers will be an important part of our overall sales strategy.  We
believe that the OEMs and Tier 1 suppliers will initiate purchase orders for
our products.  In the early stage of this strategy, we likely will be
dependent on a few OEMs and if we lose their business it will have a  8  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 royalties.  In addition, because we do
not sell directly to end users, we are dependent, in part, on the OEMs for
information about retail product sales.  Accordingly, any rapid cessation
of purchases or a switch to other companies' products by end users may not be
immediately evident to us, and could result in increased product returns.  We intend to market our products through the use of our
website, 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 in the
United States, we anticipate expanding our distribution network throughout the
world.  There can be no assurance that we will be successful in developing
such a sales force or in expanding our distribution network.  License and supply arrangements,
such as those discussed above, create certain risks for us, including:  Reliance for sales of products on other parties, and,
therefore, reliance on the other parties' marketing ability, marketing plans and
credit-worthiness;  If our products are marketed under other parties' labels,
goodwill associated with use of the products may inure to the benefit of the
other parties rather than Flexpoint Sensor and its subsidiaries;  We may have only limited protection from changes in
manufacturing costs and raw materials costs; and  If we are reliant on other parties for all or
substantially all of our sales, we may be limited in our ability to negotiate
with such other parties upon any renewals of their agreements.  MANUFACTURING AND DISTRIBUTION  Automobile manufacturers and Tier 1 suppliers require all
manufactured parts to be used in their automobiles to be manufactured in
ISO/TS-16949 certified facilities.  IS0/TS-16949 is a Quality Management
System that contains the particular requirements for the application of ISO
9001:2000 for automotive production and relevant service part organization.
 TS-16949 is based on ISO requirements 9001:2000, but it contains
additional requirements that are particular to the automotive industry.
 These additions are considered automotive interpretations by the ISO
community of accreditation bodies and registrars.  TS-16949 is a common
supplier quality standard for 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 are in the
process of qualifying our own manufacturing facility for TS-16949, but we
determined that it was necessary that we had the required manufacturing
capabilities now.  As a result, in February 2005 we entered into a
Cooperative Agreement with The Bergquist Company, a Minnesota corporation that
is a qualified automotive manufacturer.  The agreement provides that the
companies will cooperate with one another to produce Bend Sensor® technology
applications for the automotive industry.  This cooperative agreement
provides us with the means to deliver a finished product to market.  Under the terms of the Bergquist agreement neither
company will grant licenses to the other for their own intellectual property,
nor is either company obligated to rely on the other for production or
technology.  Flexpoint Sensor may produce any production contract or may
give Bergquist a reasonable opportunity to provide a bid for the production
contract.  Bergquist may offer Flexpoint a reasonable opportunity to
provide a bid for technology for one of its production contracts.  The
cooperative agreement has a two year term, but may be extended for a successive
one year period at Flexpoint Sensors option.   9  COMPETITION  The sensor business is highly competitive and competition
is expected to continue to increase.  We will compete directly with firms
that have longer operating histories, more experience, substantially greater
financial resources, greater size, more substantial research and development and
marketing organizations, established distribution channels and are better
situated in the market.  We do not have an established customer base and
are likely to encounter a high degree of competition in developing a customer
base.  To management's knowledge, technology similar to our
technology is currently in production by other competitors. Management believes
that our products will be sufficiently distinguishable from the existing
products so that it will not compete directly with existing sensor products.
 Certain force transducer sensors and fiber optic sensors are comparable to
our Bend Sensors® 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, compatibility, reliability, comparable price,
quality and support.  Management also believes our intellectual property
provides an advantage over our competitors.  Although management believes
that our products will be well received in our markets because of innovative
features, performance characteristics and cost-effective pricing, there can be
no assurance that comparable or superior products incorporating more advanced
technology or other features or having better price or performance
characteristics will not be introduced by competitors.  PATENTS AND INTELLECTUAL PROPERTY  We regard certain of our designs as proprietary and
attempt to protect them with patents and by restricting disclosure of the
designs as trade secrets.  We have nine issued patents for our Bend Sensor®
technology and have filed five additional patent applications, and are in the
process of preparing two additional patents for new types of sensors using our
technology.  Sensitron owns seven United States patents and two foreign
patents related to the Bend Sensor® technology.  Patents do expire and it
will be necessary for us to file patents for each application we develop so that
it is protected from competition.  The earliest patent will expire in
October 2009; however, we have improved these technologies and expect to file
new patents based on the enhancements.  We must file patents on any
technology for which we develop enhancements which contain material improvements
to the original technology.  We are aware of three potentially conflicting
patents which we believe will not affect our current or planned use of our
technology.  There can be no assurance that the protection provided by
patents and patent applications, if issued, will be broad enough to prevent
competitors from introducing similar products or that such patents, if
challenged, will be upheld by the courts of any jurisdiction.  Patent
infringement litigation, either to enforce our patents or defend us from
infringement suits, are expensive and could divert resources from other planned
uses.  For example, we determined that it was necessary to file a patent
encroachment action in January 2006 (See 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  10  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.  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, 2007 we spent $484,987 for testing of our
Bend Sensor® technology applications.  We spent $491,554 on research and
development for the year ended December 31, 2006 related to development
engineering for the medical bed technology, new product development resulting in
new patents and testing of products for marketable applications.  Also, we believe that the coatings for the Bend Sensor®
products are difficult to duplicate.  We must develop new coatings to fit
emerging customer needs and to stay ahead of the competition.  There can be
no assurance that we will be successful in developing new coatings.
 While we expect that future research and development efforts, if any, will
lead to the filing of additional patent applications, there can be no assurance
that any additional patent filings will be forthcoming.  GOVERNMENTAL REGULATION  During the past several years, the automotive industry
has been subject to increased government safety regulation. Among other things,
regulations from the National Highway Transportation and Safety Administration
required automakers to incorporate advanced air bag technology into vehicles
beginning in 2005 with the phase in to be completed by 2008.  These
proposals call for upgraded air bag system performance tests for passenger cars
and light trucks. The new testing requirements are intended to improve the
safety of infants, children and out-of-position adults, and maximize the
protection of properly seated adults.  The National Highway Transportation
and Safety Administration tests are similar to conditions that we have already
been using to test our Seat Mat System and we believe that our Seat Mat System
will meet the standards as proposed.  EMPLOYEES  As of the date of this filing we have 11 full time
employees and employ two sub-contractors.  Our employees are not presently
covered by any collective bargaining agreement.  We have not experienced
any work stoppages and believe that our relations with our employees are good.  ITEM 2.  DESCRIPTION OF
PROPERTY  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, manufacturing and fulfillment.  The average monthly payments
over the term of the lease are $8,718, including common area maintenance and a
2% annual increase.  Management is working toward qualifying this
manufacturing facility for TS-16949 certification.  The building is located
in a business park in Draper, Utah consisting primarily of high tech
manufacturing firms and it is located adjacent to Utahs main interstate.   11  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.  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, 2007, 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 a matter to a vote of our security
holders during the fourth quarter of 2007.   PART II  ITEM 5.  MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS  MARKET INFORMATION  Our common stock is listed on the National Association of
Securities Dealers (NASD) OTC Bulletin Board under the symbol FLXT.  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, 2007 and 2006 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.  2007

2006Fiscal Quarter
Ended
High
Low

High
LowMarch 31
June 30
September 30
December 31
$1.55
1.42
1.38
1.27
$
 0.85
1.00
0.95
0.75

$ 2.22
2.31
1.75
1.43
$ 1.54
1.56
1.15
.95  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:   12  · 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 April 11, 2008, we had approximately 466
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  Two private placements were completed during 2007,
resulting in the issuance of 1,500,000 shares of our common stock.  The
first placement, for $1,000,000, was made with a single investor in June in
which 1,000,000 shares of common stock were sold at $1.00 per share.  The
second placement, for $500,000, was made with two individuals and a Limited
Liability Company in which 500,000 shares of common stock were sold at $1.00 per
share.  Net proceeds from these two placements were $1,500,000, as there
were no offering costs associated with the private placements.  We relied
on an exemption from registration for a private transaction not involving a
public distribution provided by Section 4(2) of the Securities Act.  ISSUER PURCHASE OF SECURITIES  None.  ITEM 6. MANAGEMENTS DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION  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 and
manufacturing and selling sensor technology and equipment featuring Bend Sensor®
technology and equipment.   13  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 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 by the end of
2008.  This qualification will increase the marketability of our products
to automotive parts suppliers.  During 2006 and 207 development and research on products
for several automotive customers was approved to be advanced to the next stage
of testing.  Negotiations for potential automotive applications using our
Bend Sensor® technology are in process, but we have not yet entered into a major
contract for the sale of our automotive products.  We are also continuing
to develop new products that we may sell or license to an industrial control
company.  Finalizing a major contract with a customer remains our
greatest challenge.  We must continue to obtain funding to operate and
expand our operations so that we can deliver our products to the market.
 Management believes that even though we are making positive strides
forward with our business plan, it is likely that significant progress may not
occur for the next four to six months.  Accordingly, we cannot guarantee
that we will realize significant revenues or that we will become profitable
within the next twelve months.  LIQUIDITY AND CAPITAL RESOURCES  Our revenue is primarily from design, contract and
testing services 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 this 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.  To date we have used the funds generated from these private
placements to fund continuing operations and business development.  Management believes that our current cash burn rate is
approximately $120,000 per month and that the remaining proceeds from the
private placement will fund our operations for at least the next six months.
 Our auditors have expressed doubt that we may realize significant revenue
or become profitable within the next twelve months.  We will require
additional financing to fund our long-term cash needs.  We may rely on debt
financing, 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 also may receive additional funds in the future from
warrants outstanding. As of December 31, 2007 we have outstanding warrants to
purchase an aggregate of 350,000 shares and we may receive an additional
$280,000 if those warrants are exercised.  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.  As we enter into new technology agreements in the future,
we must ensure that those agreements provide adequate funding for any
pre-production research and development and manufacturing costs.  If we are
successful in establishing agreements with adequate initial funding, management
believes that our operations for the long term will be funded by revenues,
licensing fees and royalties related to these agreements.  However, we have
formalized only a few additional agreements during the past year and there can
be no assurance that agreements will come to fruition in the future or that a
desired technological application can be brought to market.     14  COMMITMENTS AND
CONTINGENCIES  Our principal commitments at December 31, 2007 consist of
our operating lease and total current liabilities of $99,825.  The
operating lease has average monthly payments of $8,718, including common area
maintenance and a 2% annual increase.  The total future minimum payments
under this lease as of December 31, 2007 were $187,513.  Our total current liabilities include accounts payable of
$15,588 related to normal operating expenses, including health insurance,
utilities, production supplies and travel expense.  Accrued liabilities at
December 31, 2007, were $34,237 and were related to payroll tax liabilities,
accrued audit and tax expenses, accrued lease expense and accrued Paid Time Off,
a combination vacation-sick leave policy.  In January 2006 we initiated a legal action for patent
encroachment and 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 $200,000.  Management believes it is
critical to protect our patents and will divert a portion of our financial
resources to continue this legal matter.  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 December 31, 2007 projected that long-lived assets were
carried on the books at a greater value than their fair value, indicating an
impairment of $299,798.  We have therefore written down our long-lived
assets by the indicated amount 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, 2007 and 2006 we
recognized $578,649 and $827,718, respectively, of stock-based compensation
expense for our stock options and there was approximately $258,413 of
unrecognized compensation cost related to employee stock options that will be
recognized over approximately 1.6 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  15  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, 2007 and 2006.  These financial statements are included in
this report at Part II, Item 7, below.  SUMMARY OF
OPERATING RESULTSYear
endedDec. 31,
2007
Dec. 31,
2006Design, contract and
testing revenue
$
                 31,495
$
                  101,781Total operating costs and
expenses
(2,515,837)
(2,658,839)Net other income
(expense)
25,873
44,222Net loss
$
           (2,458,469)
$
           (2,512,836)Basic and diluted loss per
common share
$
                    (0.10)
$
                    (0.11)
  Our revenue for the 2007 and 2006 years was from design,
contract and testing services.  Revenue from research and development
engineering contracts is recognized as the services are provided and accepted by
the customer.  Revenue from contracts to license technology to others is
deferred until all conditions under the contract are met and then the sale is
recognized as licensing royalty revenue over the remaining term of the contract.
 Revenue from the sale of a product is recorded at the time of shipment to
the customer.   Management does not anticipate that revenue will
increase until we finalize a major contract.  Total operating costs and expenses decreased for 2007
when compared to 2006.  Included in 2007 operating costs and expenses was a
charge of $299,798 taken for the impairment of long-lived assets. There was no
impairment charge in 2006.  Administrative and marketing expenses decreased
to $1,566,991 for 2007 compared to $2,006,364 for 2006 primarily due to
reductions in litigation fees and 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 2007 and 2006  Total net other income in 2007 and 2006 was primarily the
result of interest income from the proceeds of the private placement offering,
which were deposited in a savings account and sublease rent income from
Handstands, Inc.  Reduced operating expenses in 2007 were offset by lower
revenues, but resulted in a slightly smaller net loss and net loss per share in
2007 as compared to 2006.  Management expects operating expenses to
increase in 2008 as development work accelerates.  While it is expected the
additional investment made in these developments will result in the generation
of revenues, there is no guarantee that operating losses will reduce in the
short term.  The chart below presents a summary of our consolidated
balance sheets at December 31, 2007 and 2006.         16   SUMMARY OF
BALANCE SHEET INFORMATIONYear ended
Dec. 31,
2007
Year ended
Dec. 31,
2006Cash and cash
equivalents
$
         1,058,135
$
            768,220Total current assets
1,092,292
802,291Total assets
8,463,974
8,792,304Total current
liabilities
99,825
48,335Deficit accumulated during
the development stage
(11,252,051)
(8,793,582)Total stockholders
equity
$
       8,364,149
$
        8,743,969  Cash and cash equivalents increased in 2007 compared to
2006.  The increase is the net result of funds received from the private
placement of our common stock, offset by cash used to fund operations.
 Until our revenue increases, our cash and assets will decrease as we fund
our operations.  Our non-current assets decreased at December 31, 2007
compared to 2006 due to adjustments for depreciation and amortization and the
charge taken for impairment of our long-lived assets.  These assets
include, after adjustment for the impairment charge, property and equipment
valued at $792,535, patents and proprietary technology of $1,216,233, goodwill
of $5,356,414, and long-term deposits of $6,500.  Total current liabilities increased at December 31, 2007,
primarily as a result of deferred revenue of $50,000, which represents cash
deposits provided us for services to be performed during 2008.  Factors Affecting Future Performance  We have a history of losses and may never become
profitable.  We are unable to fund our day-to-day operations from
revenues and the lack of revenues for continued growth may cause us to delay our
business development.  We anticipate proceeds from our private placements
completed in March 2005 and June and September 2007 will fund our
operations for at least the next six months; however, we expect that revenue
will not increase until mid 2008.  In addition, if we decide to expand our
business activities outside the automotive market in the next twelve months, we
anticipate needing more than approximately $1,000,000 in additional funding.  We may not have adequate experience to successfully
manage anticipated growth.  In January 2005 we restructured our management team
and brought in an experienced group of executive level management personnel to
direct the growth of our business operations.  However, we may not be
equipped to successfully manage any 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   17  § attract and retain additional
qualified technical and marketing personnel.  There is intense competition for management, technical
and marketing personnel in our business.  The loss of the services of any
of our key employees or our failure to attract and retain additional key
employees could have a material adverse effect on our ability to continue as a
going concern.  We may not have adequate manufacturing capacity to
meet anticipated manufacturing contracts.  Based on projected business development, we will need to
complete a second production line and have it installed and approved in 2008.
 The second manufacturing line is expected to result in increased
manufacturing capacity and manufacturing efficiencies.  We have completed
installation of our first production line and are in the process of qualifying
our own manufacturing facility for ISO/TS-16949 certification.  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 customers.  Our success is dependent on our intellectual property
rights which are difficult to protect.  Our future success depends on our ability to protect our
intellectual property.  We use a combination of patents and other
intellectual property arrangements to protect our intellectual property.
 There can be no assurance that the protection provided by our patents will
be broad enough to prevent competitors from introducing similar products or that
our patents, if challenged, will be upheld by courts of any jurisdiction.
 Patent infringement litigation, either to enforce our patents or defend
ourselves from infringement suits, will be expensive and could divert our
resources from other planned uses.  Patent applications filed in foreign
countries and patents in these countries are subject to laws and procedures that
differ from those in the U.S. and may not be as favorable to us.  We also
attempt to protect our confidential information through the use of
confidentiality agreements and by limiting access to our facilities.  There
can be no assurance that our program of patents, confidentiality agreements and
restricted access to our facilities will be sufficient to protect our
confidential information from competitors.  Research and development may result in problems which
may become insurmountable to full implementation of production.  Customers request that we create prototypes and perform
pre-production research and development. As a result, we are exposed to the risk
that we may find problems in our designs that are insurmountable to fulfill
production.  In that event, we will be unable to recover the costs of the
pre-production research and development.  However, we are currently unaware
of any insurmountable problems with ongoing research and development that may
prevent further development of an application.  Our products must satisfy governmental regulations in
order to be marketable  During the past several years, the automotive industry
has been subject to increased government safety regulation. Among other things,
proposed regulations from the National Highway Transportation and Safety
Administration required automakers to incorporate advanced air bag technology
into vehicles beginning in 2005 with the phase-in to be completed by 2008.
 Our products may not meet the proposed National Highway Transportation and
Safety Administration standards or the standards may be modified.  These
proposals call for upgraded air bag system performance tests for passenger cars
and light trucks.  The new testing requirements are intended to improve the
safety of infants, children and out-of-position adults, and maximize the
protection of properly seated adults.  The National Highway Transportation
and Safety Administration tests are similar to conditions that we have already
been using to test our Seat Mat System and we believe that our Seat Mat System
will meet the standards as proposed.  In addition, automakers may react to
these proposals and the uncertainty surrounding these proposals by curtailing or
deferring investments in new technology, including our Bend Sensor® technology,
until final regulatory action is taken.  We cannot predict what impact, if
any, these proposals or reforms might have on our financial condition and
results of operations.   18  Because we are
significantly smaller than the majority of our competitors, we may lack the
financial resources needed to capture increased market share.  The market for sensor devices is extremely competitive,
and we expect that competition will intensify in the future. There can be no
assurance that we will be able to compete successfully against current or future
competitors or that competitive pressures we face will not materially adversely
affect our business, operating results or financial condition.  Our primary
competitors in the air bag market are International Electronics and Engineering,
Siemens, Robert Bosch GmbH, Denso, Inc., Breed Technologies, TRW Automotive,
Delphi Corporation, Autoliv Inc., Takata and Temic.  We believe that none
of our competitors have a product that is superior to our Bend Sensor®
technology at this time.  However, many of our competitors and potential
competitors have substantially greater financial, technical and marketing
resources, larger customer bases, longer operating histories, greater name
recognition and more established relationships than we do.  These
competitors may be able to undertake more extensive marketing campaigns, adopt
more aggressive pricing policies and devote substantially more resources to
developing new products and markets than we can.  Ongoing industry consolidation among worldwide
automotive parts suppliers and financial difficulties of U.S. auto makers may
limit the market potential for our products.  In the automotive parts industry, there is a trend of
consolidation through business combinations and acquisitions of complementary
technologies among worldwide suppliers as these suppliers seek to build stronger
customer relationships with automobile manufacturers.  Automobile
manufacturers look to Tier 1 suppliers (major suppliers) to provide fully
engineered systems and pre-assembled combinations of components rather than
individual components.  This trend of consolidation of suppliers may result
in fewer Tier 1 suppliers and thus limit the marketing opportunities for our
Bend Sensor® 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.  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, beginning with this annual report 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.  In order to achieve compliance with Section 404 of the Act
within the prescribed period, we have engaged in a process to document and
evaluate our internal control over financial reporting, which has been
challenging.  We can not 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.  If we fail to achieve and maintain the adequacy of our
internal controls, as such standards are modified, supplemented or amended from
time to time, we may not be able to ensure that we can conclude on an ongoing
basis that we have effective internal controls over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act.  Moreover, effective
internal controls, particularly those related to revenue recognition, are
necessary for us to produce reliable financial reports and are important to
helping prevent financial fraud.        19    ITEM 7.  FINANCIAL
STATEMENTS   FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A
Development Stage Company)  INDEX TO FINANCIAL STATEMENTS  Page  Report of
Independent Registered Public Accounting Firm 21  Consolidated
Balance Sheets  December 31, 2007 and 2006 22  Consolidated Statements of Operations for the Years Ended
December 31, 2007 and 2006 and for the Cumulative Period from
February 24, 2004 (Date
of Emergence from Bankruptcy) through December 31, 2007 23  Consolidated Statements of Stockholders Equity for the
Period from February 24, 2004 (Date of Emergence from
Bankruptcy) through December
31, 2005 and for the Years Ended December 31, 2006 and 2007 24  Consolidated Statements of Cash Flows for the Years Ended
December 31, 2007 and 2006 and for the Cumulative Period
from February 24, 2004 (Date
of Emergence from Bankruptcy) through December 31, 2007 25  Notes to
Consolidated Financial Statements 26             20  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, 2007 and 2006 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, 2007.
 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 audit
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, 2007 and 2006 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, 2007 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, 2007 and 2006 and
for the cumulative period from February 24, 2004 (date of emergence from
bankruptcy) through December 31, 2007. 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, PC  HANSEN,
BARNETT & MAXWELL, P.C.  Salt Lake City, Utah April 14, 2008   21  FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage
Company) CONSOLIDATED BALANCE SHEETS    December 31,2007
2006ASSETSCurrent
AssetsCash and cash
equivalents
$      1,058,135
$      768,220Accounts
receivable
6,933
1,263Deposits and
prepaid expenses
27,224
32,808Total
Current Assets
1,092,292
802,291Long-Term
Deposits
6,500
6,500Property
and Equipment,net of accumulated depreciationof
$0 and $369,923
792,535
1,076,383Patents
and Proprietary Technology,net of accumulatedamortization
of $0 and $417,634
1,216,233
1,550,716Goodwill
5,356,414
5,356,414Total
Assets
$   8,463,974
$   8,792,304LIABILITIES
AND STOCKHOLDERS' EQUITYCurrent
LiabilitiesAccounts
payable
$
       15,588
$
       23,348Accrued
liabilities
34,237
24,987Deferred
revenue
50,000
-Total
Current Liabilities
99,825
48,335Stockholders'
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 23,292,887 shares issued and outstanding
24,792
23,292Additional
paid-in capital
17,791,493
14,324,756Warrants and
options outstanding
1,799,915
3,189,503Deficit
accumulated during the development stage
(11,252,051)
(8,793,582)Total
Stockholders' Equity
8,364,149
8,743,969Total
Liabilities and Stockholders' Equity
$   8,463,974
$   8,792,304The accompanying notes are an integral part of these
financial statements.     22  FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES (A Development Stage
Company) CONSOLIDATED STATEMENTS OF OPERATIONS  For the CumulativePeriod fromFebruary 24, 2004(Date of EmergenceFor the Years
from Bankruptcy)Ended December 31,
through2007
2006
December 31, 2007Design,
Contract and Testing Revenue
$    31,495

$    101,781

$
        491,304Operating
Costs and ExpensesAmortization
of patents and proprietary technology
152,968

152,967

570,602Cost of
revenue
11,093

7,954

113,344Administrative
and marketing expense
1,566,991

2,006,364

7,932,396Research and
development expense
484,987

491,554

1,455,956Impairment of
long-lived assets
299,798

-

299,798Total
Operating Costs and Expenses
2,515,837

2,658,839

10,372,096Other
Income and (Expenses)Interest
expense
-

-

(1,576,054)Interest
income
21,831

40,334

121,709Sublease rent
income
3,564

3,888

11,340Other
income
478

-

478Gain on
forgiveness of debt
-

-

71,268Net Other
Income (Expense)
25,873

44,222

(1,371,259)Net
Loss
$(2,458,469)

$(2,512,836)

$    (11,252,051)Basic and
Diluted Loss Per Common Share
$
        (0.10)

$
        (0.11)Basic and
Diluted Weighted-AverageCommon
Shares Outstanding
24,003,846

23,147,008    The
accompanying notes are an integral part of these financial statements             23  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, 2005 and for the Years Ended
December 31, 2006 and 2007 DeficitAccumulatedAdditional
Warrants 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 issuedon
March 3, 2004 for consulting services
-
-
-
731,328
-
731,328Issuance for
acquisition of equipment and proprietarytechnology
from Flexpoint Holdings, LLC, A companycontrolled
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
-
-
1,776,000Issuance of
common stock at $ .77 per shareand
2,836,335 warrants at $0.61 per warrant for cashnet
of $347,294 cash offering costs and 140,000 commonshares
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 forservices
rendered, July 2005
-
-
-
41,300
-
41,300Issuance of
common stock at $ 1.73 per share, ascompensation
to director of company forservices
rendered, August 2005
18,350
18
31,727
-
-
31,745Net
Loss
-
-
-
-
(6,280,746)
(6,280,746)Balance
 December 31, 2005
22,992,887
22,992
13,777,276
2,699,565
(6,280,746)
10,219,087Employee
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
-
-
-
-
(6,280,746)
(6,280,746)Balance -
December 31, 2006
23,292,887
23,292
14,324,756
3,189,503
(8,793,582)
8,743,969Issuance of
common stock for cash at $1.00 per share, June 2007
1,000,000
1,000
999,000
-
-
1,000,000Issuance of
common stock for cash at $1.00 per share, September 2007
500,000
500
499,500
-
-
500,000Employee
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)
$
     8,364,149    The
accompanying notes are an integral part of these financial statements   24  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,
through2007

2006
December 31, 2007Cash Flows
from Operating Activities:Net loss

$      (2,458,469)

$ (2,512,836)

$  (11,252,051)Adjustments to
reconcile net loss to net cash used inoperating
activities:Depreciation

165,566

164,283

535,489Amortization
of patents and proprietary technology

152,968

152,967

570,602Impairment
of long-lived assets

299,798

-

299,798Issuance
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

578,649

827,718

1,406,367Changes in
operating assets and liabilities:Accounts
receivable

(5,670)

(1,263)

(6,933)Accounts
payable

(7,761)

(18,389)

(192,519)Accrued
liabilities

9,250

(18,338)

31,745Deferred
revenue

50,000

-

(293,750)Prepaid
expenses

5,584

1,853

(27,224)Deposits

-

-

(6,500)Net Cash Used
in Operating Activities

(1,210,085)

(1,404,005)

(4,623,257)Cash Flows
from Investing Activities:Payments for the
purchase of equipment

-

(2,262)

(197,574)Payments for
patents

-

-

(43,626)Payment for
acquisition of equipment and proprietarytechnology from Flexpoint Holdings, LLC

-

-

(265,000)Net Cash Used
in Investing Activities

-

(2,262)

(506,200)Cash Flows
from Financing Activities:Net
proceeds from issuance of common stock  warrants

1,500,000

210,000

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

-

-

583,334Net Cash
Provided By Financing Activities

1,500,000

210,000

6,185,541Net Change in
Cash and Cash Equivalents

289,915

(1,196,267)

1,056,084Cash and Cash
Equivalents at Beginning of Period

768,220

1,964,487

2,051Cash and Cash
Equivalents at End of Period

$        1,058,135

$      
768,220

$       1,058,315Supplemental
Cash flow Information:Cash paid for
interest

$     
                -

$        
          -

$   
        16,888 The
accompanying notes are an integral part of these financial statements  25


FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDARIES (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, and
manufacturing and selling sensor technology and equipment using flexible
potentiometer technology. Through December 31, 2007, 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.  Business Condition  The Company suffered
losses of $2,458,469 and $2,512,836 and used cash in operating activities of
$1,210,085 and $1,404,005 during the years ended December 31, 2007 and 2006,
respectively.  At December 31, 2007, the Company had accumulated a deficit
of $11,252,051. The Company is in the development stage, has not earned any
appreciable revenue during the period from February 24, 2004 (date of emergence
from bankruptcy) through December 31, 2007. 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.  The Company may not make significant progress towards
obtaining manufacturing contracts for its sensor technology within the next six
months and the Company may not realize significant revenues or become profitable
within the next twelve months. Reaching profitable operations may require the
Company to obtain additional financing. Through December 31, 2007, 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.  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.  On January 1, 2006, the Company adopted Statement of
Financial Accounting Standards (SFAS) Statement No. 153, Exchanges of
Non-monetary Assetsan amendment of APB Opinion No. 29.Beginning on
January 1, 2006, the Company recognizes gains or losses upon the trade-in of
property and equipment based upon the difference between the fair value and the
depreciated cost of the assets on the dates exchanged for those transactions
with commercial substance. Commercial substance is defined as a transaction in
which the future cash flows of the Company are expected to change significantly
as a result of the exchange. Through December 31, 2005 and before the adoption
of SFAS Statement No. 153, no gain or loss was recognized upon the trade-in of
property or equipment. As there were no trade-ins of property or equipment
during the years ended December 31, 2006 and 2007, there were no effects on the
financial statements as a result of adoption of SFAS Statement No. 153.


26


FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  Valuation of Long-lived
AssetsThe carrying values of the
Companys long-lived assets are reviewed for impairment annually and whenever
events or changes in circumstances indicate that they may not be recoverable.
 When projections indicate that the carrying value of the long-lived asset
is not recoverable, the carrying value is reduced by the estimated excess of the
carrying value over the projected discounted cash flows.  The impairment
test conducted at December 31, 2007 resulted in a $299,798 impairment of
long-lived assets.  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 charge is identified as a
line item in the consolidated statement of operations and was 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.
Estimated useful lives of patents and proprietary technology range from 5 to 15
years.  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.  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, 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, 2007 or 2006  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, 2007 and 2006, the Company recognized
expense for stock-based compensation under SFAS No. 123R of $578,649 and
$827,718, respectively.


27


FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDARIES (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, 2007 and  2006, there were
warrants outstanding to purchase 350,000 and 3,356,665 shares of common stock,
respectively. 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 SFAS No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. In
February 2008, the FASB issued FASB Staff Position (FSP FIN) No. 157-2 which
extended the effective date for certain nonfinancial assets and nonfinancial
liabilities to fiscal years beginning after November 15, 2008.  The Company
is currently evaluating the impact of SFAS 157 on the financial statements and
anticipates that the statement will not have a significant impact on the
reporting of its financial position and results of operations.  In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities.
SFAS No. 159 permits companies to choose to measure many financial
instruments and certain other items at fair value. SFAS No. 159 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007. The Company is currently evaluating the impact of SFAS
157 on the financial statements and anticipates that the statement will not have
a significant impact on the reporting of its financial position and results of
operations.  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 $165,566 and
$164,283 for the years ended December 31, 2007 and 2006, respectively.
 Property and equipment, equipment at December 31, 2007, following the
writedown for the impairment charge, and at December 31, 2006, consists of the
following  December
31,
2007
2006Machinery and
equipment
$718,806
$1,250,406Office
equipment
55,411
141,659Furniture and
fixtures
17,761
42,712Software
557
11,529Total
Property and Equipment
792,535
1,446,306Less:
Accumulated depreciation
-
(369,923)Net Property
and Equipment
$792,535
$1,076,383
  NOTE 2  GOODWILL AND INTANGIBLE ASSETS  Intangible Assets  The components of
intangible assets at December 31, 2007, following the charge for impairment, and
at December 31, 2006 were as follows:


28


FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS   Gross Carrying
Accumulated
Net CarryingDecember 31,
2007
Amount
Amortization
AmountPatents
$
       202,377
$
             -
$
       202,377Proprietary
technology
1,013,856
-
1,013,856Total
Amortizing Intangible Assets
$     1,216,233
$
             -
$     1,216,233Gross Carrying
Accumulated
Net CarryingDecember 31,
2006
Amount
Amortization
AmountPatents
$
       322,773
$
       (65,334)
$
       257,439Proprietary
technology
1,645,577
(352,300)
1,293,277Total
Amortizing Intangible Assets
$     1,968,350
$      (417,634)
$
    1,550,716  Patent amortization was $24,859 and $24,858 for the years
ended December 31, 2007 and 2006, and amortization related to proprietary
technology was $128,109 and $128,109 for the same periods respectively.
 Patent and proprietary technology amortization is charged to operations.  Estimated aggregate amortization expense for each of the
next five years is $152,948 each year.  Goodwill  Intangible assets not subject to
amortization as of December 31, 2007 and 2006 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 provide an
evaluation of the fair value of its intangible assets using similar methods.  NOTE 3 INCOME TAXES  There was no provision for, or benefit from, income tax
during the years ended December 31, 2007 and 2006, respectively.  The
components of the net deferred tax asset as of December 31, 2007 and 2006,
including temporary differences and operating loss carry forwards that arose
prior to reorganization from bankruptcy, are as follows:  December
31,
2007
2006Operating
loss carry forwards
$   12,861,239
$   11,602,264Property and
equipment
43,475
(350)Patents and
proprietary technology
114,348
34,456Stock-based
compensation
524,575
308,739Total
Deferred Tax Assets
$   13,543,637
$   11,945,109Valuation
allowance
(13,543,637)
(11,945,109)Net
Deferred Tax Asset
$
                   -
$
                   -  Federal and state net operating loss
carryforwards at December 31, 2007 and 2006 were $32,651,049 and $31,105,104,
respectively.  Although net operating losses begin to expire in the year
2020, those carry forwards will be limited or unavailable, under the tax laws,
due to a change of greater than 50% in ownership of the Company on February 24,
2004.


29


FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS   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, 2007 and 2006, respectively:  For the
Years Ended December 31,
2007
2006Tax at
statutory rate (34%)
$      (835,879)
$      (854,364)Non-deductible
expenses
879
1,233Change in
valuation allowance
916,130
936,055State tax
benefit, net of federal tax effect
(81,130)
(82,924)Provision
for Income Taxes
$
                  -
$
                  -   NOTE 4 COMMON STOCK  Private Placement of Common Stock and
Warrants  From January 25, 2005 through March 31, 2005, the Company
issued 2,836,335 shares of common stock and warrants to purchase 2,836,335
shares of common stock at $3.00 per share from October 1, 2005 through September
30, 2007 in a private placement offering. The Company realized proceeds of
$3,907,207, net of $347,294 of cash offering costs. As part of this private
placement, the Company also issued the placement agent 140,000 shares of common
stock and 140,000 warrants exercisable at $3.00 per share for the agents
services in connection with the offering. The fair value of the warrants issued
was $4,047,816 as estimated by the Company using the Black-Scholes pricing model
with the following assumptions: risk free interest rate of 4.58%; volatility of
200%; estimated life of two years; and dividend yield of 0%. The net proceeds
were allocated to the shares of common stock and the warrants based upon their
relative fair values and resulted in allocating $1,980,271 to the shares of
common stock and $1,926,937 to the warrants.  All outstanding warrants
issued in this transaction have expired.  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.  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.,
650,00 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.


30


FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  The following table summarizes the
activity of warrants outstanding for the years ended December 31, 2007 and
2006: Warrants
Shares
Weighted-
Average
Exercise Price
Weighted-Average
Remaining
Contractual LifeOutstanding
at January 1, 2006
3,656,335
2.59
2.00Exercised
(300,000)
0.70
2.68Outstanding
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
1.17  NOTE 5  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 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


31


FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS   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 - $109; 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.  During the years ended December 31, 2007 and 2006, the
Company recognized $578,649 and $827,718 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 years ended December
31, 2006 of  $827,718 ($0.04 per share)..  There were no effects on
cash flows from operating activities or financing activities from the adoption.
There were 1,607,000 and 1,150,000 employee stock options outstanding at
December 31, 2007 and 2006, respectively.  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:  Weighted-AverageWeighted-

Remaining

AggregateAverage

Contractual

IntrinsicOptions
Shares

Exercise Price

Life (Years)

ValueOutstanding at
beginning of year
1,150,000

$
              1.92Granted
757,000

1.27Expired
(90,000)

1.91Forfeited
(210,000)

1.53Outstanding at
end of year
1,607,000

$
              1.66

7.68

$
                -Exercisable at
end of year
793,000

$
              1.92

7.67

$
                -  A summary of all employee options
outstanding and exercisable under the plan as of December 31, 2006, and changes
during the year then ended is set forth below:  Weighted-AverageWeighted-

Remaining

AggregateAverage

Contractual

IntrinsicOptions
Shares

Exercise Price

Life (Years)

ValueOutstanding at
beginning of year
1,159,000

$
             1.91Granted
75 ,000

2.07Expired
(28,000)

1.91Forfeited
(56,000)

1.91Outstanding at
end of year
1,150,000

$
             1.92

8.69

$
                 -Exercisable at
end of year
551,000

$
             1.91

8.65

$
                 -


32


FLEXPOINT SENSOR
SYSTEMS, INC. AND SUBSIDARIES (A Development
Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  As of December 31, 2007, there was approximately $258,413
of unrecognized compensation cost related to employee stock options that will be
recognized over a weighted average period of approximately 1.61 years.  NOTE 6  LEASE COMMITMENT  Effective March 31, 2004, the
Company agreed to sub-lease offices and a manufacturing facility in which the
Companys acquired equipment is located, with monthly lease payments of $5,500
plus common area maintenance fees.  The lease expired in September 2004.
 During July 2004, the Company entered into a new five-year lease agreement
with average monthly payments including prescribed common area fees of $8,718,
with a 2% annual increase in lease payments.  Rent expense over the term of
the lease is recognized on a straight-line basis over the term of the lease.
 Rent expense of $110,678 and $104,616 was charged to operations for the
years ended December 31, 2007 and 2006, respectively.  Total future annual
minimum rent payments as of December 31, 2007 are as follows:  Year Ending December 31:2008


$
               106,6192009


80,894$
               187,513  NOTE 7  RELATED PARTY
MANUFACTURING CONTRACT  In September 2005, the Company
entered into a manufacturing agreement with R&D Products, LLC, a Utah
limited liability company, doing business in Midvale, Utah.  For the
purpose of this contract, management considers R&D Products to be a Related
Party because a controlling member of R&D Products, LLC is also a
non-controlling interest shareholder of Flexpoint Sensor Systems, Inc.
 R&D Products has developed a mattress with multiple air chambers that
uses the Companys Bend Sensors® and the Company has agreed to manufacture the
Bend Sensors® for the mattresses.  The initial order is for 30,000 Bend
Sensors® 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.  Upon receipt of an additional $50,000, the
Company will begin production of the initial prototypes under this agreement.
 The additional $50,000 payment was received by the Company subsequent to
year-end.  The realization of the manufacturing and sales of the Bend
Sensors® is dependent upon R&D Products selling either their bed technology
directly or licensing their technology to a third party.  There are no
guarantees that R&D will make such sales in such quantities to meet the
demands of this contract.  NOTE 8  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.  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, 2007, 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 this date, neither
party is actively pursuing this action.


33  ITEM 8.
 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE  We have not had a change in or disagreement with our
independent accountant during the last two fiscal years.  ITEM 8A.  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 quarter than 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, 2007.  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, 2007, 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.   ITEM 8B.  OTHER INFORMATION  None.  PART III  ITEM 9.  DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT  DIRECTORS AND EXECUTIVE OFFICERS  Our directors and executive officers are listed below,
with their respective ages, positions and biographical information.  Our
bylaws provide that the directors shall be divided into three classes.  A
class of directors shall be elected for a one-year term, a class of directors
for a two-year term and a class of directors for a three-year term.  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
61
President, CEO and
Director
Until next annual
meetingJohn A. Sindt
63
Chairman of the Board and
Principal Finance and Accounting Officer
Until next annual
meetingByron E. Allen
39
Vice President of Sales
& MarketingRuland J. Gill, Jr.
62
Director
Three year term until Nov.
2008  Clark M. Mower  Mr. Mower was appointed our President
and CEO in January 2005.  He was appointed as Director, President and CEO
of Sensitron in February 2005.  In November 2005 he was elected to serve a
one year term as director.  He formerly served as Senior Vice President -
Mergers and Acquisitions - Merchant Energy Group for El Paso Energy Corporation
(NYSE: EP).  From August 2002 through 2004 he was the managing member of
Polaris Energy, LLC, a non-affiliated consulting company to energy related
mergers and acquisition.  From August 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.   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.  Byron E. Allen -Prior to accepting the position
of VP of Sales and Marketing for Flexpoint in June 2007, Mr. Allen was VP of
International Sales for Icon Health & Fitness, the worlds largest
manufacturer and seller of indoor fitness equipment.  In this role Mr.
Allen was responsible for all sales outside of North America. In his 3.5 yrs
with Icon, Mr. Allen grew international sales from $80 to $120 million.
 Prior to that, Mr. Allen spent more than 8 years with  35  Iomega Corporation. During his
tenure with Iomega he served in many different sales capacities ranging from OEM
Business Development Manager to OEM Sales Manager.  Ruland J. Gill, Jr. - Mr. Gill is Vice President of
Government Affairs and Senior Attorney for Questar Corporation (NYSE: STR),
where he has worked since 1973.  He was appointed as a Director of
Sensitron in February 2005.  In November 2005 he was elected to serve a
three year term as director.  In addition to his professional career, Mr.
Gill has held several important positions
including President of the Utah Petroleum Association, and Trustee of the Rocky
Mountain Mineral Law Foundation.  He is also a current Board member of
Prime Snax, a privately held company.  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 NASD 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, 2007, we believe that all required reports were filed as
required by the SEC.   ITEM 10.  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.   36  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.  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.  SUMMARY COMPENSATION TABLE  Compensation  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 ($)
Bonus ($)
Stock Awards ($)
Option Awards(2) ($)
Non-Equity Incentive Plan Compensation
($)
Nonqualified Deferred Compensation
Earnings ($)
All Other Compensation ($)
Total
($)Clark M. Mower, President, CEO and Director
2007
2006
2005
$154,500
$154,500
$143,750
0
0
0
0
0
0
$143,389
0
$516,843
0
0
0
0
0
0
0
0
0
$297,889
$154,500
$660,593John A. Sindt, Principal Financial Officer and
Director.
2007
2006
2005
$
 12,000
$123,600
$115,000
0
0
0
0
0
0
0
0
$310,107
0
0
0
0
0
0
0
0
0
$
 12,000
$123,600
$425,107Byron E. Allen,  VP-Sales & Mktg.
2007
$75,833
(1)
0
0
$334,377
0
0
0
$410,210  (1) Represents compensation from
Mr. Allens hire date of June 1, 2007. (2) Represents value of options granted
computed in accordance with FAS 123R.  OUTSTANDING EQUITY AWARDS  The following table shows outstanding
equity awards granted to the above named executive officers as of December 31,
2007.  37   Option Awards
Stock AwardsName
(a)
Number of Securities Underlying Unexercised
Options
(#)
Exercisable
(b)
Number of Securities Underlying Unexercised
Options
(#)
Unexercisable
(c)
Equity Inventive Plan Awards:
Number of Securities Underlying Unexercised
Unearned Options
(#)
(d)
Option Exercise Price
($)
(e)
Option Exercise Date
(f)
Number of Shares
or Units
of
Stock
That
Have
Not
Vested
(#)
(g)
Market
Value
Of
Shares
Or
Units
Of
Stock
That
Have
Not
Vested
($)
(h)
Equity
Incentive
Plan
Awards:
Number
Of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
(i)
Equity
Incentive
Plan
Awards:
Market
Or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
(j)Clark M. Mower, CEO, President and Director
300,000
100,000 (1)
0
$1.91
$1.18
12/31/15
8/25/15
0
0
0
0John A. Sindt, Principal Financial Officer and
Director
180,000
0
0
$1.91
12/31/15
0
0
0
0Byron E. Allen, VP-Sales & Mktg.
0
300,000 (2)
0
$1.38
8/25/15
0
0
0
0  (1) Options for 100,000 shares vest on
February 8, 2008.  (2) Options for 100,000 shares vest on
June 4, 2008; options for 100,000 shares vest on June 4, 2009; options for
100,000 shares vest on June 4, 2010.  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  DIRECTOR COMPENSATION  Cash Compensation Paid to Board
Members  We have not paid any compensation to our directors during
the fiscal year ended December 31, 2007.  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.    38  ITEM 11.
 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS  SECURITIES UNDER EQUITY COMPENSATION PLANS  The following table lists the securities authorized for
issuance under any equity compensation plans approved by our shareholders and
any equity compensation plans not approved by our shareholders as of December
31, 2007.  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
1,607,000
$ 1.66
893,000Equity
compensation plans
not
approved by security holders
350,000
$ 0.80
0Total
1,957,000
$ 1.51
893,000  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.  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  39  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 22, 2008, 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 owners
Amount
and nature of beneficial owner
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
and address of beneficial owners
Amount and nature of beneficial owner
Percent of classClark
M. Mower
106 West
Business Park Drive
Draper,
Utah 84020
1,205,000 (1)
4.8John
A. Sindt
106 West
Business Park Drive
Draper,
Utah 84020
1,611,326 (2)
6.5Ruland
J. Gill, Jr.
106 West
Business Park Drive
Draper,
Utah 84020
235,017 (3)
1.0Directors
and officers as a group
3,051,343
12.3  (1) Represents 655,000 shares, warrants to
purchase 150,000 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 18,350 shares, 163,120
shares held in a family trust and warrants to purchase 216,667 shares.   40   ITEM 12.  CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE  TRANSACTIONS WITH RELATED PARTIES  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.  DIRECTOR INDEPENDENCE  We believe Ruland J. Gill, Jr. and Kevin A. Howard are
independent directors as defined under NASD Rule 4200(a)(15).  ITEM 13.  EXHIBITS  No. Description 2.1 Order Confirming Plan, dated February
24, 2004 (Incorporated by reference to exhibit 2.1 for Form 8-K filed March 5,
2004)  2.2 Debtors Plan of Reorganization,
dated January 14, 2004 (Incorporated by reference to exhibit 2.2 for Form 8-K
filed March 5, 2004)  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)  4.1 Common stock purchase warrant of
Investors Stock Daily, Inc., dated July 26, 2005 (Incorporated by reference to
exhibit 4.1 to Form 10-KSB filed March 15, 2006)  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 Manufacturing Agreement between
Flexpoint Sensor and R&D Products, Inc., dated September 28, 2005
(Incorporated by reference to exhibit 10.1 of Form 8-K, filed October 3,
2005)  10.4 Flexpoint Sensor Systems, Inc. 2005
Stock Incentive Plan (Incorporated by reference to Schedule 14A, filed October
27, 2005)  20.2 Audit Committee Charter (Incorporated
by reference to Schedule 14A, filed October 27, 2005)  21.1 Subsidiaries of Flexpoint Sensor
Systems, Inc. (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 John A. Sindt
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   41  ITEM 14.
 PRINCIPAL ACCOUNTANT FEES AND SERVICES  ACCOUNTANT FEES  The following table presents the aggregate fees billed
for each of the last two fiscal years by our principal accountant, Hansen
Barnett & Maxwell, Certified Public Accountants, in connection with the
audit of our financial statements and other professional services rendered by
that firm.  2007
2006Audit
fees
$ 26,051
$
48,592Audit-related
fees
0
0Tax related fees
$
  1,600
$
  3,341All other fees
0
0  Audit fees represent the professional services rendered
for the audit of our annual financial statements and the review of our financial
statements included in quarterly reports, along with services normally provided
by the accountant in connection with statutory and regulatory filings or
engagements.  Audit-related fees represent professional services rendered
for assurance and related services by the principal accountant that are
reasonably related to the performance of the audit or review of our financial
statements that are not reported under audit fees.  Tax fees represent professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning.  All
other fees represent fees billed for products and services provided by the
principal accountant, other than the services reported for the other categories.  PRE-APPROVAL POLICIES  Our audit committee makes recommendations to our board of
directors regarding the engagement of an auditor.  Before the auditor
renders audit and non-audit services our board of directors approves the
engagement.  Our audit committee does not rely on pre-approval policies and
procedures.   42        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: April
15, 2008 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:
 April 15, 2008 By:/s/ Clark M. Mower Clark M.
Mower President, Chief
Executive Officer and Director   Date:
 April 15, 2008 By: /s/ John A.
Sindt John A.
Sindt Chairman of the
Board, and Principal Finance
and Accounting Officer   Date:
 April 15, 2008 By:/s/Rulund J. Gill,
Jr. Rulund J. Gill,
Jr. Director         43