Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 12-May-14 | |
Document and Entity Information [Abstract] | ' | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 31-Mar-14 | ' |
Entity Registrant Name | 'FLEXPOINT SENSOR SYSTEMS INC | ' |
Entity Central Index Key | '0000925660 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 53,377,114 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Current Assets | ' | ' |
Cash and cash equivalents | $19,438 | $35,221 |
Accounts receivable | 30,212 | 6,425 |
Inventory | 5,741 | 6,584 |
Notes receivable | 25,000 | 25,000 |
Deposits and prepaid expenses | 11,840 | 11,830 |
Total Current Assets | 92,231 | 85,060 |
Long-Term Deposits | 6,550 | 6,550 |
Property and Equipment, net of accumulated depreciation of $545,819 and $587,496 | 40,574 | 59,378 |
Patents and Proprietary Technology, net of accumulated amortization of $506,863 and $587,496 | 347,012 | 373,489 |
Goodwill | 4,896,917 | 4,896,917 |
Total Assets | 5,383,284 | 5,421,394 |
Current Liabilities | ' | ' |
Accounts payable | 213,422 | 212,142 |
Accounts payable - related party | 7,347 | 6,056 |
Accrued liabilities | 291,125 | 206,822 |
Deferred revenue | ' | 10,000 |
Convertible notes payable , net of discount of $4,687 and $4,653 | 640,313 | 520,347 |
Convertible notes payable to related party | 40,000 | 40,000 |
Total Liabilities | 1,192,207 | 995,367 |
Stockholders' Equity | ' | ' |
Preferred stock - $0.001 par value; 1,000,000 shares authorized; no shares issued or outstanding | ' | ' |
Common stock - $0.001 par value; 100,000,000 shares authorized; 53,377,114 shares and 53,377,114 shares issued and outstanding | 53,377 | 53,377 |
Additional paid-in capital | 24,790,929 | 24,780,929 |
Deficit accumulated during the development stage | -20,653,229 | -20,408,279 |
Total Stockholders' Equity | 4,191,077 | 4,426,027 |
Total Liabilities and Stockholders' Equity | $5,383,284 | $5,421,394 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
CONSOLIDATED BALANCE SHEETS [Abstract] | ' | ' |
Property and Equipment, accumulated depreciation | $545,819 | $587,496 |
Patents and Proprietary Technology, accumulated amortization | 506,863 | 587,496 |
Convertible notes payable, discount | $4,687 | $4,653 |
Preferred stock, par value per share | $0.00 | $0.00 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value per share | $0.00 | $0.00 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 53,377,114 | 53,377,114 |
Common stock, shares outstanding | 53,377,114 | 53,377,114 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 121 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract] | ' | ' | ' |
Engineering, Contract and Testing Revenue | $53,351 | $13,280 | $1,099,765 |
Operating Costs and Expenses | ' | ' | ' |
Amortization of patents and proprietary technology | 26,477 | 26,389 | 1,289,850 |
Cost of revenue | 2,164 | 794 | 196,791 |
Administrative and marketing expense | 180,248 | 173,126 | 13,842,758 |
Research and development expense | 64,268 | 49,584 | 3,553,517 |
Impairment of long-lived assets | ' | ' | 1,006,059 |
Total Operating Costs and Expenses | 273,157 | 249,893 | 19,888,975 |
Other Income (Expense) | ' | ' | ' |
Interest expense | -25,155 | -9,166 | -2,552,285 |
Interest income | 10 | 19 | 131,948 |
Sublease rent income | ' | ' | 11,340 |
Debt forgiveness | ' | ' | 27,324 |
Other income | ' | ' | 218 |
Loss on sales of equipment | ' | ' | -810 |
Gain on stock debt exchange | ' | ' | 518,246 |
Net Other Income (Expense) | -25,145 | -9,147 | -1,864,019 |
Net Loss | ($244,951) | ($245,760) | ($20,653,229) |
Basic and Diluted Loss Per Common Share | $0 | ($0.01) | ' |
Basic and Diluted Weighted-Average Common Shares Outstanding | 53,377,114 | 45,732,214 | ' |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | 121 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
Cash Flows from Operating Activities: | ' | ' | ' |
Net loss | ($244,951) | ($245,760) | ($20,653,229) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' | ' |
Depreciation | 18,804 | 18,804 | 1,193,009 |
Amortization of patents and proprietary technology | 26,477 | 26,389 | 1,289,850 |
Impairment of long-lived assets | ' | ' | 1,006,059 |
Issuance of common stock and warrants for services | ' | ' | 4,230,685 |
Expenses paid by increase in convertible note payable | ' | ' | 82,200 |
Amortization of discount on notes payable | 9,966 | 241 | 2,310,253 |
Stock-based compensation expense for employees | ' | ' | 1,874,849 |
Loss on asset disposal | ' | ' | 2,437 |
Loss on extinguishment of debt | ' | ' | 22,966 |
(Gain)/loss on conversion of notes payable to common stock | ' | ' | -469,944 |
Gain on forgiveness of debt | ' | ' | -27,324 |
Bad debt expense | ' | ' | 13,638 |
Changes in operating assets and liabilities: | ' | ' | ' |
Accounts receivable | -23,787 | 318 | -45,848 |
Inventory | 843 | -1,252 | -5,741 |
Notes receivable | ' | -25,000 | -25,000 |
Deposits and prepaid expenses | -10 | 1,967 | -18,390 |
Accounts payable | 1,280 | -14,566 | 34,639 |
Accounts payable - related parties | 1,291 | -1,003 | 7,347 |
Accrued liabilities | 84,304 | 90,115 | 474,179 |
Deferred revenue | -10,000 | ' | -343,750 |
Net Cash Used in Operating Activities | -135,783 | -149,747 | -9,047,115 |
Cash Flows from Investing Activities: | ' | ' | ' |
Payments for the purchase of equipment | ' | ' | -200,119 |
Payments for patents | ' | ' | -45,868 |
Payment for acquisition of equipment and proprietary technology from Flexpoint Holdings, LLC | ' | ' | -265,000 |
Net Cash Used in Investing Activities | ' | ' | -510,987 |
Cash Flows from Financing Activities: | ' | ' | ' |
Net proceeds from issuance of common stock, warrants and options | ' | ' | 5,622,157 |
Proceeds from subscriptions receivable | ' | ' | 50,000 |
Principal payments on notes payable - related parties | ' | ' | -520,300 |
Proceeds from notes payable - related parties | ' | ' | -37,475 |
Payments on convertible notes payable | ' | ' | 495,300 |
Proceeds from borrowings under convertible note payable | 120,000 | 150,000 | 3,965,807 |
Net Cash Provided by Financing Activities | 120,000 | 150,000 | 9,575,489 |
Net Change in Cash and Cash Equivalents | -15,783 | 253 | 17,387 |
Cash and Cash Equivalents at Beginning of Period | 35,221 | 42,024 | 2,051 |
Cash and Cash Equivalents at End of Period | 19,438 | 42,277 | 19,438 |
Supplemental Cash Flow Information: | ' | ' | ' |
Cash paid for income taxes | ' | ' | ' |
Cash paid for interest | ' | ' | 16,955 |
Supplemental Disclosure on Noncash Investing and Financing Activities | ' | ' | ' |
Stock issued for debt | ' | ' | 795,025 |
Stock issued for accrued liabilities | ' | ' | 173,608 |
Outstanding notes payable converted to stock | ' | ' | 3,218,599 |
Expiration of warrants outstanding | ' | ' | 2,361,785 |
Subscription receivable | ' | ' | 50,000 |
Recognition of discounts on convertible notes payable | 10,000 | ' | 2,153,287 |
Extinguishment of unamortized discounts on modified convertible notes payable | ' | ' | ($17,477) |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2014 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ' |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Condensed Consolidated Interim Financial Statements - The accompanying unaudited condensed consolidated financial statements include the accounts of Flexpoint Sensor Systems, Inc. and its subsidiaries (the "Company"). These financial statements are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. Therefore, these statements should be read in conjunction with the most recent annual consolidated financial statements of Flexpoint Sensor Systems, Inc. and subsidiaries for the year ended December 31, 2013 included in the Company's Form 10-K filed with the Securities and Exchange Commission on April 1, 2014. In particular, the Company's significant accounting principles were presented as Note 1 to the Consolidated Financial Statements in that report. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the full year ending December 31, 2014. | |
Nature of Operations - The Company is located near Salt Lake City, in Draper, Utah and is a development stage company engaged principally in designing, engineering, and manufacturing sensor technology products and equipment using Bend Sensors® flexible potentiometer technology. The Company suffered losses of $244,951 and $245,760 and used cash in operating activities of $135,783 and $149,747 during the three months ended March 31, 2014 and 2013, respectively. Through March 31, 2014, the Company had an accumulated deficit of $20,653,229. The Company is in the development stage and has not earned any appreciable revenue during the period from February 24, 2004 (date of emergence from bankruptcy) through March 31, 2014. These matters raise 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. | |
From 2008 through 2013, the Company raised $3,451,391 in additional capital, including accrued interest, through the issuance of long and short-term notes to various entities, including related parties. All of the notes had an annual interest rate of 10% to 12% and were secured by the Company's business equipment. The notes also had a conversion feature for restricted common shares ranging from $.05 to $.25 per share with maturity dates from March 31, 2008 to December 31, 2013. However, prior to December 31, 2012, all but $327,525 of the convertible notes were converted to an aggregate of 13,210,663 shares of the Company's restricted common stock at an average share price of about $.17 per share. On December 31, 2013, the Company converted an additional 3,750,000 restricted common shares at $.08 per share and retired $287,525 in debt plus all accrued interest. | |
During the three months ending March 31, 2014, the Company has raised an additional $120,000 in operating capital through the issuance of short-term notes to Capital Communications LLC. The notes have an annual interest rate of 10% and a default rate of 15% annually. The notes are secured by the Company's business equipment and have a conversion feature for restricted common shares at $.04 per share with various maturity dates during the year. | |
Cash and Cash Equivalents - Cash and cash equivalents are considered to be cash and highly liquid securities with original maturities of three months or less. The cash and equivalents of $19,438 at March 31, 2014 and $35,221 at December 31, 2013 represent cash on deposit in various bank accounts with a financial institution. | |
Fair Value of Financial Instruments - The carrying amounts reported in the balance sheets for accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term nature of these financial instruments. The carrying amounts reported for notes payable approximate fair value because the underlying instruments are at interest rates that approximate current market rates. | |
Accounts Receivable - Trade accounts receivable are recorded at the time product is shipped or services are provided, including any shipping and handling fees. Due to the limited amount of transactions, collectability of the trade receivables is reasonably assured, therefore the Company has not created an allowance for doubtful accounts. Most contracts associated with design and development engineering require a deposit of up to 50% of the quoted price of the initial phase of such contracts prior to the commencement of work. As the Company completes each phase or milestone of such a contract additional funding is normally required from the customer. These deposits are considered deferred income until each phase or milestone is completed and accepted by the customer, at which time the agreed upon price for that particular phase of the contract is billed to the customer and the deposit applied. As the Company's revenues and customer base increase, an allowance policy will be established. | |
Inventories - Inventories are stated at the lower of cost or market. Cost is determined by using the first in, first out (FIFO) method. Inventories consist of raw materials. | |
Property and Equipment - Property and equipment are stated at cost. Additions and major improvements are capitalized while maintenance and repairs are charged to operations. Upon trade-in, sale, or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized. | |
Valuation of Long-lived Assets - The carrying values of the Company's long-lived assets are reviewed for impairment quarterly and whenever events or changes in circumstances indicate that they may not be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the carrying value over the projected discounted cash flows. The Company's analysis did not indicate any impairment of assets as of March 31, 2014. | |
Intangible Assets - Costs to obtain or develop patents are capitalized and amortized over the remaining life of the patents, and technology rights are amortized over their estimated useful lives. The Company currently has the rights to several patents and proprietary technology. Patents and technology are amortized from the date the Company acquires or is awarded the patent or technology rights, over their estimated useful lives, which range from 5 to 15 years. An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected undiscounted net future cash flows. The Company's analysis did not indicate any impairment of intangible assets as of March 31, 2014. | |
Research and Development - Research and development costs are recognized as an expense during the period incurred until the conceptual formulation, design, and testing of a process is completed and the process has been determined to be commercially viable. | |
Goodwill - Goodwill represents the excess of the 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. As described in Accounting Standards Codification ("ACS") 360, the Company has adopted the two step goodwill impairment analysis that includes quantitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. A fair-value-based test is applied at the overall Company level. The test compares the estimated fair value of the Company at the date of the analysis to the carrying value of its net assets. The analysis also requires various judgments and estimates, including general and macroeconomic conditions, industry and the Company's targeted market conditions, as well as relevant entity-specific events; such as a change in the market for the Company's products and services. After considering the qualitative factors that would indicate a need for interim impairment of goodwill and applying the two-step process described in ASC 360, management has determined that the value of Company's assets is not more likely than not less than the carrying value of the Company including goodwill, and that no impairment charge needs be recognized during the reporting periods. | |
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 collectability 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 - Under ASC Topic 718, Stock Compensation, the Company is required to recognize 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. Prior to 2006, no compensation was recorded in earnings for the Company's stock-based options granted under the 2005 Stock Incentive Plan (the "Plan"). Under ASC 718, 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 ASC 718, 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. | |
Basic and Diluted Earnings Per Share - Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. At March 31, 2014, there were outstanding options to purchase 2,024,000 shares of common stock. These options were not included in the computation of diluted earnings because the related exercise prices were greater than the average market price of the common shares. |
STOCK_OPTION_PLANS
STOCK OPTION PLANS | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
STOCK OPTION PLANS [Abstract] | ' | ||||
STOCK OPTION PLANS | ' | ||||
NOTE 2 - 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 continues to utilize the Black-Scholes option-pricing model for calculating the fair value as defined by ASC Topic 718, which is an acceptable valuation approach under ASC 718. 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. The Company uses the simplified method to calculate the expected term. 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. | |||||
During the three month period ended March 31, 2014 the Company recognized $0 of stock-based compensation expense, compared to $0 during the same period in 2013. There were 2,024,000 employee stock options outstanding at March 31, 2014. A summary of all employee options outstanding and exercisable under the plan as of March 31, 2014, and changes during the three months then ended is set forth below: | |||||
Options | Shares | Weighted | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | |
Average | |||||
Exercise | |||||
Price | |||||
Outstanding at the beginning of period | 2,024,000 | $ 1.10 | 1.4 | $ - | |
Granted | - | - | - | - | |
Expired | - | - | - | - | |
Forfeited | - | - | - | - | |
Outstanding at the end of Period | 2,024,000 | $ 1.10 | 1.4 | $ - | |
Exercisable at the end of Period | 2,024,000 | $ 1.10 | 1.4 | $ - | |
Based upon the current options issued as of March 31, 2014, there was no additional unrecognized compensation cost related to employee stock options that will be recognized. |
ISSUANCE_OF_STOCK
ISSUANCE OF STOCK | 3 Months Ended |
Mar. 31, 2014 | |
ISSUANCE OF STOCK [Abstract] | ' |
ISSUANCE OF STOCK | ' |
NOTE 3 - ISSUANCE OF STOCK | |
None during the period presented. |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2014 | |
RELATED PARTY TRANSACTIONS [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
NOTE 4 - RELATED PARTY TRANSACTIONS | |
The Company has a related party payable to its President, CEO and Director for reimbursement of travel and other related expenses incurred on behalf of the Company. The amount due to the President as of March 31, 2014 and December 31, 2013 is $3,347 and $2,055, respectively. | |
The Company has a related party payable to its Chief Financial Officer for services provided to the Company. The amount due to the Chief Financial Officer as of March 31, 2014 and December 31, 2013 is $4,000 and $4,000, respectively. | |
The amounts due to these related parties are on demand and bearing no interest. |
NOTES_PAYABLE
NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2014 | |
NOTES PAYABLE [Abstract] | ' |
NOTES PAYABLE | ' |
NOTE 5 - NOTES PAYABLE | |
During the three months ending March 31, 2014, the Company raised an additional $120,000 in capital through the issuance of long and short-term notes to Capital Communications, Inc. This is in addition to the $525,000 issued and outstanding as of December 31, 2013. All of the notes had an annual interest rate of 10%, had various maturity dates during the year, and were secured by the Company's business equipment. The notes also had a conversion feature for restricted common shares ranging from $.04 to $.07 per share. In addition to two notes for $25,000 each in 2013 with discounts, one of the notes issued on February 25, 2014 for $40,000 has an exercise price which was less than the trading price of the stock on the date of issuance, resulting in a beneficial conversion feature valued at $10,000 resulting in a discount on the value of the note. The unamortized discount of this note as of March 31, 2014 was $4,687, resulting in $5,313 amortized discount recorded as part of the $9,966 in amortization of discount on notes payable during the three month period. The notes had various maturity dates but prior to December 31, 2013 all of the outstanding and future convertible notes issued to Capital Communications were extended to June 30, 2014. On August 8, 2011, the Company issued a promissory note for $40,000 to an existing shareholder. The note has an annual interest rate of 10% and is secured by the Company's equipment. The principle amount of the note, and all | |
accrued interest is due and payable on or before July 31, 2012 and has a conversion feature for restricted common shares at $0.20 per share. Management is negotiating to extend this note to December 31, 2013 under similar terms. |
LITIGATION
LITIGATION | 3 Months Ended |
Mar. 31, 2014 | |
LITIGATION [Abstract] | ' |
LITIGATION | ' |
NOTE 6 - LITIGATION | |
R&D Products, LLC - On June 23, 2010, the Company, along with David B. Beck, the Company's Director of Engineering, filed a complaint against R&D Products, LLC, Persimmon Investments, Inc. and Jules A. deGreef, the managing member of R&D Products, LLC. The complaint alleged that all of the intellectual properties owned by R&D Products and Mr. deGreef, specifically patented applications using Bend Sensor® technology that were filed jointly by Mr. Beck and Mr. deGreef, and later assigned solely to Mr. deGreef and R&D Products, are the property of the Company. The assignment by Mr. Beck of his rights in the patents and intellectual properties were improperly given and are the property of the Company. The Company believed that since Mr. Beck was an employee of the | |
Company during the time that he became the primary creative force and inventor of the Bend Sensor® applications for R&D Products and Mr. deGreef, and the inventions and applications were created using Flexpoint resources, the Company claimed that such intellectual properties, patents, etc. filed by deGreef, Persimmon and R&D belong to Flexpoint and therefore is sought financial damages and ownership of all intellectual rights, patents and inventions created by Mr. Beck for deGreef, Persimmon and R&D Products. | |
On April 9, 2013, the parties of the above referenced litigation reached a favorable universal settlement agreement that reinforces the Company's rights to the intellectual properties and their related products, including the medical bed. In order to secure the Company had exclusive rights to all patents and intellectual properties associated with this litigation the Company advanced to Mr. deGreef $25,000 to bring current all of the filing and maintenance fees for the patents detailed in the law suit. The advance is secured by a promissory note with an annual interest rate of 10% to be paid no later than April 8, 2015. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2014 | |
COMMITMENTS AND CONTINGENCIES [Abstract] | ' |
COMMITMENTS AND CONTINGENCIES | ' |
NOTE 7 - COMMITMENTS AND CONTINGENCIES | |
On the same date as part of the settlement agreement (see Note 6- Litigation), the Company entered into an exclusive licensing agreement that granted the Company the sole and exclusive rights to all products, devices, and commercial applications of any type or nature that relate to or are derived from the patents and application for patents controlled by Mr. deGreef and his companies. As additional compensation for the settlement the Company also received a note in the amount of $360,000 from the deGreef companies to be paid with accrued interest no later than April 8, 2015 through future royalties generated from the exclusive rights to technology specifically identified in the settlement and licensing agreements. The note has an annual interest rate of 5% and is secured by the intellectual properties of Mr. deGreef and his companies, including patents issued and those currently under application and any and all devices derived from such. | |
At the time of this filing the Company does not have orders for products or devices; contracts for, or contracts that are currently being negotiated; or any type of existing or negotiated royalty agreement that uses the patents or technology identified in the settlement and licensing agreement. And because the source of repayment of the $360,000 note receivable is from future royalty income from the sales of product, devices or uses of the technology, as stipulated in Accounting Standards Codification ("ACS") 450 the Company is not permitted at this time to | |
recognize a contingent asset. At such time as royalty income can be reasonably estimated and is "virtually certain", the Company will recognize the note receivable. |
NEW_ACCOUNTING_PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Mar. 31, 2014 | |
NEW ACCOUNTING PRONOUNCEMENTS [Abstract] | ' |
NEW ACCOUNTING PRONOUNCEMENTS | ' |
NOTE 8 - NEW ACCOUNTING PRONOUNCEMENTS | |
After evaluating the recent accounting pronouncements through the date of this filing, the Company has concluded that application of these pronouncements will have no material impact on the Company's financial results. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2014 | |
SUBSEQUENT EVENTS [Abstract] | ' |
SUBSEQUENT EVENTS | ' |
NOTE 9 - SUBSEQUENT EVENTS | |
On April 15, 2014 the Company issued a promissory note for $20,000. The note has an annual interest rate of 10% and is secured by the Company's equipment. The note has a conversion feature for restricted common shares at $.04 per share and a maturity date of June 30, 2014. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ' |
Condensed Consolidated Interim Financial Statements | ' |
Condensed Consolidated Interim Financial Statements - The accompanying unaudited condensed consolidated financial statements include the accounts of Flexpoint Sensor Systems, Inc. and its subsidiaries (the "Company"). These financial statements are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. Therefore, these statements should be read in conjunction with the most recent annual consolidated financial statements of Flexpoint Sensor Systems, Inc. and subsidiaries for the year ended December 31, 2013 included in the Company's Form 10-K filed with the Securities and Exchange Commission on April 1, 2014. In particular, the Company's significant accounting principles were presented as Note 1 to the Consolidated Financial Statements in that report. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the full year ending December 31, 2014. | |
Nature of Operations | ' |
Nature of Operations - The Company is located near Salt Lake City, in Draper, Utah and is a development stage company engaged principally in designing, engineering, and manufacturing sensor technology products and equipment using Bend Sensors® flexible potentiometer technology. The Company suffered losses of $244,951 and $245,760 and used cash in operating activities of $135,783 and $149,747 during the three months ended March 31, 2014 and 2013, respectively. Through March 31, 2014, the Company had an accumulated deficit of $20,653,229. The Company is in the development stage and has not earned any appreciable revenue during the period from February 24, 2004 (date of emergence from bankruptcy) through March 31, 2014. These matters raise 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. | |
From 2008 through 2013, the Company raised $3,451,391 in additional capital, including accrued interest, through the issuance of long and short-term notes to various entities, including related parties. All of the notes had an annual interest rate of 10% to 12% and were secured by the Company's business equipment. The notes also had a conversion feature for restricted common shares ranging from $.05 to $.25 per share with maturity dates from March 31, 2008 to December 31, 2013. However, prior to December 31, 2012, all but $327,525 of the convertible notes were converted to an aggregate of 13,210,663 shares of the Company's restricted common stock at an average share price of about $.17 per share. On December 31, 2013, the Company converted an additional 3,750,000 restricted common shares at $.08 per share and retired $287,525 in debt plus all accrued interest. | |
During the three months ending March 31, 2014, the Company has raised an additional $120,000 in operating capital through the issuance of short-term notes to Capital Communications LLC. The notes have an annual interest rate of 10% and a default rate of 15% annually. The notes are secured by the Company's business equipment and have a conversion feature for restricted common shares at $.04 per share with various maturity dates during the year. | |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents - Cash and cash equivalents are considered to be cash and highly liquid securities with original maturities of three months or less. The cash and equivalents of $19,438 at March 31, 2014 and $35,221 at December 31, 2013 represent cash on deposit in various bank accounts with a financial institution. | |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments - The carrying amounts reported in the balance sheets for accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term nature of these financial instruments. The carrying amounts reported for notes payable approximate fair value because the underlying instruments are at interest rates that approximate current market rates. | |
Accounts Receivable | ' |
Accounts Receivable - Trade accounts receivable are recorded at the time product is shipped or services are provided, including any shipping and handling fees. Due to the limited amount of transactions, collectability of the trade receivables is reasonably assured, therefore the Company has not created an allowance for doubtful accounts. Most contracts associated with design and development engineering require a deposit of up to 50% of the quoted price of the initial phase of such contracts prior to the commencement of work. As the Company completes each phase or milestone of such a contract additional funding is normally required from the customer. These deposits are considered deferred income until each phase or milestone is completed and accepted by the customer, at which time the agreed upon price for that particular phase of the contract is billed to the customer and the deposit applied. As the Company's revenues and customer base increase, an allowance policy will be established. | |
Inventories | ' |
Inventories - Inventories are stated at the lower of cost or market. Cost is determined by using the first in, first out (FIFO) method. Inventories consist of raw materials. | |
Property and Equipment | ' |
Property and Equipment - Property and equipment are stated at cost. Additions and major improvements are capitalized while maintenance and repairs are charged to operations. Upon trade-in, sale, or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized. | |
Valuation of Long-lived Assets | ' |
Valuation of Long-lived Assets - The carrying values of the Company's long-lived assets are reviewed for impairment quarterly and whenever events or changes in circumstances indicate that they may not be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the carrying value over the projected discounted cash flows. The Company's analysis did not indicate any impairment of assets as of March 31, 2014. | |
Intangible Assets | ' |
Intangible Assets - Costs to obtain or develop patents are capitalized and amortized over the remaining life of the patents, and technology rights are amortized over their estimated useful lives. The Company currently has the rights to several patents and proprietary technology. Patents and technology are amortized from the date the Company acquires or is awarded the patent or technology rights, over their estimated useful lives, which range from 5 to 15 years. An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected undiscounted net future cash flows. The Company's analysis did not indicate any impairment of intangible assets as of March 31, 2014. | |
Research and Development | ' |
Research and Development - Research and development costs are recognized as an expense during the period incurred until the conceptual formulation, design, and testing of a process is completed and the process has been determined to be commercially viable. | |
Goodwill | ' |
Goodwill - 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. As described in Accounting Standards Codification ("ACS") 360, the Company has adopted the two step goodwill impairment analysis that includes quantitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. A fair-value-based test is applied at the overall Company level. The test compares the estimated fair value of the Company at the date of the analysis to the carrying value of its net assets. The analysis also requires various judgments and estimates, including general and macroeconomic conditions, industry and the Company's targeted market conditions, as well as relevant entity-specific events; such as a change in the market for the Company's products and services. After considering the qualitative factors that would indicate a need for interim impairment of goodwill and applying the two-step process described in ASC 360, management has determined that the value of Company's assets is not more likely than not less than the carrying value of the Company including goodwill, and that no impairment charge needs be recognized during the reporting periods. | |
Revenue Recognition | ' |
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 collectability 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 | ' |
Stock-Based Compensation - Under ASC Topic 718, Stock Compensation, the Company is required to recognize 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. Prior to 2006, no compensation was recorded in earnings for the Company's stock-based options granted under the 2005 Stock Incentive Plan (the "Plan"). Under ASC 718, 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 ASC 718, 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. | |
Basic and Diluted Earnings Per Share | ' |
Basic and Diluted Earnings Per Share - Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. At March 31, 2014, there were outstanding options to purchase 2,024,000 shares of common stock. These options were not included in the computation of diluted earnings because the related exercise prices were greater than the average market price of the common shares. | |
STOCK_OPTION_PLANS_Tables
STOCK OPTION PLANS (Tables) | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
STOCK OPTION PLANS [Abstract] | ' | ||||
Schedule of Stock Option Activity | ' | ||||
A summary of all employee options outstanding and exercisable under the plan as of March 31, 2014, and changes during the three months then ended is set forth below: | |||||
Options | Shares | Weighted | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | |
Average | |||||
Exercise | |||||
Price | |||||
Outstanding at the beginning of period | 2,024,000 | $ 1.10 | 1.4 | $ - | |
Granted | - | - | - | - | |
Expired | - | - | - | - | |
Forfeited | - | - | - | - | |
Outstanding at the end of Period | 2,024,000 | $ 1.10 | 1.4 | $ - | |
Exercisable at the end of Period | 2,024,000 | $ 1.10 | 1.4 | $ - |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 3 Months Ended | 121 Months Ended | ||||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Feb. 23, 2004 | |
Finite-Lived Intangible Assets [Line Items] | ' | ' | ' | ' | ' | ' |
Cash and cash equivalents | $19,438 | $42,277 | $19,438 | $35,221 | $42,024 | $2,051 |
Net loss | -244,951 | -245,760 | -20,653,229 | ' | ' | ' |
Net cash used in operating activities | -135,783 | -149,747 | -9,047,115 | ' | ' | ' |
Deficit accumulated during the development stage | ($20,653,229) | ' | ($20,653,229) | ($20,408,279) | ' | ' |
Shares not included in computation of diluted loss per share as their effect would have been anti-dilutive | 2,024,000 | ' | ' | ' | ' | ' |
Minimum [Member] | ' | ' | ' | ' | ' | ' |
Finite-Lived Intangible Assets [Line Items] | ' | ' | ' | ' | ' | ' |
Intangible assets, useful lives | '5 years | ' | ' | ' | ' | ' |
Maximum [Member] | ' | ' | ' | ' | ' | ' |
Finite-Lived Intangible Assets [Line Items] | ' | ' | ' | ' | ' | ' |
Intangible assets, useful lives | '15 years | ' | ' | ' | ' | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Debt Instruments) (Details) (USD $) | Aug. 08, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 |
Notes Payable to Related Parties [Member] | Notes Payable to Related Parties [Member] | Notes Payable to Related Parties [Member] | Notes Payable to Related Parties [Member] | Notes Payable to Related Parties [Member] | Notes Payable to Related Parties [Member] | ||
Minimum [Member] | Maximum [Member] | ||||||
Debt Instrument [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Additional capital raised through issuance of long and short-term notes to related parties | ' | ' | ' | $120,000 | $3,451,391 | ' | ' |
Debt instrument, minimum interest rate | ' | ' | ' | 10.00% | 10.00% | ' | ' |
Debt instrument, maximum interest rate | ' | ' | ' | 15.00% | 12.00% | ' | ' |
Debt instrument, conversion price | $0.20 | ' | ' | $0.04 | ' | $0.05 | $0.25 |
Debt instrument, maturity date range start | ' | ' | ' | ' | 31-Mar-08 | ' | ' |
Debt instrument, maturity date range end | ' | ' | ' | ' | 31-Dec-13 | ' | ' |
Total current notes payable outstanding | ' | ' | 327,525 | ' | ' | ' | ' |
Shares issued from conversion of convertible debt | ' | 3,750,000 | 13,210,663 | ' | ' | ' | ' |
Conversion of convertible notes, amount | ' | $287,525 | ' | ' | ' | ' | ' |
Price per share | ' | $0.08 | ' | ' | ' | ' | ' |
Average conversion price for converted debt instruments | ' | ' | $0.17 | ' | ' | ' | ' |
STOCK_OPTION_PLANS_Narrative_D
STOCK OPTION PLANS (Narrative) (Details) (USD $) | 3 Months Ended | 121 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Aug. 25, 2005 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' |
Effective term | ' | ' | ' | '10 years |
Purchase premium, period preceeding grant date | ' | ' | ' | '30 days |
Purchase premium, percentage | ' | ' | ' | 10.00% |
Shares authorized | ' | ' | ' | 2,500,000 |
Stock based compensation expense | ' | ' | $1,874,849 | ' |
Stock-based compensation - stock options granted, shares | 2,024,000 | ' | ' | ' |
STOCK_OPTION_PLANS_Schedule_of
STOCK OPTION PLANS (Schedule of Stock Option Activity) (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
STOCK OPTION PLANS [Abstract] | ' |
Outstanding at the beginning of period, shares | 2,024,000 |
Granted, shares | ' |
Expired, shares | ' |
Forfeited, shares | ' |
Outstanding at the end of Period, shares | 2,024,000 |
Exercisable at the end of the Period, shares | 2,024,000 |
Outstanding at the beginning of period, weighted average exercise price | $1.10 |
Granted, weighted average exercise price | ' |
Expired, weighted average exercise price | ' |
Forfeited, weighted average exercise price | ' |
Outstanding at the end of Period, weighted average exercise price | $1.10 |
Exercisable at the end of Period, weighted average exercise price | $1.10 |
Granted, weighted average remaining contractual life | ' |
Expired, weighted average remaining contractual life | ' |
Forfeited, weighted average remaining contractual life | ' |
Outstanding, weighted average remaining contractual life | '1 year 4 months 24 days |
Exercisable at the end of Period, weighted average remaining contractual life | '1 year 4 months 24 days |
Outstanding at the beginning of period, aggregate intrinsic value | ' |
Granted, aggregate intrinsic value | ' |
Expired, aggregate intrinsic value | ' |
Forfeited, aggregate intrinsic value | ' |
Outstanding at the end of Period, aggregate intrinsic value | ' |
Exercisable at the end of the Period, aggregate intrinsic value | ' |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Related Party Transaction [Line Items] | ' | ' |
Related party payable | $7,347 | $6,056 |
President [Member] | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Related party payable | 3,347 | 2,055 |
Chief Financial Officer [Member] | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Related party payable | $4,000 | $4,000 |
NOTES_PAYABLE_Details
NOTES PAYABLE (Details) (USD $) | 3 Months Ended | 121 Months Ended | 1 Months Ended | 3 Months Ended | ||||||||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Aug. 08, 2011 | Feb. 28, 2014 | Mar. 31, 2014 | Feb. 25, 2014 | Dec. 31, 2013 | Dec. 30, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | |
Capital Communications, Inc. [Member] | Capital Communications, Inc. [Member] | Capital Communications, Inc. [Member] | Capital Communications, Inc. [Member] | Capital Communications, Inc. [Member] | Capital Communications, Inc. [Member] | Capital Communications, Inc. [Member] | ||||||
Minimum [Member] | Maximum [Member] | |||||||||||
Short-term Debt [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Short-term debt | ' | ' | ' | ' | ' | ' | $120,000 | ' | $525,000 | ' | ' | ' |
Debt instrument, face amount | ' | ' | ' | ' | 40,000 | ' | ' | 40,000 | 25,000 | 25,000 | ' | ' |
Debt instrument, interest rate | ' | ' | ' | ' | 10.00% | ' | 10.00% | ' | 10.00% | ' | ' | ' |
Debt instrument, conversion price | ' | ' | ' | ' | $0.20 | ' | ' | ' | ' | ' | $0.04 | $0.07 |
Discount for beneficial conversion | ' | ' | ' | ' | ' | 10,000 | ' | ' | ' | ' | ' | ' |
Convertible notes payable, discount | 4,687 | ' | 4,687 | 4,653 | ' | ' | ' | ' | ' | ' | ' | ' |
Amortization of discount on notes payable | $9,966 | $241 | $2,310,253 | ' | ' | ' | $5,313 | ' | ' | ' | ' | ' |
LITIGATION_Details
LITIGATION (Details) (Legal Settlement [Member], Note Receivable One [Member], USD $) | 0 Months Ended |
Apr. 09, 2013 | |
Legal Settlement [Member] | Note Receivable One [Member] | ' |
Legal Settlement [Line Items] | ' |
Notes receivable | $25,000 |
Interest rate | 10.00% |
Maturity date | 8-Apr-15 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (Legal Settlement [Member], Note Receivable Two [Member], USD $) | 0 Months Ended |
Apr. 09, 2013 | |
Legal Settlement [Member] | Note Receivable Two [Member] | ' |
Legal Settlement [Line Items] | ' |
Notes receivable | $360,000 |
Interest rate | 5.00% |
Maturity date | 8-Apr-15 |
SUBSEQUENT_EVENTS_Details
SUBSEQUENT EVENTS (Details) (USD $) | Aug. 08, 2011 | Apr. 15, 2014 |
Subsequent Event [Member] | ||
Promissory Note One [Member] | ||
Subsequent Event [Line Items] | ' | ' |
Debt instrument, face amount | $40,000 | $20,000 |
Debt instrument, interest rate | 10.00% | 10.00% |
Debt instrument, conversion price | $0.20 | $0.04 |