UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For quarterly period ended March 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: No. 0-24368
FLEXPOINT SENSOR SYSTEMS, INC.
(Name of small business issuer in its charter)
Delaware 87-0620425
(State of incorporation) (I.R.S. Employer Identification No.)
106 West Business Park Drive, Draper, Utah 84020
(Address of principal executive offices) (Zip code)
Issuer's telephone number: 801-568-5111
47 East 7200 South, Suite 204, Midvale, Utah 84047
(Former address of principal executive offices)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]
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 [ ]
As of April 23, 2004 the Registrant had a total of 18,698,202 shares of common stock issued and outstanding.
Transitional small business disclosure format: Yes [ ] No [X]
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements..............................................3
Item 2. Management's Discussion and Analysis..............................13
Item 3. Controls and Procedures...........................................16
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.................................................16
Item 2. Changes in Securities and Issuer's Purchases of Equities.........17
Item 4. Submission of Matters to a Vote of Security Holders..............18
Item 5. Other Information................................................18
Item 6. Exhibits and Reports on Form 8-K ................................19
Signatures................................................................20
In this report references to "Flexpoint Sensor," "we," "us," and "our" refer
to Flexpoint Sensor Systems, Inc. and its subsidiaries.
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FORWARD LOOKING STATEMENTS
This report contains certain forward-looking statements and for this purpose any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "expect," "believe," "anticipate," "estimate" or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within Flexpoint Sensor's control. These factors include, but are not limited to, economic conditions generally and in the industries which we may participate; competition in the sensor technology market, technological innovations by our competitors within our market and failure by Flexpoint Sensor to successfully develop business relationships.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
As a result of our reorganization under a court approved Chapter 11 bankruptcy plan, we are now a development stage company with a date of inception of February 24, 2004. We used fresh-start reporting (See Note 3 of the Notes to Unaudited Consolidated Financial Statements, below) and all assets of Flexpoint Sensor Systems, Inc. have been restated to reflect their reorganization value, which approximates the fair value at the date of reorganization. Management estimated the reorganization value to be $5,634,000 based upon the negotiated price at which certain creditors were willing to convert their claims into common shares.
The financial information set forth below with respect to our consolidated financial position as of March 31, 2004 and the consolidated statements of operations and cash flows for the interim period from February 24, 2004 through March 31, 2004 is unaudited. This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the interim period from February 24, 2004 through March 31, 2004 are not necessarily indicative of results to be expected for any subsequent period.
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
UNAUDITED CONSOLIDATED BALANCE SHEET
MARCH 31, 2004
Current Assets Cash $ 74,138 ------------------------------------------------------------------------------ Total Current Assets 74,138 ------------------------------------------------------------------------------ Property and equipment, net of accumulated depreciation of $0 1,698,000 Patents and proprietary technology, net of accumulated amortization of $16,996 6,736,437 ------------------------------------------------------------------------------ Total Assets $ 8,508,575 ============================================================================== |
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities Accounts payable $ 81,199 Accrued liabilities 3,678 Deferred revenue 337,500 Notes payable - related party 16,000 ------------------------------------------------------------------------------ Total Current Liabilities 438,377 ------------------------------------------------------------------------------ Stockholders' Equity Common stock - $0.001 par value; 100,000,000 shares authorized; 18,598,718 shares issued and outstanding 18,598 Additional paid-in capital 8,340,186 Warrants outstanding 309,587 Deficit accumulated during the development stage (598,173) ------------------------------------------------------------------------------ Total Stockholders' Equity 8,070,198 ------------------------------------------------------------------------------ Total Liabilities and Stockholders' Equity $ 8,508,575 ============================================================================== |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 24, 2004 (DATE OF INCEPTION OF THE DEVELOPMENT
STAGE) THROUGH MARCH 31, 2004 ------------------------------------------------------------------------------ Sales $ 15,750 General and administrative expense (514,042) Interest expense (99,881) ------------------------------------------------------------------------------ Net loss $ (598,173) ============================================================================== Basic and Diluted Loss Per Share $ (0.04) ============================================================================== Basic and Diluted Weighted-Average Shares Outstanding 16,254,274 ============================================================================== |
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FEBRUARY 24, 2004 (DATE OF INCEPTION OF THE DEVELOPMENT
STAGE) THROUGH MARCH 31, 2004
Deficit
Accumulated
Common Stock Additional During the Total
-------------------------- Paid-in Warrants Development Stockholders'
Shares Amount Capital Outstanding Stage Equity
-------------------------- ------------- ------------ ------------- ----------- ------------ -------------
Balance - February 24,
2004 (Date of Inception
of the Development Stage) - $ - $ - $ - $ - $ -
Issuance for patents,
cash, net of assumption of
liabilities, February 24,
2004, $0.52 per share 14,098,718 14,098 4,952,166 - - 4,966,264
Issuance for consulting
services, March 3, 2004,
$1.15 per share 100,000 100 114,580 - - 114,680
Issuance of warrants for
consulting services,
March 3, 2004, $1.15
per share - - - 309,587 - 309,587
Issuance for acquisition of
equipment and proprietary
technology from Flexpoint
Holdings, LLC, a company
controlled by a shareholder,
March 31, 2004, $1.15
per share 1,600,000 1,600 1,833,400 - - 1,835,000
Conversion of note payable,
March 31, 2004, $0.50 per
share 2,800,000 2,800 1,397,200 - - 1,400,000
Beneficial conversion
option on note payable - - 42,840 - - 42,840
Net loss - - - - (598,173) (598,173)
--------------------------- ------------- ------------ ------------- ----------- ------------- ------------
Balance - March 31, 2004 18,598,718 $ 18,598 $ 8,340,186 $ 309,587 $ (598,173) $ 8,070,198
=========================== ============= ============ ============= =========== ============= =============
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
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FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FEBRUARY 24, 2004 (DATE OF INCEPTION OF THE DEVELOPMENT
STAGE) THROUGH MARCH 31, 2004
------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net loss $ (598,173)
Adjustments to reconcile net loss to net cash used
in operating activities:
Issuance of stock and vesting of warrants granted for services 424,267
Expenses paid by increase in convertible note payable 60,000
Interest expense from beneficial conversion option of
convertible note payable 42,840
Interest expense from origination fees on convertible notes payable 56,666
Changes in operating assets and liabilities:
Accounts payable (126,907)
Accrued liabilities 2,186
Deferred revenue (6,250)
------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (145,371)
------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Payments for patents (876)
Payment for acquisition of equipment and proprietary
technology from Flexpoint Holdings, LLC (265,000)
------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (265,876)
------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Cash received in fresh start accounting 2,051
Proceeds from borrowings under convertible note payable 483,334
------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities 485,385
------------------------------------------------------------------------------------
Net Change in Cash 74,138
Cash at Beginning of Period -
------------------------------------------------------------------------------------
Cash at End of Period $ 74,138
====================================================================================
Supplemental Cash Flow Information
Cash paid for interest $ -
====================================================================================
Supplemental Schedule of Noncash Investing and Financing Activities:
------------------------------------------------------------------------------------
Issuance of 14,813,004 shares of common stock valued at $4,966,264 and the
assumption of $671,348 of liabilities in exchange for patents of $5,635,561 and
$2,051 cash in fresh start.
Short-term advances of $102,000 were repaid from an increase in a convertible note
payable.
Equipment and proprietary technology with a fair value of $2,798,000 purchased from
Flexpoint Holdings, LLC, a company controlled by a shareholder, in exchange for
the issuance of 1,600,000 shares of common stock valued at $1,835,000, a cash
payment of $265,000 and the payment of $698,000 from an increase in a convertible
note payable.
The principal balance of a $1,400,000 convertible note payable was converted into
2,800,000 shares of common stock.
------------------------------------------------------------------------------------
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
5
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FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS
Nature of Operations - Flexpoint Sensor Systems, Inc. (the Company) is a development stage enterprise engaged principally in designing, engineering, and manufacturing sensor technology and equipment using flexible potentiometer technology. On February 24, 2004, the Company's plan of reorganization was confirmed by the U.S. Bankruptcy Court and the Company emerged from bankruptcy. As discussed further in Note 3, the emergence from bankruptcy was accounted for using fresh start accounting and the Company is considered a new entity for financial reporting purposes. The new entity is in the development stage as planned operations have not commenced. Development stage activities include acquiring equipment and technology, organization operations, obtaining financing and seeking manufacturing contracts.
Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Flexpoint Sensor Systems, Inc. and its 90%-owned subsidiary, Sensitron, Inc., and Sensitron Inc.'s 90%-owned subsidiary, Flexpoint, Inc. Minority interests in subsidiaries are carried at no value based on their historical cost. Intercompany transactions and accounts have been eliminated in consolidation.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from these estimates.
Interim Financial Statements - The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of the Company's management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to fairly present the Company's consolidated financial position as of March 31, 2004, its consolidated results of operations and cash flows for the period from February 24, 2004 (date of inception of the development stage) through March 31, 2004. The results of operations for the period from February 24, through March 31, 2004, may not be indicative of the results that may be expected for the period ending December 31, 2004.
Business Condition - The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company is in the development stage and its efforts are primarily obtaining necessary capital to complete its production facility and re-start operations following its emergence from Chapter 11 bankruptcy proceedings. The Company incurred a loss of $598,173 and used cash from operations of $145,371 for the period from February 24, 2004 (date of inception of development stage) through March 31, 2004. Through March 31, 2004, the Company has accumulated a deficit during the development stage of $598,173. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, which may include the need to obtain additional financing, and ultimately to attain profitable operations. While the Company has received some customer deposits against future deliveries, the Company does not have sufficient cash flow to finance its operations on an on-going basis. To date, the Company has met its short-term cash needs through confirmation of its plan of reorganization and through proceeds from a convertible note payable as described in Note 2. Management plans to issue equity securities through a private placement offering. However, there can be no assurance that such sources of financing, if any, will be completed as planned or continue to be available, and if available, that they will be on terms favorable to the Company or in amounts sufficient to meet the Company's cash flow requirements.
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Fair Values of Financial Instruments - The amounts reported as accounts payable, accrued liabilities and notes payable are considered to be reasonable approximations of their fair values. The fair value estimates were based on information available to management at the time of the preparation of the financial statements.
Property and Equipment - Property and equipment are stated at cost. Additions and major improvements are capitalized while maintenance and repairs are charged to operations. Upon retirement, sale or disposition, the cost and accumulated depreciation of the items sold are eliminated from the accounts, and any resulting gain or loss is recognized in operations. Depreciation is computed using the straight-line method and is recognized over the estimated useful lives of the property and equipment, which are three to seven years. No depreciation expense was recognized during the period ended March 31, 2004 because the property was acquired on March 31, 2004.
Valuation of Long-lived Assets - The carrying values of the Company's long-lived assets will be reviewed for impairment 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 of the long-lived asset is reduced by the estimated excess of the carrying value over the projected discounted cash flows.
Intangible Assets - The Company currently has the rights to several patents. Patents are amortized from the date the Company is awarded the patent, over their estimated useful lives. Impairment is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible asset. Costs to obtain or develop patents are capitalized and amortized over a five-year period.
Revenue Recognition - Revenue from the sale of products is recorded at the time of shipment to the customers. Revenue from research and development engineering contracts is recognized as the services are provided and accepted by the customer. Revenue from contracts to license technology to others, including sales of software licenses, is deferred until all conditions under the contracts are met and then recognized as licensing royalty revenue over the remaining term of the contracts.
As of March 31, 2004, Sensitron, the Company's subsidiary, had deferred revenue of $337,500, consisting of $250,000 of prepaid licensing royalties to be deferred and recognized as the related licensing royalty sales are reported to the Company by the customer over the remaining term of the agreement, and $87,500 of deferred sales related to software license rights sold to the customer that is being amortized over the six-year term of the contract.
Stock Based Compensation - The Company accounts for its stock-based compensation issued to employees and directors under Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Under APB Opinion No. 25, compensation related to stock options, if any, is recorded if an option's exercise price on the grant date is less than the fair value of the Company's common stock on the grant date, and amortized over the vesting period. Compensation expense for stock awards or purchases, if any, is recognized if the award or purchase price on the measurement date is below the fair value of the Company's common stock, and is recognized on the date of award or purchase. Employee stock options have not been granted nor have any employee stock awards occurred; therefore, no employee stock-based compensation has been recognized in the accompanying financial statements nor would there have been any employee stock-based compensation using the fair value method to value grants or awards.
The Company accounts for its stock-based compensation issued to non-employees using the fair value method in accordance with SFAS No. 123, Accounting for Stock Based Compensation. Under SFAS No. 123, stock-based compensation is determined as the fair value of the equity instruments issued. The measurement date for these issuances is the earlier of the date at which a commitment for performance by the recipient to earn the equity
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
instruments is reached or the date at which the recipient's performance is complete. Stock based compensation to non-employees totaled $424,267.
At March 31, 2004, the Company has a stock-based employee compensation plan, which is described more fully in Note 7. As of March 31, 2004 no stock options had been granted or were outstanding.
Basic and Diluted Loss Per Share - Basic and diluted loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. At March 31, 2004, there were outstanding stock equivalents to purchase 650,000 shares of common stock that were not included in the computation of basic and diluted net loss per share as their effect would have been anti-dilutive, thereby decreasing the net loss per common share.
NOTE 2 - CONFIRMATION OF PLAN OF REORGANIZATION
On February 24, 2004, the Bankruptcy Court confirmed the Company's plan of reorganization. The confirmed plan provided for the following:
Reverse Stock Split - The shares of common stock outstanding prior to the confirmation were reverse split on a 1-for-7 basis. All shares amounts are presented in the accompanying financial statements on a post-split basis.
Cancellation of Common Stock - The Company cancelled 714,286 shares of common stock issued to an officer during 2001, as provided for by the confirmed plan of reorganization.
Convertible Debentures Payable - Convertible debentures of $3,681,280 were forgiven in exchange for the Company agreement not to contest the issuance of 7,142,087 shares of common stock that were issued to Aspen Capital based upon the exercise of warrants prior to the bankruptcy petition.
Convertible Promissory Note to Former Employee - The Company converted $194,620 of claims that included accounts payable, accrued wages and a convertible promissory note to a former employee of $20,000, into 377,682 shares of common stock at a conversion price of $0.5153 per share.
Note Payable to Stockholder - The Company exchanged $1,230,218 of notes payable to a stockholder for 2,387,382 shares of common stock at a conversion price of $0.5153 per share.
Lease Obligation - A lease obligation of $574,255 was exchanged for 1,114,410 shares of common stock at a conversion price of $0.5153 per share.
Delphi Automotive Systems Supply Agreement - Flexpoint entered into a Purchase and Supply Agreement (the "Supply Agreement") with Delphi Automotive Systems ("Delphi") in June 1998. Under the terms of the Supply Agreement, the Company was to supply its proprietary sensor mats to Delphi for integration into a weight-based suppression system as a critical part of a smart air bag system. The Supply Agreement provided that such sensor mats were to be exclusively supplied to General Motors, through Delphi, by the Company through 2002. In May 2000, the Supply Agreement was amended, primarily providing for Delphi to make loan payments to the Company to be used directly for Delphi programs. As of December 31, 2000, the Company had received loan payments of $1,700,000 from Delphi.
In August 2000, Delphi notified the Company of its intent to terminate the Supply Agreement. The Company believes that Delphi was not entitled to terminate the agreement or had not followed the appropriate contractual provisions for termination of the Supply Agreement. As a result of the termination, the Company was required to significantly reduce its workforce and its operating costs. In addition, the Company sought protection under the United States federal bankruptcy laws.
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company believes it was damaged and has offsets to the loan from Delphi. Accordingly, the note payable was reduced to zero.
Litigation under the Delphi Supply Agreement remains under the jurisdiction of the bankruptcy court and the outcome of the future legal proceedings between the Company and Delphi is uncertain. However, on February 24, 2004, the Company concluded that the likelihood that this contingency will require that the Company transfer assets to Delphi is remote, and therefore, the liability was accounted for as extinguished with the resulting gain included in gain on forgiveness of debt in the pre-confirmation consolidated statements of operations.
Convertible Note Payable - The plan of reorganization provided for the Company to draw upon a convertible note payable. During March 2004, the Company borrowed $1,343,334, net of origination fees of $56,666, from the note. The terms of the convertible note payable provide that interest accrues on outstanding balance at 10% per annum, and that all amounts become due within three years of the date of the agreement. Proceeds of $698,000 were used for the acquisition of assets from Flexpoint Holdings, LLC, as described in Note 3, and proceeds of $102,000 were used to repay a short-term advance from Flexpoint Holdings, LLC. The Company borrowed $483,334 under the note and $60,000 was borrowed from the direct payment to settle certain secured and priority claims determined in the reorganization plan and to pay operating expenses. The $1,400,000 balance under the note payable was converted into common stock on March 31, 2004 at the rate of $0.50 per share resulting in the issuance of 2,800,000 shares of common stock. At March 31, 2004, $100,000 remains available for borrowing under the terms of the note payable. If borrowed, the note is convertible in to common stock at the rate of $0.50 per share.
NOTE 3 - FRESH START ACCOUNTING
In accordance with the fresh start requirements of SOP 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, the Company accounted for the reorganization using fresh-start reporting. Accordingly, all assets of Flexpoint Sensor Systems, Inc. have been restated to reflect their reorganization value, which approximates fair value at the date of reorganization. Management estimated a reorganization value of $5,634,000 based upon the negotiated price at which certain creditors were willing to convert their claims into common stock. The following summarizes the effect of the plan of reorganization on the Company's consolidated balance sheet, as of February 24, 2004, the date of confirmation of the plan of reorganization:
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Reorganized
As of Date of Confirmation Pre- Debt Exchange Balance
of Plan, February 24, 2004 Confirmation Discharge of Stock Fresh Start Sheet
------------------------------- ------------- ------------- ------------- ------------- -------------
ASSETS
Current Assets - Cash $ 2,051 $ - $ - $ - $ 2,051
Patents, net 1,561 - - 5,634,000 5,635,561
-----------------------------------------------------------------------------------------------------
Total Assets $ 3,612 $ - $ - $ 5,634,000 $ 5,637,612
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities Not Subject to
Compromise - Current
Accounts payable $ 244,642 $ (36,536) $ - $ - $ 208,106
Accrued liabilities 1,492 - - - 1,492
Deferred revenue 343,750 - - - 343,750
Short-term advance payable 102,000 - - - 102,000
Notes payable - related party 16,000 - - - 16,000
-----------------------------------------------------------------------------------------------------
Total Liabilities Not Subject
to Compromise - Current 707,884 (36,536) - - 671,348
-----------------------------------------------------------------------------------------------------
Liabilities Subject to Compromise 7,777,379 (7,777,379) - - -
-----------------------------------------------------------------------------------------------------
Stockholders' Equity (Deficit)
Preferred stock 1,080,426 - (1,080,426) - -
Common stock (old) 76,535 - (76,535) - -
Common stock (new) - 11,022 3,076 - 14,098
Additional paid-in capital 22,078,206 5,669,351 1,153,885 (23,949,276) 4,952,166
Deficit accumulated during the
development stage (31,716,818) 2,133,542 - 29,583,276 -
-----------------------------------------------------------------------------------------------------
Total Stockholders'
Equity (Deficit) (8,481,651) 7,813,915 - 5,634,000 4,966,264
-----------------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity (Deficit) $ 3,612 $ - $ - $ 5,634,000 $ 5,637,612
=====================================================================================================
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NOTE 4 - PROPERTY AND EQUIPMENT
On March 31, 2004, Flexpoint Sensor Systems, Inc. entered an asset purchase agreement with Flexpoint Holdings, LLC, a company controlled by a shareholder, to acquire equipment and proprietary software technology with a total fair value of $2,798,000 in exchange for $963,000 and 1,600,000 shares of common stock valued at $1,835,000, or $1.15 per share. Flexpoint Holdings, LLC is a holding company with the primary purpose to acquire and hold assets which one of the Company's creditors caused to be seized during 2001 and sold at public auction during 2002.
The acquisition of the assets of Flexpoint Holdings, LLC has been accounted for using the purchase method of accounting; however, Flexpoint Holdings, LLC was not a business and had no operations. Accordingly, pro forma financial information is not provided. The purchase price was determined using estimated fair values of the assets acquired. The Company is in the process of determining the fair values of certain assets; accordingly, the purchase price is subject to refinement. At March 31, 2004, the fair value of the assets acquired as follows:
------------------------------------------------------ Property and equipment $ 1,698,000 Proprietary technology 1,100,000 ------------------------------------------------------ Net assets acquired $ 2,798,000 ====================================================== |
The equipment consists of manufacturing equipment to produce the Company's product, and the technology consists of software algorithms that interpret data provided by the Company's flexible sensor technology. The technology has an estimated weighted-average useful life of 5 years.
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
NOTE 5 - NOTE PAYABLE - RELATED PARTY
The Company carries a $16,000 unsecured note payable to a shareholder with interest stated at 10% with repayment terms requiring payment of the principal and interest by December 31, 2004.
NOTE 6 - INCOME TAXES
There was no provision for, or benefit from, income tax during the period. The components of the net deferred tax asset as of March 31, 2004 are as follows:
---------------------------------------------------------------- Operating loss carry forwards $ 8,820,593 Deferred license and royalty income 125,888 Accrued rent 120,343 Amortization of intangibles 2,014,969 ---------------------------------------------------------------- Total Deferred Tax Assets 11,081,793 Valuation allowance (11,081,793) ---------------------------------------------------------------- Net Deferred Tax Asset $ - ================================================================ |
As a result of the confirmation of the bankruptcy plan, $7,813,915 in debt was discharged. For tax reporting purposes, net operating loss carry forwards were reduced to $23,648,000 at March 31, 2004. Although net operating losses begin to expire in the year 2012 those carry forwards will be limited or unavailable, under the tax laws, due to a change of greater than 50% in ownership of the Company upon emergence from bankruptcy.
The following is a reconciliation of the amount of benefit that would result from applying the federal statutory rate to pretax loss with the provision for income taxes for the period from February 24, 2004 through March 31, 2004:
---------------------------------------------------------------- Tax at statutory rate (34%) $ (203,379) Change in valuation allowance 223,119 State tax benefit, net of federal tax effect (19,740) ---------------------------------------------------------------- Provision for Income Taxes $ - ================================================================ |
NOTE 7 - STOCK OPTION PLAN
On April 1, 1995, the Board of Directors and shareholders adopted an Omnibus Stock Option Plan (the "Plan"). Under the terms of the Plan, as amended in October 1997, Flexpoint may grant options to employees, directors and consultants to purchase up to 719,643 shares of common stock. Incentive or non-qualified options may be granted under the Plan. Options granted under the Plan are exercisable over periods determined by the Board of Directors, not to exceed 10 years from the date of grant. Options generally vest from immediately to five years. Generally, the only condition for exercise of options granted under the Plan is that the employees remain employed through the date the options are exercised or vested. As of the date of the confirmation of the plan of reorganization, all previously outstanding stock options were cancelled. No stock options have been issued since the Company emerged from bankruptcy.
FLEXPOINT SENSOR SYSTEMS, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
NOTE 8 - LEASE COMMITMENT
Effective March 31, 2004, the Company agreed to sub-lease offices and a manufacturing facility in which the Company's acquired equipment is located. The sublease expires in October 2004 with monthly lease payments of $6,500. Total future minimum lease payments as of March 31, 2004 are $45,500.
NOTE 9 - CONSULTING AGREEMENT
On March 3, 2004, the Company entered into a twelve-month consulting agreement with Summit Resource Group whereby Summit Resource Group has agreed to provide consulting services for the Company related to investor relations, including dealing with direct investor relations and broker/dealer relations and the investing public. The agreement may be terminated after the first 90 days by a 45-day written notice from either party. In consideration for consulting services, the Company issued Summit Resource Group 100,000 common shares and warrants to purchase 650,000 common shares. The warrants are exercisable for five years from the date awarded as follows: I) warrants to purchase 150,000 shares are exercisable at $0.70 per share from the date awarded, ii) warrants for 150,000 shares are exercisable at $0.70 per share beginning on May 1, 2004, and iii) warrants to purchase 350,000 shares are exercisable at $0.80 beginning September 1, 2004, unless the agreement is terminated, whereupon they are exercisable pro rata through the date of termination as a percentage of the days outstanding from March 3, 2004 through September 1, 2004. The Company granted Summit Resource Group registration rights with respect to the 650,000 common shares underlying the warrants, and the Company has the obligation for all related registration costs.
The Company valued the issuance of 100,000 common shares to Summit at
$114,680, or approximately $1.15 per share, based on the estimated market
value of the stock issued on the date of the agreement, with the related
expense charged to operations. The Company valued the warrants granted to
Summit at $731,328, estimated on the date granted using the Black-Scholes
option pricing model with the following weighted-average assumptions:
risk-free interest rate of 3.06%, expected dividend yield of 0.0%, expected
life of 5 years and expected volatility of 200%. Consulting expense is
recognized over the period the warrants vest, which resulted in recognizing
$309,587 of compensation through March 31, 2004.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Executive Overview
Our Chapter 11 bankruptcy reorganization plan was confirmed by the bankruptcy court on February 24, 2004 and effected on March 5, 2004. As a result, Flexpoint Sensor is considered a new entity for financial reporting purposes. We are a development stage company focused on obtaining necessary capital to complete our production facility and re-starting operations following our reorganization. The settlement of the creditor claims in the bankruptcy reorganization enabled Flexpoint Sensor to emerge from Chapter 11 bankruptcy with our technology intact and with financial backing to operate our business in the short term.
We are engaged principally in designing, engineering and manufacturing sensor technology and equipment using flexible potentiometer technology, which we refer to as Bend Sensor technology. While we have recorded revenues of $15,750 for the period from February 24, 2004 through March 31, 2004, we currently do not have sufficient cash flow to finance our operations on an on-going basis. We have relied upon confirmation of our bankruptcy reorganization plan and proceeds from a convertible line of credit for our short-term cash needs. We expect to complete a private placement in the second quarter of 2004 for additional funding; however, we cannot assure that the private placement will be completed as planned or continue to remain available.
We acquired the assets of Flexpoint Holdings, LLC on March 31, 2004, which allowed us to establish a production line in our new manufacturing facility. (See Part II, Item 5, below) We have rehired previous senior managers who have many years of experience with our products and industry. In March 2004 we resumed our agreement with Ricochet Development and started fulfilling orders for the Bend Sensor technology. We intend to commercialize and market patented automotive applications of Bend Sensor technology in the coming year.
Our primary challenge is to manage the timing of distribution and promotion of our products. Our plan is to rehabilitate our operations to the point that mass production and incorporation of our products into new model automobiles will begin within two years. However, this will be subject to our ability to market our products to customers who can exploit the potential of the patents we own. We intend to primarily market our products to original equipment manufacturers to create demand. We also intend to resume old relationships or establish new ones.
Bankruptcy Reorganization Plan
The essence of our bankruptcy reorganization plan was to restructure our equity stockholders by completing a 7-to-1 reverse stock split that was effective March 5, 2004. All share and per share amounts presented in this quarterly 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 $1,400,000 of notes payable to Board Investment Partners. The reorganization plan provided for the cancellation of 714,286 shares of common stock issued to an officer during 2001.
The following creditors' claims were satisfied by equity transactions in the
reorganization:
. Convertible debentures of $3,681,280 were forgiven in exchange for our
agreement not to contest the issuance of 7,142,087 shares issued to Aspen
Capital Resources, LLC, upon its exercise of warrants related to the
convertible debenture agreement.
. $194,620 of claims of former employees, which included accounts payable,
accrued wages and a $20,000 convertible promissory note, were converted
for 377,682 shares.
. 2,387,382 shares were exchanged for $1,230,218 of notes payable to a
shareholder.
. A lease obligation of $574,255 was exchanged for 1,114,410 shares.
Options, warrants or executory contracts for acquisition of any common shares entered into prior to our petition for bankruptcy protection were cancelled upon confirmation of the reorganization plan. Preferred stock and super-voting preferred stock were also cancelled upon confirmation.
In the bankruptcy proceeding we objected to the $1,700,000 claim made by Delco Electronics, Inc., related to the Delphi Automotive Systems ("Delphi") supply and purchase agreement. Flexpoint, Inc, our subsidiary, partnered with Delphi Automotive Systems, a then subsidiary of General Motors ("GM"), to mass produce a seat sensor system for a smart air bag system for GM automobiles. Delphi advanced approximately $300,000 per month to our subsidiary, Flexpoint, Inc., to supply our sensor products to GM. In July 1999 Delphi withdrew its financial support of Flexpoint, Inc.'s operations, which was a primary factor that lead to Flexpoint Sensor's bankruptcy. We believe that Delphi is precluded by the terms of the agreement from any financial recovery due to its breach of the agreement. Any litigation related to this claim will be conducted under the supervision of the bankruptcy court. (See Part II, Item 1, below). The bankruptcy court will retain jurisdiction over our bankruptcy case until the litigation with Delphi is complete and at that time we anticipate that the bankruptcy court will enter a final discharge closing the Flexpoint Sensor bankruptcy case.
Liquidity and Capital Resources
For the next twelve months, management anticipates that we will rely on revenues and private placements of our common stock to fund our on-going operations. In addition, as we enter into new technology agreements, we must ensure that those agreements provide adequate funding for any pre-production research and development and manufacturing costs. If we are successful in establishing agreements with adequate initial funding, management believes that our operations for the long term will be funded by revenues, licensing fees and royalties related to these agreements. However, we have formalized only a few additional agreements since confirmation of our bankruptcy reorganization plan and there can be no assurance that agreements will come to fruition in the future or that a desired technological application can be brought to market.
Operations. Net cash used in operating activities for the period from February 24, 2004 through March 31, 2004 was $145,371. Net cash used in investing activities was $265,876 with $265,000 of that amount related to the payment for acquisition of equipment from Flexpoint Holdings LLC. We are fulfilling orders for Bend Sensor technology and anticipate that on-going negotiations with third parties may result in several technology agreements. It is critical to our continued operations that we are successful in closing these agreements.
Financing. Net cash provided by financing activities was proceeds of $485,385 primarily from the $1.5 million convertible line of credit. During March 2004, we drew approximately $1,343,000, net of origination fees of $57,000, from this line of credit. Of the amount drawn from the line of credit, we used $698,000 to acquire the assets of Flexpoint Holdings, LLC, and $102,000 was used to repay a short-term advance from Flexpoint Holdings, LLC. We borrowed approximately $483,000 for operations and $60,000 was borrowed to settle certain secured and priority claims of the reorganization plan. We have approximately $100,000 remaining available on this line of credit.
The $1,400,000 amount drawn from the line of credit was converted into common stock at $0.50 per share and resulted in the issuance of 2,800,000 shares to Broad Investment Partners and its assignees in March 2004 as provided by the reorganization plan. We initially placed 3,000,000 free trading shares in an escrow account as part of our reorganization plan for conversion of the credit line and 200,000 shares remain available for future conversion of debt related to this line of credit. The terms of the line of credit provide that interest accrues on the outstanding balance at 10% per annum, and all amounts become due within three years of the date of the agreement.
Management is currently in negotiations for additional funding of approximately $2 million through a private placement of our common stock; but we cannot assure that the negotiations will be successful. We expect to issue this stock pursuant to exemptions from registration provided by federal and state securities laws and currently do not intend to make a public offering of our stock. We also note that if we issue more shares of our common stock, then our shareholders may experience dilution in the value per share of their common stock.
Commitments and Contingencies
Our principal commitments consist of our total current liabilities, discussed in more detail below in "Results of Operations," and an operating lease. We are obligated to make monthly payments of $6,500 per month for the sublease of office and manufacturing space in which our equipment is located. (See Part II, Item 5, below for more details about the sublease.) The total future minimum payments under this sublease as of March 31, 2004 are $45,000.
We have extinguished our contingent liability related to the Delphi creditor's claim. We characterized the funds advanced to Flexpoint, Inc. by Delphi as a contingent liability and accrued $1.7 million as of December 31, 2003. However, as of March 31, 2004 management concluded that the likelihood that this contingency will require us to transfer assets is remote and we extinguished the contingent liability and included it in gain on forgiveness of debt in the pre-confirmation consolidated statements of operations.
Off-balance Sheet Arrangements
None.
Results of Operations
The following discussions are based on the consolidated operations of Flexpoint Sensor, its 90% owned subsidiary, Sensitron, Inc., and Sensitron's 90% owned subsidiary, Flexpoint, Inc. The information should be read in conjunction with our unaudited consolidated financial statements included in this report at Part I, Item 1, above. The charts below present a summary of our unaudited consolidated statement of operations for the period from February 24, 2004 through March 31, 2004 and further details are presented in our unaudited consolidated financial statements and the accompanying notes.
Summary Operating Results for the Interim Period from
February 24, 2004 through March 31,2004 ------------------------------------------------------ Sales $ 15,750 General and administrative expenses (514,042) Interest expense (99,881) Net loss (598,173) Net loss per share $ (0.04) |
Sales for the period from February 24, 2004 through March 31, 2004 were primarily from licensing fees and royalties and engineering services. General and administrative expenses consisted of professional fees and consulting expense. The consulting expense represented $424,267 of the general and administrative expense and was related to the issuance of 100,000 shares of common stock and partial vesting of warrants to purchase 650,000 shares to Summit Resource Group in consideration for consulting services. (See Part II, Item 2 and 5, below.) Interest expense was primarily from our convertible line of credit.
Cash $ 74,138 Total assets 8,508,575 |
Total current liabilities 438,377 Accumulated deficit (598,173) Total stockholders equity $ 8,070,198 |
Our total assets at March 31, 2004 included property and equipment valued at $1,698,000 acquired from Flexpoint Holdings, LLC at the end of March 2004. Patents and other intangible assets represent $6,736,437 of our total assets. Total current liabilities included accounts payable, accrued liabilities, deferred revenue and notes payable to a related party. Deferred revenue related to Sensitron's prepaid royalties and software license rights sold to customers and amortized over the 6-year term of the agreements was $337,500, or 77.0%, of total liabilities as of March 31, 2004.
Factors Affecting Future Performance
We have recorded a net loss since inception and may be unable to attain or maintain profitability.
We are unable to fund our day-to-day operations with our revenues and must obtain additional financing. In the past we have not been successful at marketing our sensor products on the scale contemplated in the bankruptcy reorganization plan and we may be unable to attain those levels. In addition, we may not realize revenues from our subsidiaries or may be unable to increase revenues to the point that we attain and are able to maintain profitability.
Research and development may result in problems which may become insurmountable to full implementation of production.
Customers may request that we create prototypes and perform pre-production research and development. As a result, we are exposed to the risk that we may find problems in our designs that are insurmountable to fulfill production. However, we are currently unaware of any insurmountable problems with ongoing research and development that may prevent further development of an application.
ITEM 3. CONTROLS AND PROCEDURES
Our Chief Executive Officer, who acts in the capacity of principal financial officer, has reevaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and determined that there continued to be no significant deficiencies in these procedures. Also, there were no changes made or corrective actions to be taken related to our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In our bankruptcy proceeding we objected to the $1,700,000 claim made by Delco Electronics, Inc. (See Part I, Item 2- Bankruptcy Reorganization Plan, above). We believe that Delphi is precluded by the terms of the agreement from any financial recovery due to its breach of the sponsorship agreement. Other potential claims are breach of contract, breach of fiduciary duties owed to Flexpoint, Inc. pursuant to the contract, and intentional and negligent interference with Flexpoint, Inc.'s contractual and business relationship with General Motors. We believe Delphi will owe a yet to be determined amount of damages for these claims. We are currently attempting to negotiate a settlement to this controversy, but if our negotiations are unsuccessful, we intend to litigate this claim under the supervision of the bankruptcy court.
ITEM 2. CHANGES IN SECURITIES AND ISSUER'S PURCHASES OF EQUITIES
Sales of Unregistered Securities
On March 3, 2004 we issued 100,000 restricted common shares and warrants to purchase 650,000 common shares to Summit Resource Group in consideration for investor relations consulting services. The shares were valued at $114,680, or $1.15 per share, and the warrants were valued at $731,328 based on the Black-Scholes option pricing model, or a fair value of $1.13 per share. Warrants to purchase 150,000 shares at $0.70 vested at the execution of the agreement, warrants to purchase 150,000 shares at $0.70 per share vest on May 1, 2004, and warrants to purchase 350,000 shares at $0.80 per share vest on September 1, 2004. The warrants have a five year term from the date they are awarded. 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.
On March 5, 2004, pursuant to the bankruptcy reorganization plan, our board authorized the issuance of an aggregate of 6,679,474 shares of common stock to our creditors in satisfaction of debt valued at $2.0 million and for conversion of a $1.4 million line of credit. We relied upon an exemption from registration provided by Section 1145 of the Bankruptcy Code.
On March 31, 2004 we issued 1,600,000 shares valued at approximately
$1,835,000 as partial payment to purchase the assets of Flexpoint Holdings,
LLC. 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.
Changes in Control
As a result of the bankruptcy reorganization, our issued and outstanding shares of common stock were reversed to 10,933,529 shares. Of those shares, 714,286 shares issued to an officer during 2001 were cancelled. The bankruptcy reorganization plan resulted in an aggregate of 6,679,474 shares issued to our creditors. The following table lists the beneficial ownership of our management and each person or group known to us to own beneficially 10% or more of our outstanding common stock after the reorganization. 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. The percentage of beneficial ownership is based on 18,698,202 shares of common stock outstanding as of April 23, 2004.
MANAGEMENT
Name and address of Percentage beneficial owners Number of shares of class --------------------------------- ------------------- ------------- John A. Sindt 110,199 (1) Less than 1% 47 East 7200 South, Suite #204 Midvale, Utah 84047 Donald E. Shelley 9,000 Less than 1% 656 West 7250 South Midvale, Utah 84047 Directors and officers 119,199 Less than 1% as a group |
(1) Represents 2,266 shares owned by Mr. Sindt; 28,572 shares owned jointly by Mr. Sindt and his spouse, 1,143 shares owned by his spouse, and 78,218 shares held by a company of which Mr. Sindt is an affiliate.
CERTAIN BENEFICIAL OWNERS
Name and address of Percentage beneficial owners Number of shares of class ---------------------------------- ------------------ -------------- First Equity Holdings Corp. 7,142,858 38.2% 2157 S. Lincoln Street Salt Lake City, UT 84106 |
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 24, 2004 the bankruptcy reorganization plan required the approval of various creditor classes and equity shareholders entitled to vote on the plan. Shareholders representing 55,040,125 pre-reverse common shares voted for the reorganization plan and shareholders representing 33,750 pre-reverse common shares voted against the plan. Pre-reverse shares of 18,374,326 were not voted. We did not solicit proxies and our board of directors remained the same after the vote.
ITEM 5. OTHER INFORMATION
New Manufacturing Facility
As part of the asset purchase agreement with Flexpoint Holdings, LLC, we are using that company's office and manufacturing facility as our principal offices. Flexpoint Holdings, LLC, subleased approximately 11,500 square feet of office and manufacturing space. This facility has executive offices and space for research and development, manufacturing and fulfillment. 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.
Flexpoint Holdings, LLC, entered into a sublease with Ortho Development Corporation for the office and manufacturing space on September 1, 2003. The sublease has a term of one year, expiring September 30, 2004, and requires a monthly payment of $6,500. We installed one full production line with the capacity to produce over 50 million Bend Sensors units per year in this facility and this property provides enough space to assemble a second production line, if needed.
Asset Acquisition
We are providing the required disclosures related to our acquisition of the assets of Flexpoint Holdings, LLC, in this report in lieu of filing a separate Current Report on Form 8-K.
On March 31, 2004 Flexpoint Sensor entered into an asset purchase agreement with Flexpoint Holdings, LLC, a company controlled by a shareholder of Flexpoint Sensor. The bankruptcy court must approve this acquisition and we anticipate the court will grant its approval on May 11, 2004. The agreement provides that Flexpoint Sensor acquires substantially all of Flexpoint Holding's equipment and proprietary technology. Flexpoint Holdings, LLC was a Utah limited liability company formed to acquire and hold the assets which one of Flexpoint Sensor's creditor's caused to be seized during 2001 and sold at public auction during 2002. Flexpoint Holdings LLC was not a business and had no operations. Accordingly, pro forma financial information is not provided.
The acquisition has been accounted for using the purchase method of accounting and we agreed to pay $963,000 in cash and issued 1,600,000 common shares valued at $1,835,000 for assets with a fair value of $2,798,000. We used proceeds from the line of credit for a portion of this acquisition. We estimate that we acquired $1,698,000 in property and equipment and $1,100,000 in proprietary technology. The equipment consists of manufacturing equipment to produce our Bend Sensor products and the technology consists of the software algorithms that interpret data provided by the sensor technology. However, we are in the process of determining the fair values of
certain assets and the purchase price is subject to refinement.
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 is for a twelve month period and the agreement may be terminated after the first 90 days by a 45-day written notice from either party. We agreed to pay Summit Resource Group 100,000 restricted common shares, valued at $114,680, and warrants to purchase 650,000 common shares, valued at $731,328. Warrants to purchase 150,000 shares at $0.70 vested at the execution of the agreement, warrants to purchase 150,000 shares at $0.70 per share vest on May 1, 2004, and warrants to purchase 350,000 shares at $0.80 per share vest on September 1, 2004. The warrants expire five years after the vesting date and have demand registrations rights. If the agreement is terminated by either party, then the warrants to purchase 350,000 shares at $0.80 per share will vest pro rata through the date of termination, as a percentage of the days outstanding from March 3, 2004 through September 1, 2004.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Part I Exhibits 31.1 Chief Executive Officer Certification 31.2 Principal Financial Officer Certification 32 Section 1350 Certification |
Part II Exhibits
2.1 Order Confirming Plan, dated February 24, 2004 (Incorporated by
reference to exhibit 2.1 for Form 8-K filed March 5, 2004)
2.2 Debtor's Plan of Reorganization, dated January 14, 2004 (Incorporated
by reference to exhibit 2.2 for Form 8-K filed March 5, 2004)
2.3 Asset Purchase Agreement between Flexpoint Sensor and Flexpoint
Holdings, LLC, dated March 31, 2004
3.1 Certificate of Incorporation of Nanotech Corporation (Incorporated by
reference to exhibit 3.1 of Form 10-SB registration statement, filed
June 17,1994.)
3.2 Certificate of Amendment to Certificate of Incorporation of Nanotech
Corporation (Incorporated by reference to exhibit 3.1 of Form 8-K,
filed April 9, 1998)
3.3 Certificate of Amendment to Certificate of Incorporation of Micropoint
Inc.
3.4 Restated bylaws of Flexpoint Sensor
10.1 Credit Line Agreement between Flexpoint Sensor and Broad Investment
Partners, LLC, dated January 14, 2004 (Incorporated by reference to
exhibit 10.1 for Form 8-K filed March 5, 2004)
10.2 Sublease Agreement between Flexpoint Holdings, LLC and Ortho
Development Corporation, dated September 1, 2003
10.3 Consulting Agreement between Flexpoint Sensor and Summit Resource
Group, dated March 3, 2004
21 Subsidiaries of Flexpoint Sensor Systems, Inc. (Incorporated by
reference to exhibit 21 of Form 10-KSB, filed February 18, 2004)
|
Reports on Form 8-K
On March 5, 2004, we filed a Current Report on Form 8-K, dated February 24, 2004, including items 1, 3, and 5 related to the confirmation of our bankruptcy reorganization plan.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, who is duly authorized.
FLEXPOINT SENSOR SYSTEMS, INC.
/s/ John A. Sindt
Date: April 30, 2004 By: _______________________________________
John A. Sindt
President, CEO, Chairman of the Board,
and Principal Financial Officer
|
ASSET PURCHASE AGREEMENT
Flexpoint Sensor Systems, Inc., a Delaware corporation ("Buyer"), and Flexpoint Holdings, LLC, a Utah limited liability company ("Seller") hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.01. Assets Being Purchased. Seller shall sell to Buyer and Buyer shall purchase from Seller on the terms specified in this Agreement all the assets, both real and personal and both tangible and intangible, of Seller, herein called "Assets," including but without limitation:
(a) All the assets shown on the schedule hereto attached marked Schedule 1.01.
(b) All other assets of Seller, including the goodwill of Seller, not expressly excluded in this Agreement.
1.02. Purchase Price. Buyer has paid or will pay to Seller on or before Closing the following:
(a) Nine Hundred Sixty Three Thousand Dollars ($963,000.00) in cash which has been paid to Seller; and
(b) One Million Six Hundred Thousand (1,600,000) fully paid and non-assessable shares of Flexpoint Sensor Systems, Inc. Common Stock.
1.03. Closing. The sale and purchase described in this Agreement shall be consummated on or before March 31, 2004 ("Closing" or "Closing Date").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES BY SELLER
2.01. Title to Assets. Seller has good and marketable title to all assets covered by this Agreement, except such stock in trade or inventory items as it may sell in the ordinary course of business between the date of this Agreement and the Closing. Seller's title to all assets is free and clear of any liens, encumbrances, or other defects except as shown on Schedule 2.01 attached hereto.
2.02. Authority to Sell. Seller has complied with all the requirements of any applicable law of the State of Utah relative to the sale of assets described in this Agreement and that prior to Closing, all of the consents and approvals that may be required by law or by agreements to which Seller may be a party will be obtained.
2.03. Liabilities. Except for any liabilities set forth in this Agreement, there are no other liabilities to which Seller or its assets are subject unless set forth on Schedule 2.03.
2.04. Defaults and Violations. Seller is not in default or material violation of any contracts, agreements, leases, or other instruments or obligations to be sold and transferred to Buyer pursuant to this Agreement, and this Agreement and the purchase and sale to be consummated pursuant to this Agreement will not create or cause a default or material violation of any contract, agreement, lease or other instrument to which Seller may be a party.
2.05. Taxes. All federal, state and local tax returns and payments that have become due from Seller to the date of this Agreement have been timely filed and timely paid by it including any returns or taxes due for (1) state or federal income or franchise tax, (2) personal or real property tax levied on any of the assets, (3) sales tax, or (4) other tax. All tax returns and payments for the above taxes which become due between the date of this Agreement to the Closing Date shall be timely filed and paid by Seller.
2.06. Litigation. There is now no litigation pending against it of which it or its officers are aware that will, might, or could affect consummation of the purchase and sale described in this Agreement or transfer of title of any of said assets in good and marketable condition to Buyer and Seller is not aware of any threatened litigation which may affect the consummation of the purchase and sale described in this Agreement.
2.07. Survival of Warranties. Seller agrees that all warranties made by it in this Agreement shall survive the Closing.
ARTICLE 3
WARRANTIES OF BUYER
Buyer represents and warrants as follows:
3.01. Due Organization. Buyer is a corporation duly organized and existing under the General Corporation Law of the State of Delaware and that its power as a corporation has never been and is not now suspended.
3.02. Authority to Buy. This Agreement has been approved by Buyer's Board of Directors and that Buyer has full power and authority to both execute and perform this contract.
3.03. Court Approval. The Buyer shall seek Court approval for the stock to be transferred to Seller free of restriction.
ARTICLE 4
OPERATION OF BUSINESS
4.01. Seller to Continue Business. Seller shall continue to operate its business in the normal course until the Closing. Any and all risk of loss or damages to the assets during such period from any and all causes shall be apportioned among the parties as hereinafter provided.
4.02. Prorations and Risk of Loss. All expenses paid and incurred and all received and earned shall be prorated between the parties as of March 31, 2004.
ARTICLE 5
CONDITIONS TO BUYER'S PERFORMANCE
Absent a waiver in writing, all obligations of the Buyer under this Agreement are subject to satisfaction of the following conditions on or before the Closing Date:
5.01. Performance by Seller. Seller shall have performed, satisfied and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with on or before the Closing Date.
5.02. Representations and Warranties True as of the Closing Date. Except as otherwise permitted by this Agreement, all representations and warranties by Seller in this Agreement shall be true on and as of the Closing Date as though made at that time.
5.03. Third Party Consents. All consents and approvals required to be given by third parties shall have been obtained and Buyer shall have been furnished with appropriate evidence reasonably satisfactory to it and its counsel of the granting of such consents and approvals.
5.04. Absence of Litigation. No action, suit, or proceeding before any court or any governmental body or authority, pertaining to the transaction contemplated by this Agreement, or to its consummation, shall have been instituted or threatened on or before the Closing Date.
5.05. Assumed Contracts. Buyer shall assume all leases relating to the lease premises or equipment.
5.06. Corporate Approvals. The sole member and manager of Seller has duly authorized and approved the execution and delivery of this Agreement and all corporate action necessary or proper to fulfill Seller's obligations hereunder on or before the Closing Date.
ARTICLE 6
CONDITIONS OF SELLER'S PERFORMANCE
Absent a waiver in writing, all obligations of Seller hereunder are subject to the satisfaction of the following conditions on or before the Closing Date:
6.01. Representations and Warranties True as of the Closing Date. All representations and warranties of Buyer contained in this Agreement shall be true on and as of the Closing Date as though such representations and warranties were made on and as of that date.
6.02. Performance By Buyer. Buyer shall have performed and complied with all covenants and agreements and satisfied all conditions required by this Agreement to be performed by Buyer on or before the Closing Date.
6.03. Approvals. The Board of Directors of Buyer, and to the extent if any required by the Shareholders of Buyer shall have duly authorized and approved the execution and delivery of this Agreement and all corporate action necessary or proper to fulfill Buyer's obligations hereunder on or before the Closing Date. That the Bankruptcy Court, to the extent if any required, shall have duly authorized and approved the transaction as soon as practicable.
6.04. No Violations. The Buyer has not violated any applicable federal or state securities laws in connection with the offer, sale and issuance of any of its Capital Stock.
6.05. Issued. All of the outstanding Capital Stock has been validly issued and is fully paid and nonassessable and has been issued in compliance with all applicable securities laws (including the provision of the securities Act and the rules and regulations promulgated thereunder). There are no options, convertible securities, warrants, calls, pledges, transfer restriction (except restrictions imposed by federal and state securities laws), voting restrictions, liens, rights of first offer, rights of first refusal, antidilution provisions or commitments of any character relating to any issued or unissued shares of Capital Stock of the Company.
ARTICLE 7
SELLER'S COVENANTS
7.01. Conduct of Business. From the date of this Agreement to the Closing, Seller shall operate the business without causing detriment thereto, shall maintain in effect all governmental permits and approvals necessary for the operation of the business as it is now being conducted and shall maintain the relationships with all persons and entities with whom Seller currently is doing business.
7.02. Buyer's Investigation. Seller shall make available to Buyer at all reasonable times all books and records of the business and such other items as may be from time to time requested by Buyer.
ARTICLE 8
INDEMNITY AGREEMENT
8.01. Seller's Indemnity. Except as otherwise expressly provided in this Agreement or any attachment to this Agreement, Seller shall indemnify and hold Buyer and the property of Buyer, including the assets, free and harmless from any and all claims, liability, loss, damage, or expense resulting from Seller's ownership of the assets or Seller's operation of the assets, including any claim, liability, loss or damage arising by reason of the injury to or death of any person or persons, or the damage of any property, caused by Seller's use of the assets and the condition of the assets when owned by Seller. Provided, however, Seller shall incur no liability under this section until and unless the aggregate amount of any and all claims, liability, loss, damage, or expense equals or exceeds $200,000.00.
8.02. Buyer's Indemnity. Except as otherwise provided in this Agreement or any attachment to this Agreement, Buyer shall indemnify and hold Seller free and harmless from any and all claims, liabilities, loss, damage, or expense resulting from Buyer's acts or omissions to act after the Closing Date as they relate to the assets purchased and liabilities assumed by Buyer pursuant to this Agreement.
8.03. Lease Agreement. Buyer shall assume, indemnify and hold Seller harmless from any assumed lease referenced herein. In addition, Buyer shall cause the removal of Seller's name from the lease.
ARTICLE 9
TERMINATION DEFAULT REMEDIES
9.01. Termination. If either Buyer or Seller materially defaults in the due and timely performance of any of its warranties, covenants or agreements or in the event of the failure to satisfy or fulfill any of the conditions, the non-defaulting party may on the Closing Date give notice of termination. The notice shall specify the default or defaults upon which the notice is based. The termination shall be effective five (5) days after the Closing Date, unless the specified default or defaults have been cured on or before the effective date of the termination.
9.02. Default Remedies. Notwithstanding Section 9.01, in the event of a default, the non-defaulting party may seek specific performance of this Agreement against the defaulting party from a court of competent jurisdiction, or alternatively, such non-defaulting party may seek damages from the defaulting party.
9.03. Litigation Costs. If any legal action or other proceeding is brought for the enforcement of this Agreement or to remedy its breach, the prevailing party in such action or proceeding shall be entitled to recover its actual attorney's fees and other costs incurred in the action or proceeding, in addition to such other relief to which it may be entitled.
ARTICLE 10
MISCELLANEOUS
10.01. Entire Agreement. This instrument with its attachments constitutes the entire agreement between Buyer and Seller respecting the assets or the sale of the assets to Buyer by Seller, and any agreement or representation respecting the assets or their sale by Seller to Buyer not expressly set forth in this instrument is null and void.
10.02. Notices. Any and all notices or other communications required or permitted by this Agreement or by law to be served on or given to either party hereto, Buyer or Seller, by the other party hereto shall be, unless otherwise required by law, in writing and deemed duly served and given when personally delivered to the party to whom directed or any of its officers or, in lieu of such personal service, when deposited in the United States mail, first-class postage prepaid, addressed to Buyer at Flexpoint Holdings, Inc. at 3434 East 7800 South, #182, Salt Lake City, Utah 84121 and Seller at Flexpoint Sensor Systems, Inc., 106 West Business Park Drive, Draper, UT 84020.
10.03. Assignment. Neither this Agreement nor any right or interest in it may be assigned by either party to any other person or corporation without the express written consent of the other party to this Agreement.
10.04. Governing Law. This Agreement shall be governed and all rights and liabilities under it determined in accordance with the laws of the State of Utah in effect on this date.
10.05. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original, but al of which shall constitute but one Agreement.
10.06. Expenses. Each party shall pay all costs and expenses incurred by it in negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated herein and hereby.
10.07. Further Assurances. The parties agree that at any time and from time to time after the Closing Date, they will execute and deliver to any other party such further instruments or documents as may be reasonably required to give effect to the transactions contemplated hereunder.
10.08. Construction. This Agreement shall not be construed against the party preparing it, and shall be construed without regard to the identity of the person who drafted it or the party who caused it to be drafted and shall be construed as if all parties had jointly prepared this Agreement and it shall be deemed their joint work product, and each and every provision of this Agreement shall be construed as though all the parties hereto participated equally in the drafting hereof; and any uncertainty or ambiguity shall not be interpreted against any one party. As a result of the foregoing, any rule of construction that a document is to be construed against the drafting party shall not be applicable.
ARTICLE 11
PIGGY BACK REGISTRATION RIGHTS
11.1 In the event that the Bankruptcy Court does not approve the transfer of stock free of restriction and the stock that transfers is restricted, the Buyer shall be entitled to Piggy Back Registration Rights as following:
11.1. Special Definitions. As used in this Section.
(a) "Register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement, and any pre-effective and post-effective amendments filed or required to be filed, in compliance with the Securities Act of 1933, and the declaration or ordering of effectiveness of such registration statement.
(b) "Registrable Securities" means Common Stock issuable and any Common Stock issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, the Common Stock issued on such exercise.
11.2. Company Registration. If at any time or from time to time Buyer shall register any of its securities, Buyer will:
(a) promptly give to the Seller written notice of its determination; and
(b) include in such registration all the Registrable Securities specified in a written request or requests, made within 30 days after receipt of such written notice from the Buyer, by any Seller.
11.3 Expenses of Registration. All expenses (which term does not include underwriting discounts or commissions) incurred in connection with any registration under this Section, shall be borne by the Buyer; provided, however, that the Buyer shall not be obligated to pay any fees or disbursements of counsel retained by Seller.
11.4 Information by Holder. The Buyer shall not be obligated to register the Registrable Securities if the Seller, upon request, does not provide Buyer in writing such information regarding such Seller and the distribution proposed by such Seller as the Buyer may request and as shall be required in connection with any registration. Information so furnished shall state that it can be used in the subject registration.
11.5 Termination of Buyer's Obligations. The Buyer shall have no obligation pursuant to this Section after the fourth year anniversary hereof.
EXECUTED on March 31, 2004,
BUYER: SELLER: Flexpoint Sensor Systems, Inc. Flexpoint Holdings, LLC /s/ John Sindt /s/ Jules A. DeGreef _________________________________ __________________________________ John Sindt, President Jules A. deGreef, Manager |
ATTACHMENTS
SCHEDULE 1.01(a) ASSETS PURCHASED SCHEDULE 1.01(b) ASSETS EXCLUDED SCHEDULE 2.01 LIENS AND ENCUMBRANCES SCHEDULE 2.03 LIABILITIES |
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 6/18/1999
991250459-2300523
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MICROPOINT, INC.
Micropoint, Inc., a Corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Micropoint, Inc., resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said Corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said Corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this Corporation be amended by changing the Article thereof numbered "FIRST" so that, as amended said Article shall be and read as follows:
"FIRST: The name of the corporation is Flexpoint Sensor Systems, Inc."
SECOND That thereafter, pursuant to resolution of it's Board of Directors, the annual meeting of the stockholders of said Corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation law of the state of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be signed by Douglas M. Odom, it's authorised officer, this 16th day of June, 1999.
MICROPINT, INC.
/s/ Douglas Odom ______________________________ Douglas M. Odom, President |
Micropoint, Inc
Certificate of Amendment.
06/14/99
AMENDED AND RESTATED
BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLE I
OFFICES
Section 1. Principal Executive Office. The principal executive office of the corporation shall be located as directed by the board of directors.
Section 2. Other Offices. Other business offices may at any time be established by the board of directors at any place or places by them or where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of stockholders shall be held at the principal executive office of the corporation, or at any other place within or without the State of Delaware which may be designated either by the board of directors or by the written consent of all persons entitled to vote there at and not present at the meeting, given either before or after the meeting and filed with the secretary of the corporation.
Section 2. Annual Meetings. The annual meetings of the stockholders shall be fixed by the board of directors. At such meetings directors shall be elected, reports of the affairs of the corporation shall be considered, and any other business may be transacted which is within the powers of the stockholders.
Section 3. Special Meetings. Special meetings of the stockholders, for the purpose of taking any action permitted by the stockholders under the Delaware General Corporation Law and the certificate of incorporation of the corporation, may be called at any time by the chairman of the board or the president, or by the board of directors, or by any one or more holders of shares entitled to cast in the aggregate not less than twenty percent (20%) of the votes at the meeting. Upon request in writing that a special meeting of stockholders be called for any proper purpose, directed to the chairman of the board, president, vice president or secretary by any person (other than the board of directors) entitled to call a special meeting of stockholders, of the officer forthwith shall cause notice to be given to stockholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after receipt of the request.
Section 4. Notice of Annual or Special Meeting. Written notice of each
annual or special meeting of stockholders shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote there at. Such written notice shall be given
either personally or by mail or other means of written communication, charges
prepaid, addressed to such stockholder at his address appearing on the books
of the corporation or given by him to the corporation for the purpose of
notice. If any notice or report addressed to the stockholder at the address of
such stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service as unable to deliver the
notice or report to the stockholder at such address, all future notices or
reports shall be deemed to have been duly given without further mailing if the
same shall be available for the stockholder upon written demand of the
stockholder at the principal executive office of the corporation for a period
of one (1) year from the date of the giving of notice or reports to all other
stockholders. If a stockholder gives no address, notice shall be deemed to
have been given him if sent by mail or other means of written communication
addressed to the place where the principal executive office of the corporation
is situated, or if published at least once in some newspaper of general
circulation in the county in which said principal executive office is located.
Any such notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by other means of written communication. An affidavit of mailing of any such notice in accordance with the foregoing provisions, executed by the secretary, assistant secretary or any transfer agent of the corporation, shall be prima facie evidence of the giving of the notice.
Section 5. Quorum. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting shall constitute a quorum for the transaction of business at any meeting of stockholders. The stockholders present at a duly called or held meeting at which a quorum is present may constitute to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
Section 6. Adjournment Meeting and Notice Thereof. Any stockholders' meeting, annual or special, whether or nota quorum is present, may be adjourned from time to time by the vote of a majority of the shares, the holders of which are either present in person or represented by proxy there at, but in the absence of a quorum at the commencement of the meeting, no other business may be transacted at such meeting.
When any stockholders' meeting, either annual or special, is adjourned for thirty (30) days or more, or after adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given as in the case of an original meeting. Except as provided above, it shall not be necessary to give any notice of the time and place of the adjourned meeting or of the business to be transacted there at, other than by announcement of the time and place thereof at the meeting at which such adjournment is taken.
Section 7. Voting. The stockholders entitled to vote at any meeting of stockholder shall be determined in accordance with the Delaware General Corporation Law (relating to voting of shares held by a fiduciary, in the name of a corporation, or in joint ownership). The stockholders may vote by voice vote or by ballot; provided, however, that all elections for director shall be by ballot. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote of any matter shall be the act of the stockholders, unless the vote of a greater number of voting by classes is required by the Delaware General Corporation Law or the certificate of transportation.
Section 8. Validation of Defectively Called or Noticed Meeting. The transactions of any meeting of stockholder, either annual or special, however called and noticed, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, or who, though present, has, at the beginning of the meeting, properly objected to the transaction of any business because the meeting was not lawfully called or convened, or to particular matters of business legally required to be included in the notice, but not so included, signs a written waiver of notice, or a consent to the holding of such meeting, or an approval of the minutes thereof all such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of stockholders need be specified in any written waiver of notice or consent, the waiver of notice or consent shall state the general nature of the proposal.
Section 9. Action Without Meeting. Any action required to be taken at a meeting of the stockholders, or any other action which may be taken at a meeting of the stockholders, may be taken without a meeting or notice, if one or more written consents setting forth the action so taken are signed by the holders of a minimum of the outstanding shares required for authorization of the action and entitled to vote on the matter.
Section 10. Proxies. Every person entitled to vote or execute consents shall have the right to do so either in person or by one or more agents authorized by a written proxy executed by such person or his duly authorized agent and filed with the secretary of the corporation. Subject to the Delaware General Corporation Law in the case of any proxy which states that it is irrevocable, any proxy duly executed shall continue in full force and effect until (i) an instrument revoking it or a duly executed proxy bearing a letter date is filed with the secretary of the corporation prior to the vote pursuant thereto, (ii) the person executing the proxy attends the meeting and votes in person, or (iii) written notice of the death or incapacity of the maker of such proxy is received by the corporation before the vote pursuant thereto is counted; provided that no such proxy shall be valid after the expiration of three (3) years from the date of its execution, unless otherwise provided for in the proxy. The dates contained on the forms of proxy shall presumptively determine the order of execution of the proxies, regardless of the postmark-dates on the envelopes in which they are mailed.
Without limiting the manner in which a stockholder may authorize another person or persons to act for him as proxy, the following shall constitute a valid means by which a stockholder may grant such authority.
(a) A Stockholder may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature.
(b) A stockholder may authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied.
(c) Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission described in Paragraphs (a) or (b) may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.
Section 11. Inspectors of Election. In advance of any meeting of stockholders, the board of directors may appoint any person or persons other than nominees for office as inspectors of election to act at such meeting or any adjournment thereof. If inspectors of election be not so appointed, the chairman of any such meeting may, and on the request of any stockholder or his proxy shall, make such appointment at the meeting. The number of inspectors shall be either one (1) or three (3). If appointed at a meeting on the request of one or more stockholders or proxies, the majority of shares represented in person or by proxy shall determine whether one (1) or three (3) inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may, and on the request of any stockholder or a stockholder's proxy shall, be filled by appointment by the board of directors in advance of the meeting, or at the meeting by the chairman of the meeting.
The duties of such inspectors shall be as prescribed by the Delaware General Corporation Law and shall include: determining the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies; receiving votes, ballots or consents; hearing and determining all challenges and questions in any way
arising in connection with the right to vote; counting and tabulating all votes or consents; determining when the polls shall close; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all stockholders.
The inspectors of election shall perform their duties, impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.
Section 12. Record Date for Stockholder Notice, Voting and Giving Consents. For purposes of determining the stockholders entitled to notice of any meeting or to vote, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the meeting, and in this event only stockholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer or any shares on the books of the corporation after the record date, except as otherwise provided in the Delaware General Corporation Law.
If the Board of Directors does not so fix a record date the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given, or if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.
Section 13. Notice of Stockholder Action. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the board of directors,
(b) otherwise properly brought before the meeting by or at the direction of
the Board of Directors, or (c) otherwise properly brought before the meeting
by a stockholder. For business to be properly brought before an annual meeting
by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation, not less than 50 nor more than 80 days prior to
the meeting; provided, however, that in the event that less thank 60 days'
notice or prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the 10th day following the day on
which such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the annual meeting
(a) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting; (b) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business; (c) the class and number of shares
of the Corporation which are beneficially owned by the stockholder; and (d)
any material interest of the stockholder in such business. Notwithstanding
anything in the Bylaws to the contrary, no business shall be conducted at any
annual meeting except in accordance with the procedures set forth in this
Section 13. The Chairman of the annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section 13,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to the provisions of the Delaware General Corporation Law, and to any limitations in the certificate of incorporation and these bylaws, relating to all action required to be approved by the stockholders or approved by the outstanding shares, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed by, the board of directors. Without prejudice to such general power, but subject to the same limitations, it is hereby expressly declared that the board of directors shall have the following powers, to wit:
(a) To select and remove all the officers, agents and employees of the corporation, prescribe such powers and duties for them as may not be inconsistent with law, with the certificate of incorporation or with these bylaws, fix their compensation and require from them security for faithful service.
(b) To conduct, manage and control the affairs and business of the corporation, and to make such rules and regulations therefor not inconsistent with law, or with the certificate of incorporation or with these bylaws, as they may deem best.
(c) To change the principal executive office and principal office for the transaction of the corporation from time to time one or more subsidiary offices of the corporation within or without the State of Delaware; to designate any place within or without the State of Delaware for the holding of any stockholders' meeting or meetings; and to adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time, as in their judgment they may deem best, provided such seal and such certificates shall at all times comply with the provisions of law.
(d) To authorize the issuance of shares of stock of the corporation from time to time, upon such terms as may be lawful.
(e) To borrow money and incur indebtedness for the purposes of the corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecation's or other evidences of debt and securities therefor.
Section 2. Number and Qualification of Directors. The authorized number of directors shall be no less than one, and shall be such maximum number of persons as may be determined from time to time by resolution of the board of directors.
Section 3. Election and Term of Office. The directors shall be divided into three classes. Each such class shall consist, as nearly as may be possible, of one-third of the total number of directors, and any remaining directors shall be included within such group or groups as the board of directors shall designate. A class of directors shall be elected for a one-year term, a class of directors for a two year term and a class of directors for a three year term. At each succeeding annual meeting of stockholders, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal and possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. A director may be removed from office for cause only and subject to such removal, death, resignation, retirement or disqualification, shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and qualified.
To the extent that any holders of any class or series of stock other than Common Stock issued by the corporation shall have the separate right, voting as a class or series, to elect directors, the directors elected by such class or series shall be deemed to constitute an additional class of directors and shall have a term of office for one year or such other period as may be designated by the provisions of such class or series providing such separate voting right to the holders of such class or series of stock, and nay such class of directors shall be in addition to the classes designated above. Any such directors so elected shall be subject to removal in such manner as may be provided by law.
Section 4. Vacancies. A vacancy in the board of directors shall be deemed to exist in case of the death, resignation or removal of any director, or if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by order of court or convicted of a felony, or if the authorized number of directors be increased, or if the stockholders fail, at any annual or special meeting of stockholders at which any director or directors are elected, to elect the full authorized number of directors to be voted for at that meeting.
Vacancies in the board of directors, except for a vacancy created by the removal of a director, may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, and each director so elected shall hold office until his successor is elected at an annual or a special meeting of the stockholders. A vacancy in the board of directors created by the removal of a director may only be filled by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of the holders of a majority of the outstanding shares entitled to vote.
The stockholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. Any such election by written consent shall require the consent of holders of a majority of the outstanding shares entitled to vote.
Any director may resign effective upon giving written notice to the chairman of the board, the chief executive officer, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the board of directors accepts the resignation of a director tendered to take effect at a future time, the board of directors or the stockholders shall have power to elect a successor or take office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office.
Section 5. Place of Meeting. Regular meetings of the board of directors shall be held at any place within or without the State of Delaware which has been designated from time to time by resolution of the board or by written consent of all members of the board of directors. In the absence of such designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held either at a place so designated or at the principal executive office.
Section 6. Annual Meeting. Immediately following each annual meeting of stockholders, the board of directors shall hold a regular meeting at the place of said annual meeting or at such other place as shall be fixed by the board of directors, for the purpose of organization, election of officers, and the transaction of other business. Call and notice of such meetings are hereby dispensed with.
Section 7. Other Regular Meetings. Other regular meetings of the board of directors shall be held without call on the date and at the time which the board of directors may from time to time designate; provided, however, that should the day so designated fall upon a Saturday, Sunday or legal holiday observed by the corporation at its principal executive office, then said meeting shall be held at the same time on the next day thereafter ensuing which is a full business day. Notice of all such regular meetings of the board of directors is hereby dispensed with.
Section 8. Special Meetings. Special meetings of the board of directors for any purpose or purposes shall be called at any time by the chairman of the board, the president, any vice president, the secretary or by any director.
Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States mail, postage prepaid. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient. Oral notice shall be deemed to have been given at the time it is communicated to the recipient or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient.
Any notice shall state the date, place and hour of the meeting. Notice given to a director in accordance with this section shall constitute dul, legal and personal notice to such director.
Section 9. Action at a Meeting: Quorum and Required Vote. The presence of a majority of the authorized number of directors at a meeting of the board of directors constitutes a quorum for the transaction of business, except as hereinafter provided. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the board of directors, unless a greater number, or the same number, after disqualifying one or more directors from voting, is required by law, by the certificate of incorporation or by these bylaws. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors provided that any action taken is approved by at least a majority of the required quorum for such meeting.
Section 10. Validation of Defectively Called or Noticed Meetings. The transactions of any meeting of the board of directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum is present and if, either before or after the meeting, each of the directors not present or who, though present, has prior to the meeting or at its commencement, protested the lack of proper notice to him, signs a written waiver of notice or a consent to holding such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Section 11. Adjournment. A majority of the directors present, whether or not constituting a quorum, may adjourn any board of directors' meeting to another time or place.
Section 12. Notice of Adjournment. If a meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of adjournment; otherwise, notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned.
Section 13. Participation in Meetings by Conference Telephone. Members of the board of directors may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. Participating in a meeting as permitted in this Section constitutes presence in person at such meeting.
Section 14. Action Without Meeting. Any action by the board of directors may be taken without a meeting if all members of the board shall individually or collective consent in writing to such action. Such written consents shall be filed with the minutes of the proceedings of the board and shall have the same force and effect as a unanimous vote of such directors.
Section 15. Fees and Compensation. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by resolution of the board of directors.
Section 16. Committees. The board of directors may, by resolution
adopted by a majority of the authorized number of directors, designate an
executive and other committees, each consisting of two (2) or more directors,
to serve at the pleasure of the board of directors, and may prescribe the
manner in which proceedings of any such committee meetings of such committee
may be regularly scheduled in advance and may be called at any time by any two
(2) members thereof; otherwise, the provisions of these bylaws with respect to
notice and conduct of meetings of the board of directors shall govern. Any
such committee, to the extent provided in a resolution of the board of
directors, shall have all of the authority of the board of directors, except
as limited by the Delaware General Corporation Law.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the corporation shall be a president, a secretary and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article. Any number of offices may be held by the same person.
Section 2. Election. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 6 of this Article, shall be chosen annually by, and shall serve at the
pleasure of, the board of directors, and each shall hold his office until he
or she shall resign or shall be removed or otherwise disqualified to serve, or
his or her successor shall be elected and qualified.
Section 3. Subordinate Officer. The board of directors or the chief executive officer may appoint such other officer as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
Section 4. Removal and Resignation. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors, at any regular or special meeting thereof, or, except in case of an officer chosen by the board of directors, by any officer upon whom such power or removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the board of directors, or to the president or to the secretary of the corporation. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which such officer is a party. Any such resignation
shall take effect at the date of the resignation without prejudice to the rights, if any, of the corporation under any contract to which such officer is a party. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular election or appointment to such office.
Section 6. Chairman of the Board. The chairman of the board, if there be such an office, shall preside at all meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by these bylaws.
Section 7. Chief Executive Officer. Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there by such an officer, the chief executive officer shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction and control of the business and officers of the corporation. He shall preside at all meetings of the stockholders and at all meetings of the board of directors. He shall be ex officio a member of all the standing committees, including the executive committee, if any, and shall have the general power and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws.
Section 8. President. The president shall be the chief operating officer of the corporation, and in the event of absence or disability of the chief executive officer, or if no chief executive officer has been appointed by the board of directors, shall perform all the duties of the chief executive officer, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer.
Section 9. Vice Presidents. In the absence or disability of the president, the vice presidents in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, if there be such an officer or officers, shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents, if there be such an officer of officers, shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors or these bylaws.
Section 10. Secretary. The secretary shall record or cause to be recorded, and shall keep or cause to be kept, at the principal executive office or such other place as the board of directors may order, a book of minutes of all meetings and actions, of the stockholders, the board of directors and all committees thereof, with the time and place of holding of meetings, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors' meetings, the number ob shares present or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation's transfer agent, or registrar, if one be appointed, a share register, or a duplicate share register, showing the names of the stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.
Section 11. Chief Financial Officer. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and colored accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
Section 12. Assistant Secretaries and Assistant Treasurers. In the absence or disability of the secretary or the chief financial officer, their duties shall be performed and their powers exercised, respectively, by any assistant secretary or any assistant treasurer which the board of directors may have elected or appointed. The assistant secretaries and the assistant treasurers shall have such other duties and powers as may have been delegated to them, respectively, by the secretary or the chief financial officer or by the board of directors.
ARTICLE V
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS
Section 1. Definitions. For the purpose of this Article V, "agent" means any person who is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation; "proceeding" means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative; and "expenses" includes, without limitation, attorneys' fees and any expenses of establishing a right to indemnification under Section 4 or Section 5(c) of this Article V.
Section 2. Actions by Third Parties. The corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was an agent of the corporation, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding to the fullest extent permitted by the laws of the State of Delaware as they may exist from time to time.
Section 3. Actions by or in the Right of the Corporation The corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was an agent of the corporation, against expenses, actually and reasonably incurred by such person in connection with the defense or settlement of such action to the fullest extent permitted by the laws of the State of Delaware as they may exist from time to time.
Section 4. Advance of Expenses. Expenses incurred in defending any proceeding may be advanced by the corporation prior to the final disposition of such proceeding upon receipt of a request therefor and an undertaking by or on behalf of the agent to repay such amount unless it shall be determined ultimately that the agent is not entitled to be indemnified as authorized in this Article V.
Section 5. Contractual Nature. The provision of this Article V shall be deemed to be a contract between the corporation and each director and officer who serves in such capacity at any time while this Article is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.
Section 6. Insurance. Upon and in the event of a determination by the board of directors to purchase such insurance, the corporation shall purchase and maintain insurance on behalf of any agent of the corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agent's status as such whether or not the corporation would have the power to indemnify the agent against such liability under the provisions of this Article V. All amounts received by an agent under any such policy of insurance shall be applied against, but shall not limit, the amounts to which the agent is entitled pursuant to the foregoing provisions of this Article V.
Section 7. ERISA. To assure indemnification under this provision of all such persons who are or were "fiduciaries" of an employee benefit plan governed by the Employee Retirement Income Security Act of 1974, as amended from time to time ("ERISA"), the provisions of this Article V shall, except as limited by Section 410 of ERISA, be interpreted as follows: an "other enterprise" shall be deemed to include an employee benefit plan; the corporation shall be deemed to have requested a person to serve as an employee of an employee benefit plan where the performance by such person of his duties to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person
with respect to an employee benefit plan in the performance of such person's duties for a purpose reasonably believed by such person to be in compliance with ERISA and the terms of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the corporation.
ARTICLE VI
GENERAL CORPORATE MATTERS
Section 1. Record Date for Purposes Other Than Notice and Voting For purposes of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any right in respect of any other lawful action (other than as provided in Section 12 of Article II of these bylaws), the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action, and in that case only stockholders of record on the date so fixed are entitled to receive the dividend, distribution, or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Delaware General Corporation Law.
If the board of directors does not so fix a record date, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.
Section 2. Inspection of Corporate Records. The accounting books and records, the records of stockholders, and minutes of proceedings of the stockholders and the board and committees of the board of directors of the corporation and any subsidiary of the corporation shall be open to inspection upon the written demand on the corporation of any stockholder or holder of a voting trust certificate at any reasonable time during usual business hours, for a purpose reasonably related to such holder's interests as a shareholder or as the holder of such voting trust certificate. Such inspection by a stockholder or holder of a voting trust certificate may be made in person or by an agent or attorney, and the right of inspection includes the right to copy and make extracts.
A stockholder or stockholders holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation or who hold at least one percent (1%) of such voting shares and have filed a Schedule 14B with the United States Securities and Exchange Commission relating to the election of directors of the corporation shall have (in person, or by agent or attorney) the right to inspect and copy the record of stockholders' names and addresses and shareholdings during usual business hours upon five (5) business days' prior written demand upon the corporation and to obtain from the transfer agent, if any, for the corporation, upon written demand and upon the tender of its ususal charges, a list of the stockholders' names and addresses, who are entitled to vote for the election of directors, and their shareholdings, and of the most recent record date for which it has been complied or as of a date specified by the stockholder subsequent to the date of demand. The list shall be made available on or before the later of five (5) business days after the demand is received or the date specified therein as the date as of which the list is to be compiled.
Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation. Such inspection by a director may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts.
Section 3. Inspection of Bylaws. The corporation shall keep in its principal executive office the original or a copy of the bylaws as amended or otherwise altered to date, certified by the secretary, which shall be open to inspection by the stockholders at all reasonable times during office hours.
Section 4. Checks, Drafts, Etc. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the board of directors.
Section 5. Contracts and Instruments; How Executed. The board of directors, except as in these bylaws otherwise provided, may authorize any officer or officers, agent or agent, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances; and, unless so authorized or ratified by the board of directors, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount.
Section 6. Certificate for Shares. Every holder of shares in the corporation shall be entitled to have a certificate signed in the name of the corporation by the chairman of the board or the president or a vice president any the chief financial officer or an assistant treasurer or the secretary or any assistant secretary, certifying the number of shares and the Class or series of shares owned by the stockholder. Any of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.
Any such certificate shall also contain such legend or other statement as may be required by applicable state securities laws, the federal securities laws, and any agreement between the corporation and the stockholders thereof.
Certificates for shares may be issued prior to full payment under such restrictions and for such purposes as the board of directors or these bylaws may provide; provided, however, that on any certificate issued to represent any partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated.
Except as provided in this Section 6, no new certificate for shall be issued in lieu of an old one unless the latter is surrendered and canceled at the same time. The board of directors may, however, in case of certificate for shares is alleged to have been lost, stolen, or destroyed, authorize the issuance of an new certificate in lieu thereof, and the corporation may require that the corporation be given a bond or other adequate security sufficient to indemnify it against any claim that may be made against it (including expense or liability) on account of the alleged loss, theft, or destruction of such certificate of the issuance of such new certificate.
Section 7. Representation of Shares of Other Corporation. The president or any other officer or officers authorized by the board of directors or the president that are each authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the corporation. The authority herein granted may be exercised either by any such officer in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officer.
Section 8. Construction and Definitions. Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of the foregoing, the masculine gender includes the feminine and neuter, the singular includes the plural and the plural number includes the singular, and the term "person" includes a corporation as well as a natural person.
ARTICLE VII
AMENDMENTS TO BYLAWS
Section 1. Amendment by Stockholders. New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the certificate of incorporation of the corporation sets forth the number of authorized directors of the corporation, the authorized number of directors may be changed only by an amendment of the certificate of incorporation.
Section 2. Amendment by Directors. The board of directors is expressly authorized to make, repeal, alter, amend and rescind the bylaws of the corporation.
/s/ John Sindt _____________________________ John Sindt, President |
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (the or this "Sublease Agreement") is made and entered into as of this 1 day of September, 2003 (the "Effective Date"), by and between ORTHO DEVELOPMENT CORPORATION, a Utah corporation ("ORTHO") ("Sublessor" or "Tenant"), and Flexpoint Holdings L.L.C., a Utah company ("Sublessee").
RECITALS:
A. Sublessor is the tenant under that certain Commercial Lease, dated September 14, 1994, as amended by that certain Lease Extension Agreement, dated as of September 29, 1999, together with all exhibits and addenda attached thereto (collectively, the "Master Lease Agreement"), pursuant to which Cheyenne Concrete Company, a Nevada Corporation ("Lessor" or "Landlord"), leased to Sublessor approximately 4,300 square feet of office and storage space and approximately 7,200 square feet of warehouse space (the "Premises") in Building One of the Draper Business Park (the "Building"), located at 106 West 12200 South, Draper, Utah 84020.
B. Subject to the terms and conditions of this Agreement, Sublessor desires to retain its lease of the Premises and to sublease the Premises to Sublessee, and Sublessee desires to sublease the Premises from Sublessor.
NOW THEREFORE, in consideration of the covenants and promises set forth in this Agreement, and the mutual benefits to be derived therefrom and herefrom, the parties hereto agree as follows:
1. DEFINED TERMS. Capitalized terms used in this Sublease Agreement and not otherwise defined in this Sublease Agreement shall have the meanings given to such terms in the Master Lease.
2. SUBLEASED PREMISES. Subject to the terms and conditions of this Sublease Agreement, Sublessor hereby subleases to Sublessee, the Premises consisting of approximately 11,500 square feet of office and storage space, together with the Common Areas and all other rights appurtenant to such defined portion of the Premises (collectively, and as so defined, the "Subleased Premises").
3. REPRESENTATIONS AND WARRANTIES BY SUBLESSOR. For the benefit of Sublessee, Sublessor makes the following representations and warranties, each of which may be relied upon by Sublessee, except as and to the extent Sublessee has knowledge to the contrary, as of the date hereof and as of the 1 day of September, 2003 (the "Commencement Date"):
(a) Subject to the consent of Landlord as specified below, Sublessor has the requisite corporate power and authority, and has been duly authorized, to execute this Sublease Agreement.
(b) To Sublessor's knowledge, the Master Lease is in full force and effect, the Master Lease has not been amended or modified in any manner, no event of default by Sublessor exists under the Master Lease, and there is no event or circumstance that has occurred and is continuing that with the passage of time or the giving of notice, or both, would constitute an event of default under the Master Lease.
(c) To Sublessor's knowledge, Landlord has performed all of its obligations to be performed pursuant to the Master Lease as of the date of this Sublease Agreement, Landlord is not in default under the Master Lease and there is no event or circumstance that has occurred and is continuing that with the passage of time or the giving of notice, or both, would constitute a default by Landlord under the Master Lease.
5. SUBLESSEE REPRESENTATIONS AND WARRANTIES. For the benefit of Landlord and Sublessor, Sublessee hereby represents and warrants to, and agrees with, Landlord and Sublessor as follows, each of which is true and accurate as of the date of the execution of this Sublease Agreement, and each of which will be true and accurate as of the Commencement Date:
(a) Sublessee has the requisite corporate company power and authority, and has been duly authorized, to execute this Sublease Agreement.
(b) Sublessee has made independent inquiry and investigation into the transactions contemplated by this Sublease Agreement and, on the basis of such inquiry and investigation, has independently concluded that the transactions contemplated by and under this Sublease Agreement are in the best interests of Sublessee and for full, fair and adequate consideration, such that the transactions contemplated by and under this Sublease Agreement are being made by Sublessee voluntarily, with no duress, and with full understanding of the circumstances.
6. TENANCY.
(a) The "Tenancy" of this Sublease Agreement shall commence on the Commencement Date and shall continue, through September 30, 2004, in accordance with the provisions of this Sublease Agreement. By the execution hereof, Sublessor and Sublessee acknowledge and agree that Sublessor shall have no obligation or liability for the alteration, remediation, modification and/or improvement of the Premises or the Subleased Premises under the Master Lease, by reason of this Sublease Agreement or otherwise, including without limitation in connection with any work required under the Master Lease or in connection with any future occupant of all or any part of the Premises.
(b) Subleasee shall take possession of subleased premises on August 15, 2003 or at signing of lease prior to that time, in order to make necessary improvements.
7. RENT. For the use of the Subleased Premises hereunder, Sublessee agrees that:
(a) Sublessee shall pay to Sublessor, as fixed monthly rent for the Subleased Premises during the Tenancy, without deduction, setoff, notice, or demand (except as specifically provided for in this Sublease Agreement), at the address set forth below, five thousand five hundred and NO/100 Dollars ($5,500.00).
(b) Unless otherwise instructed in writing by Sublessor, each installment of fixed monthly rent, Additional Rent, and other payments due from Sublessee to Sublessor pursuant to this Sublease Agreement shall be paid to Sublessor on or before the date due (being the first day of each month of the Tenancy, commencing on the Commencement Date) at the office of Sublessor, 12187 South Business Park Drive, Draper, Utah 84020.
(c) All rent shall be paid in advance on the first day of each month of the Commencement Date. If the Commencement Date begins or ends on a day other than the first or last day of a month, the rent for the partial months shall be prorated on a per diem basis, based on a 30-day month, for actual days elapsed.
(d) Subleasee agrees to provide subleasor with a refundable security deposit of $5,500 upon subleasee taking possession of the premises. This deposit shall be refundable at conclusion of lease terms, less any applicable expenses, as per this lease agreement.
(e) Subleasor agrees to provide subleasee internet access for one hundred fifty and NO/100 dollars ($150.00) per month for one (1) year or until subleasee obtains another source for their internet access.
8. Late Charges; Default Interest. If any monthly rent, Additional Rent, or other charge, expense, or other amount due and payable hereunder by Sublessee to Sublessor is not paid as and when due, then, without limitation, such unpaid amount shall bear interest from the due date until paid, both before and after judgment, at the rate of ten percent (10%) per annum. Further, if any monthly rental payment or any payment required to be made pursuant to this Sublease Agreement is not paid within any applicable notice and cure period after the same becomes due, Sublessee shall pay to Sublessor a late charge in an amount equal to five percent (5%) of any such overdue payment amount. The provisions for such default interest and late charges shall be in addition to all of the parties' other rights and remedies hereunder or at law and shall not be construed as, in any case, a penalty.
9. USE OF SUBLEASED PREMISES; signage and parking: Sublessor and Sublessee agree as follows:
(a) The Subleased Premises shall be used and occupied by Sublessee for general office purposes and warehouse use in accordance with customary business practices and applicable law and for no other use or purpose (the "Use").
(c) Sublessee shall obtain at its sole cost and expense all necessary licenses and permits necessary to conduct the Use;
(d) Sublessee shall operate only such services as are necessary for or incidental to the Uses.
(e) Sublessee may utilize office furniture currently located on the Subleased Premises, as identified on attached Exhibit "C". Sublessee shall be responsible for maintaining, repairing and replacing such furniture to ensure that such furniture is returned to Sublessor in its pre-sublease condition at the end of the Tenancy, ordinary wear and tear excepted. The costs for repair or replacement of damaged or destroyed furniture shall be borne entirely by Sublessee.
(f) Sublessee shall, at Sublessee's sole cost and expense, comply with all laws, ordinances, regulations or orders of any federal, state, county or municipal or other public authority applicable to Sublessee or affecting the Subleased Premises and the Common Access Areas, including but not limited to occupational health and safety, hazardous waste and substances, sudden or non-sudden pollution and environmental matters, in connection with the Use.
(g) Sublessee will not commit any waste on the Subleased Premises, nor permit any obnoxious odors or noise to emanate from the Subleased Premises, nor shall it use or permit the use of the Subleased Premises in violation of any present or future law of the United States or of the State of Utah, or in violation of any municipal or county ordinance or regulation applicable thereto. Sublessee shall promptly notify Landlord and Sublessor of Sublessee's receipt of any notice of a violation of any such law, standard or regulations.
(h) Sublessee may install on the Subleased Premises any trade fixtures and equipment reasonably necessary for Sublessee's Use of the Subleased Premises, which shall remain Sublessee's personal property. Sublessee may remove any such trade fixtures and equipment at any time during the Tenancy, but shall repair any damage to the Premises or the Building caused by the installation or removal of such trade fixtures and equipment.
(i) Sublessee shall be entitled to building directory, elevator access and doorway signage, to the extent available to Sublessor or other tenants of the Building and reasonably necessary or appropriate to indicate Sublessee's Use, but, otherwise, shall not have any other signage rights in respect of the Use under the Master Lease or otherwise.
(j) Sublessee shall be entitled to utilize parking spaces in the Common Area, as part of the Subleased Premises, without additional rent.
(k) Sublessee shall be permitted to place and maintain signage on any exterior door, wall, or window of the Subleased Premises; provided, however, no signage may be placed by Sublessee without first obtaining Sublessor's written approval and consent, said approval and consent not to be unreasonably withheld or delayed. Sublessee shall be responsible for all costs of placing and maintaining such approved signage.
(l) Notwithstanding Sublessor's sublease of the Subleased Premises to Sublessee under this Sublease Agreement, Sublessor shall be solely responsible for and shall timely pay each installment of Base Rent, Tenant's proportionate share of Additional Rent, utilities, taxes and all other amounts which become due and payable by Tenant under the Master Lease.
(m) Notwithstanding Sublessor's sublease of the Subleased Premises to Sublessee under this Sublease Agreement, Sublessor shall fully and timely perform all obligations required by Sublessor to be performed under the Master Lease, and shall, at all times, comply with all provisions of applicable law.
10. ASSIGNMENT AND SUBLETTING. Sublessee shall not assign this Sublease Agreement or sublet all or any part of the Subleased Premises without the prior written consent of Sublessor (and the consent of Landlord), which consent, subject to and consistent with the terms and conditions of Paragraph 16 of the Master Lease, may be withheld, in Sublessor's and/or Landlord's sole discretion; provided that, in the event of any request for such assignment or sublease, Sublessor may, in lieu of any such consent, terminate this Sublease as to that part or all of the Subleased Premises proposed to be assigned or subleased; provided further that Sublessee shall not be released from its obligations under this Sublease Agreement in the event of any such assignment or sublease.
11. DEFAULT AND REMEDIES. Sublessor and Sublessee further covenant and agree as follows:
(a) Sublessee shall be deemed to be in default of this Sublease Agreement upon the failure to pay rent (and/or any other amounts due and payable hereunder) when due according to the terms of this Sublease Agreement.
(b) Other than as set forth in subparagraph 11(a) above, a party shall be deemed to be in default of this Sublease Agreement only upon the expiration of five (5) days from receipt of written notice from the other party specifying the particulars in which such party has failed to perform the obligations of this Sublease Agreement, unless such party, prior to the expiration of said five (5) days, has rectified the particulars specified in said notice of default; provided that, notwithstanding the foregoing, such party shall not be deemed to be in default if such failure (except a failure to pay money) cannot be rectified within said five (5) day period and such party is using good faith and its best efforts to rectify the particulars specified in the notice of default and, in any case, shall cure any such failure within fifteen (15) days following any such notice of default.
(c) In addition to the remedies specifically set forth in this Sublease Agreement, Sublessor and Sublessee shall have all other remedies provided by law or statute to the same extent as if fully set forth herein word for word. No remedy herein conferred upon, or reserved to Sublessor or Sublessee shall exclude any other remedy herein or by law provided, but each shall be cumulative.
(d) If Sublessee is in default, Sublessor may, upon two (2) days' prior written notice to Sublessee (in addition to the notice required under subparagraph 11(b)), terminate this Sublease Agreement.
(e) Should Sublessee elect to terminate this Sublease Agreement, subject to any limitations under applicable Utah law, Sublessor may recover from Sublessee any unpaid rent which had been earned at the time of such termination and any other amounts necessary to compensate Sublessor for all detriment caused by Sublessee's failure to perform its obligations under this Sublease Agreement or which in the ordinary course would be likely to result therefrom, including, but not limited to, any costs or expenses incurred by Sublessor in (A) retaking possession of the Subleased Premises, including reasonable attorneys' fees therefor, (B) maintaining or preserving the Subleased Premises after any default, (C) preparing the Subleased Premises for reletting to a new sublessee, including repairs or alterations to the Subleased Premises, (D) leasing commissions, or (E) any other costs necessary or appropriate to relet the Subleased Premises
(f) If the defaulting part is Sublessor, Sublessee may also terminate this Sublease Agreement upon thirty (30) days' prior written notice to Sublessor (in addition to the notice required under subparagraph 11(b)).
(g) If a party is in default, the other party shall have the right, upon an additional five (5) days prior written notice to the defaulting party, to cure such default on behalf of the defaulting party and, in connection therewith, do all work and make all payments deemed reasonably necessary or appropriate by such curing party, including payment of reasonable costs (including reasonable attorneys' fees) and charges in connection with any legal action which may have been commenced or threatened (except that in case of an emergency, prior notice need not be given for a party to exercise its rights hereunder), and all sums so expended by a curing party shall be paid by the defaulting party on demand.
12. CASUALTY AND CONDEMNATION. If there is a taking by eminent domain within the coverage of Paragraph 25 of the Master Lease (a "Taking") or any casualty loss within the coverage of Paragraph 25 of the Master Lease, which in either case affects the Subleased Premises and, as a result of such Taking or casualty loss, the "Tenant" under the Master Lease has the option to terminate the Master Lease, Sublessee shall have the right to terminate this Sublease Agreement upon thirty (30) days' written notice to Sublessor. In no event will Sublessor agree to, or exercise any right to, terminate the Master Lease under Paragraph 11 of the Master Lease without the prior written consent of Sublessee, in Sublessee's sole and absolute discretion, unless Sublessee has first exercised the right granted in this Paragraph 11 to terminate the Sublease Agreement.
13. INSURANCE. Unless and as and to the extent the Sublessee shall determine, in its sole discretion, to self-insure, from and after the date of delivery of the Leased Premises to Sublessee, Sublessee will carry and maintain at Sublessee's sole cost and expense the following types of insurance, in the amounts specified and in the form hereinafter provided for, and shall, upon request, provide Landlord or Sublessor with a certificate evidencing such insurance.
(a) Sublessee shall obtain and keep in effect the following insurance, at Sublessee's sole cost and expense.
(i) Insurance upon all property situated in the Subleased Premises owned by Sublessee or for which Sublessee is legally liable.
(ii) Lessee Improvements Property Damage. Sublessee shall be responsible for obtaining and paying for such insurance as Sublessee may desire on Sublessee's trade fixtures and personal property from time to time in or upon the Leased Premises, and Sublessor shall not be liable for damage to or loss or theft of property of Sublessee or others.
(iii) Commercial General Liability insurance including fire, legal liability and contractual liability insurance coverage with respect to the Building and the Subleased Premises. The coverage is to include activities and operations conducted by Sublessee and any other person performing work on behalf of Sublessee and those for whom Sublessee is by law responsible. Such insurance shall be written on a comprehensive basis with inclusive limits of not less than ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) combined single limit of liability for each occurrence for bodily injury and property damage which amounts may be changed by consent of both parties in future years. The limit of said insurance shall not, however, limit the liability of Sublessee hereunder. Each of Sublessor and Sublessee shall be named as an additional insured on this liability policy arising out of Sublessee's occupancy and/or negligent use of the Subleased Premises and/or the Building.
(iv) Any other form of insurance as Sublessee, Sublessor, Landlord, or Landlord's Lender may from time to time mutually agree is reasonable and/or as may be otherwise required of a tenant under the Master Lease, including without limitation workers compensation insurance with no less than the limits required by Utah law. Such insurance shall be in the form, amounts and for the risks which a prudent tenant of the Subleased Premises would insure.
(b) All policies of insurance required by the terms of this Sublease Agreement shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy notwithstanding an act or negligence of Landlord or Sublessor that might otherwise result in forfeiture of said insurance, and the further agreement of the insurer waiving all rights of subrogation, counterclaim or deductions against Landlord or Sublessor.
(c) Sublessee shall deliver to Sublessor and Landlord the certificates of insurance for the insurance required to be carried by Sublessee, which, except for the insurance described in subparagraph a(ii), above, of this Paragraph 13, shall have attached an additional insured endorsement, in a form reasonably satisfactory to Sublessor, and Landlord, and a standard waiver of subrogation endorsement. If Sublessee provides any of the required insurance through blanket policies covering more than one location, then Sublessee shall furnish Sublessor with a Certificate of Insurance for each such policy setting forth the coverage, the limits of liability, the name of the carrier, the policy number, and the expiration date, at least fifteen (15) days prior to the expiration of each such policy. All such policies shall contain a provision that such policies will not be cancelled or materially amended, or the scope thereof or limits of coverage thereof or limits reduced, without at least thirty (30) days prior written notice by registered mail to Sublessor and Landlord.
(d) If Sublessee fails to secure or maintain any insurance coverage required of it by the terms of this Sublease Agreement or fails to self-insure, in Sublessee's sole discretion, Sublessor may, without obligation purchase such insurance coverage required at Sublessee's expense. Sublessee shall promptly reimburse Sublessor for any monies so expended.
Landlord, Sublessee and Sublessor hereby mutually release and waive their entire right of recovery against the other party for any and all loss or damage to the improvements, all personal property of Sublessee, and any installations, betterments or improvements added to the building by Sublessee, where such loss results from fire, is occasioned, caused or incurred by, or results from fire, windstorm, hail, explosion, riot attending strike, civil commotion, aircraft, vehicles, smoke and vandalism and all other perils which are insured (either by self insurance or otherwise) against under the terms and conditions of this Sublease Agreement, whether said loss occurred or was caused by the negligence of the Landlord, Sublessee or Sublessor, their respective agents, servants, employees, subleases or concessionaires, or otherwise, as and to the extent any such insurance covers any such loss or damage, and Landlord, Sublessor and Sublessee each further warrant that insurance companies insuring Landlord, Sublessor or Sublessee shall have no rights against the other, whether by assignment, subrogation or otherwise; provided that, notwithstanding the foregoing, willful misconduct of a criminal nature lawfully attributable to a party shall, to the extent that said conduct contributes to loss or damage, not be excused under this Paragraph.
14. INCREASE IN FIRE INSURANCE PREMIUMS. Sublessee agrees that it will not at any time during the Tenancy carry any stock of goods or do anything in or about the Leased Premises which will in any way tend to increase the insurance rates upon the Building. Sublessee agrees to pay to Sublessor forthwith upon demand the amount of any verified increase in premiums for insurance against loss by fire that may be charged during the Tenancy of this Lease on the amount of insurance to be carried by Sublessor on the Building resulting from the foregoing or from Sublessee doing any act in or about the Leased Premises which does so increase the insurance rates, whether or not Sublessor shall have consented to such act on the part of Sublessee. If Sublessee installs upon the Leased Premises any electrical equipment which constitutes an overload on the electrical lines of the Leased Premises (and Landlord has otherwise complied with the terms of Paragraph 11 hereof), Sublessee shall, at its own expense, make whatever changes are necessary to comply with the requirements of the insurance underwriters and any governmental authority having jurisdiction thereof, but nothing herein contained shall be deemed to constitute Landlord's consent to such overloading.
Sublessor agrees that it will not at any time during the Tenancy carry any stock of goods or do anything in or about the Leased Premises which will in any way tend to increase the insurance rates of the Sublessee for its trade fixtures and personal property. Sublessor agrees to pay to Sublessee forthwith upon demand the amount of any verified increase in premiums for insurance against loss by fire that may be charged during the Tenancy of this Sublease Agreement on the amount of insurance to be carried by Landlord on the Subleased Premises resulting from the foregoing or from Sublessor doing any act in or about the Subleased Premises which does so increase the insurance rates, whether or not Sublessee shall have consented to such act on the part of Sublessor. If Sublessor installs upon the Leased Premises any electrical equipment which constitutes an overload on the electrical lines of the Leased Premises (and Sublessee has otherwise complied with the terms of Paragraph 11 hereof), Sublessor shall, at its own expense, make whatever changes are necessary to comply with the requirements of the insurance underwriters and any governmental authority having jurisdiction thereof, but nothing herein contained shall be deemed to constitute Sublessee's consent to such overloading.
15. ADDITIONAL COVENANTS AND AGREEMENTS. In addition, Sublessor and Sublessee covenant and agree as follows:
(a) Sublessor shall remain liable for all of the obligations of the Tenant under the Master Lease. Sublessor shall timely pay and perform all of the "Payment Obligations" (defined below), conditioned only upon timely payment by Sublessee to Sublessor of the amounts due and owing by Sublessee to Sublessor pursuant to this Sublease Agreement. Sublessor shall timely perform all of the terms and conditions of the Master Lease as they relate to the Premises. As used in this Sublease Agreement, the term "Payment Obligations" refers to any and all obligations of Sublessor to pay any amount to Landlord under the Master Lease.
(b) Sublessor hereby indemnifies, holds harmless and agrees to defend Sublessee from and against any and all losses, injury, obligations, claims, damages, judgments, and injuries of any nature on account of any breach by Sublessor of the obligations of Sublessor under this Sublease Agreement or the Master Lease, including without limitation, on account of any breach by Sublessor of the Payment Obligations, except to the extent that Sublessor is prevented from performing any such obligations by a breach of this Sublease Agreement by Sublessee. Sublessor's obligations with respect to indemnification hereunder shall remain effective, notwithstanding the expiration or termination of this Sublease Agreement, as to claims arising or accruing prior to the expiration or termination of this Sublease Agreement.
(c) Sublessee hereby indemnifies, holds harmless and agrees to defend Sublessor from and against any and all losses, injury, obligations, claims, damages, judgments, and injuries of any nature on account of any breach by Sublessee of the obligations of Sublessee under this Sublease Agreement, except to the extent that Sublessee is prevented from performing any such obligations by a breach of this Sublease Agreement by Sublessor. Sublessee's obligations with respect to indemnification hereunder shall remain effective, notwithstanding the expiration or termination of this Sublease Agreement, as to claims arising or accruing prior to the expiration or termination of this Sublease Agreement.
(d) Except as may be otherwise required under the Master Lease, Sublessor agrees, upon reasonable, advance written request of Sublessee specifying the particulars thereof, to enforce the terms of the Master Lease to the extent reasonably necessary to cause Landlord to perform its obligations under the Master Lease, as they relate to the Subleased Premises, for the benefit of Sublessee.
(e) If there are inconsistencies in the terms of this Sublease Agreement and the terms of the Master Lease, as between Sublessor and Sublessee, the terms of this Sublease Agreement shall control.
(f) To the extent that the Master Lease grants rights and benefits to the "Tenant" under the Master Lease, Sublessee may exercise, enforce, and enjoy all such rights as they relate to the Subleased Premises independent of, and without any consent or approval from, Sublessor; provided that any such exercise shall not adversely affect any other use of or interest in the Subleased Premises.
(g) Other than the Payment Obligations, Sublessee assumes and agrees to perform the Lessee's obligations under the Master Lease during the Tenancy, to the extent that such obligations are applicable to the Subleased Premises. Sublessee shall not commit or suffer any act or omission that will violate or constitute a default under any of the provisions of the Master Lease.
(h) Conditioned only upon compliance by Sublessee with the terms and conditions of this Sublease Agreement, Sublessor covenants that Sublessee shall have quiet and peaceful possession of the Subleased Premises during the Sublessee Business Hours throughout the Tenancy, without, except as and to the extent of any rights of Landlord under the Master Lease, interference from Sublessor, anyone acting by, through or under Sublessor.
(i) If the Master Lease terminates, this Sublease Agreement shall terminate and the parties shall be relieved of any further liability or obligation under this Sublease Agreement; provided, however, that if the Master Lease terminates as a result of a default or breach by Sublessor or Sublessee under this Sublease Agreement and/or the Master Lease from and after the date hereof, then the defaulting party shall be liable to the nondefaulting party for actual damages and relocation expenses (out-of-pocket) suffered as a result of such termination, consequential damages and lost profits excepted.
(j) Sublessee agrees not to permit any lien for monies owing by Sublessee to remain against the Subleased Premises for a period of more than ten (10) days; provided, however, that nothing herein contained shall prevent Sublessee, in good faith and for good cause, from contesting in the courts the claim or claims of any person, firm or corporation growing out of Sublessee's operation of the Subleased Premises or costs of improvements by Sublessee on the Subleased Premises, and the postponement of payment of such claim or claims until such contest shall finally be decided by the courts shall not be a violation of this Sublease Agreement or any covenant hereof; provided that during such contest, upon Sublessor's request, Sublessee shall deposit with Sublessor such security as Sublessor may reasonably deem necessary to prevent the impairment of the Subleased Premises. Should any such lien be filed and not released or discharged or action not commenced to declare the same invalid within ten (10) days after discovery of same by Sublessee, Sublessor may at Sublessor's option (but without any obligation so to do) pay or discharge such lien and may likewise pay and discharge any taxes, assessments or other charges against the Subleased Premises which Sublessee is obligated hereunder to pay and which have become a lien on the Subleased Premises. Sublessee agrees to repay any sums so paid by Sublessor upon demand therefor, together with interest at the rate of twelve percent (12%) per annum from the date any such payment is made.
(k) Sublessee or Sublessor, as the case may be, shall at any time upon not less than five (5) days' prior written notice from Sublessor or Sublessee, as the case may be, execute, acknowledge, and deliver to Sublessor or Sublessee, as the case may be, a statement in writing that:
(i) Certifies that this Sublease Agreement is unmodified and in full force and effect (or if modified, states the nature of such modification and certifies this Sublease Agreement, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any; and
(ii) Acknowledges that there are not, to Sublessee's or Sublessor's knowledge, as the case may be, any uncured defaults on the part of Landlord or, as the case may be, Sublessor or Sublessee hereunder, or specifying such defaults if any are claimed.
Sublessee's or Sublessor's, as the case may be, failure to deliver such statement within such time shall be conclusive upon Sublessee or Sublessor that:
(i) This Sublease Agreement is in full force and effect, without modification except as may be represented by Lessor or, as the case may be, Sublessor or Sublessee;
(ii) There are no uncured defaults in Lessor's or, as the case may be, Sublessor's or Sublessee's performance; and
(iii) Not more than one month's rent has been paid in advance.
(l) Sublessee acknowledges and agrees that authorizing resolutions, together with signature and incumbency certifications for the individuals signing on behalf of Sublessee shall be delivered by Sublessee to Sublessor concurrently with the execution and delivery of this Sublease Agreement.
16. ATTORNEYS' FEES. If Sublessor or Sublessee shall commence an action against the other arising out of or in connection with this Sublease Agreement, the prevailing party shall be entitled to recover its actual costs of suit and reasonable attorneys' fees.
17. MAINTENANCE, REPAIRS AND INSPECTION OF PROPERTY. Except as otherwise specified in this Sublease Agreement, the Sublessor or the Landlord will make all necessary structural and exterior repairs to the Subleased Premises and all repair and maintenance of the heating, air conditioning, electrical, and plumbing equipment located in and serving the Subleased Premises, to ensure that the Subleased Premises are reasonably suitable for the Use and in good condition and repair, normal wear and tear excepted, at the expense of the Landlord or Sublessor; provided, however, that if the repairs or maintenance are required by reason of the special requirements, acts, or negligence of the Sublessee or of the agents, employees, patients, or invitees of the Sublessee, then the Sublessor or Landlord shall make the necessary repairs at the expense of the Sublessee, which shall be paid by the Sublessee to the Landlord or Sublessor within ten (10) days of the Lessor's or Lessee's written demand therefor, together with reasonably satisfactory evidentiary documentation thereof. All repairs and replacements will be at least equal to the original work in style, quality, and class.
Except as otherwise specified herein, the Sublessor shall have no obligation to repair, maintain or replace the interior of the Subleased Premises or any portion thereof, which is intended to be the sole responsibility of the Lessor under the Master Lease. At the expiration or termination of the Sublease Agreement, the Sublessee shall peacefully surrender the Leased Premises and the Parking Facilities, together with all improvements therein (other than moveable furnishings, trade fixtures, equipment, and personal property belonging to the Sublessee and not affixed to the Leased Premises) to the Lessee in a condition as good as when received by the Lessee, reasonable wear and tear and damage by acts of nature or the elements excepted.
18. COMMON AREAS; COMMON AREA MAINTENANCE.
(a) The Landlord and Sublessor represent, warrant and covenant to the Sublessee that, except and only to the extent that the same shall be reasonably necessary or appropriate for Use of the Subleased Premises by and for the benefit of the Sublessee, and the Sublessee's employees, customers, invitees, licensees, agents and representatives in connection with the Use, during the Tenancy, the Sublessee shall have right to the nonexclusive use and enjoyment of the "Common Areas" reasonably necessary or appropriate for access to and Use of the Subleased Premises. Except for the purposes specified in this paragraph, the Sublessor shall not be deemed or construed to be a legal or beneficial owner of the Building or any part thereof, but the Sublessor shall use its best reasonable efforts to ensure that the Sublessee shall not be deprived of and shall be entitled (for purposes of the Use) to nonexclusive use of and have access to the Common Areas and the Subleased Premises during the Tenancy.
(b) Sublessee shall pay to Sublessor as Additional Rent its prorata share (based upon the number of square feet comprising the Subleased Premises) of all common area maintenance and repair costs and all taxes assessed against the Premises that are required to be paid by Sublessor under the Master Lease.
19. UTILITY COSTS. Sublessee shall pay, on a monthly basis, all utility costs associated with Sublessee's Use of the Subleased Premises. Sublessee shall pay all such utility costs to Sublessor within ten (10) days after Sublessee's receipt of Sublessor's invoice itemizing all such utility charges.
21. TELEPHONE / TELECOMMUNICATION EXPENSES. Sublessee shall be solely responsible for the installation of and monthly rates for all additional telephone and telecommunication service necessary for Sublessee's Use of the Subleased Premises.
22. NOTICES. All notices and demands, which may or are to be required or permitted to be given by either party on the other hereunder shall be in writing. All notices and demands by Sublessor to Sublessee shall be sent by United States mail, postage prepaid, or by an express delivery service which maintains records of deliveries, freight prepaid, addressed to Sublessee at the Subleased Premises, and to the address herein below, or to such other place as Sublessee may from time to time designate in a notice to Sublessor. All notices and demands by Sublessee to Sublessor shall be sent by United States Mail, postage prepaid, or by an express delivery service which maintains records of deliveries, freight prepaid, addressed to Sublessor at the address set forth herein, and to such other person or place as Sublessor may from time to time designate in a notice to Sublessee. The date that notice is deemed to have been given, received and become effective shall be the date of actual receipt, if the notice is sent by express delivery service and four days following deposit in the United States mail, if the notice is sent through the United States mail.
If to Sublessor: with a copy to: Flexpoint Holdings, L.L.C. 106 West 12200 South Draper, Utah 84020 If to Sublessee: with a copy to: ORTHO DEVELOPMENT GROUP, INC. STOEL RIVES LLP 12187 South Business Park Drive 201 South Main Street, Suite 1100 Draper, Utah 84020 Salt Lake City, Utah Attention: Tom Waddoups Attention: Nile W. Eatmon, Esq. |
23. CONSTRUCTION OF SUBLEASE; FURTHER UNDERSTANDINGS. Sublessor and Sublessee, in furtherance of this Sublease Agreement, acknowledge and agree that:
(a) Words of any gender used in this Sublease Agreement shall be held to include any other gender, and words in the singular number shall be held to include the plural when the sense requires. Interpretation, construction and performance of this Sublease Agreement shall be governed by the laws of the State of Utah.
(b) This Sublease Agreement shall be governed by and construed in accordance with the laws of the State of Utah. For purposes of this Sublease Agreement, "force majeure" shall mean any delay caused by reason of a strike, labor trouble, acts of nature or any other cause beyond the reasonable control of a responsible party (financial inability excepted), where such party is otherwise without fault.
(c) The paragraph headings as to the contents of particular paragraphs herein are inserted only for convenience and are in no way to be construed as part of such paragraph or as a limitation on the scope of the particular paragraph to which they refer.
(d) The covenants and agreements contained in the within Sublease Agreement shall apply to, inure to the benefit of, and be binding upon the parties hereto and upon their respective successors in interest and legal representatives, subject to the restrictions contained herein on assignments by Sublessee.
(e) Except as and to the extent otherwise specified in this Sublease Agreement, this Sublease Agreement is not intended and shall not be deemed to amend, modify, terminate or relinquish any other right or obligation of Sublessor or Lessor under the Master Lease.
(f) The failure of a party to insist upon strict performance of any of the terms, covenants, conditions or agreements contained herein shall not be deemed a waiver of any rights or remedies that said party may have, and shall not be deemed a waiver of any subsequent breach or default in the performance of any of the terms, covenants, conditions or agreements contained herein.
(g) Nothing herein contained shall be deemed or construed as creating a relationship of principal and agent, partnership or joint venture between the parties, it being agreed that neither the method of computation or payment of rent nor any other provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties other than the relationship of landlord and tenant. Any obligation or liability whatsoever of Sublessor, which may arise at any time under this Sublease Agreement or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction, or undertaking contemplated hereby shall not be personally binding upon, nor shall resort for the enforcement thereof be had to the property of, its directors, shareholders, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort, or otherwise.
(h) This Sublease Agreement sets forth all terms, covenants, conditions, agreements, and understandings between Sublessor and Sublessee concerning the Subleased Premises, and Sublessor shall have no liability to Sublessee for any representations, warranties or covenants made in respect of the Subleased Premises by any other person or entity, including without limitation Landlord. No subsequent modification, amendment, or change in this Sublease Agreement shall be binding unless reduced to writing and signed by Sublessor and Sublessee. There are no representations or warranties between the parties pertaining to this Sublease Agreement, except as expressly set forth herein. The normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Sublease Agreement or any exhibits or amendments hereto.
[signature page follows; remainder of page intentionally left blank]
IN WITNESS WHEREOF, this Sublease Agreement has been executed and delivered by the undersigned as of the date first above written.
SUBLESSOR:
ORTHO DEVELOMENT CORPORATION, a Utah corporation
/s/ Thomas G. Waddoups
By:_____________________________________________
Thomas G. Waddoups
Printed Name:___________________________________
Title:__________________________________________
|
Dated this 22 day of August, 2003.
SUBLESSEE:
Flexpoint Holdings L.L.C., a Utah company
/s/ Jules A. DeGreef
By:_____________________________________________
Jules A. DeGreef
Printed Name:___________________________________
Title:__________________________________________
|
Dated this 22 day of August, 2003.
LANDLORD'S CONSENT
Landlord hereby consents to Sublessor's sublease of the Subleased Premises in accordance with the terms and conditions of this Sublease Agreement.
FGBP
a Utah L.L.C.
By /s/ Alan Wheatley ______________________________________________ |
Alan Wheatley Printed Name:___________________________________ Title:__________________________________________
Dated this 22 day of August, 2003.
EXHIBIT "A" Master Lease Agreement
EXHIBIT "B" Floor Plan
EXHIBIT "C" Office Furniture
CONSULTANT AGREEMENT
Agreement made this 3rd day of March, 2004 between Flexpoint Sensor Systems, Inc. (hereinafter referred to as "Corporation"), and Summit Resources Group, Inc. (hereinafter referred to as "Consultant"), (collectively referred to as the "Parties"):
RECITALS
A. Summit Resource Group, Inc. is an investor relations, direct marketing, publishing, public relations and advertising firm with expertise in the dissemination of information about publicly traded companies.
B. The Corporation desires to engage the Consultant to perform consulting services regarding all phases of the Corporation's ""Investor Relations" including direct investor relations and broker/dealer relations as such may pertain to the operation and advancement of the Corporation's business.
C. The Consultant desires to consult with the Board of Directors, the Officers of the Corporation, and certain administrative staff members of the Corporation, and to undertake for the Corporation consultation as to the company's investor relations activities and relationships with various broker/dealers in the securities industry.
NOW, THEREFORE, in consideration of the mutual promises, agreements and covenants contained herein and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Term: The term of this Agreement shall be for a period of twelve
(12) months commencing on the date first appearing above. This Agreement may
be terminated by either party only in accordance with the terms and conditions
set forth in Paragraph 8.
2. Services Provided by Consultant: Consultant shall provide consulting services in connection with the Corporation's "investor relations" dealings with NASD broker/dealers and the investing public. (At no time shall the Consultant provide services which would require Consultant to be registered and licensed with any federal or state regulatory body or self-regulating agency.) During the term of this Agreement, Consultant will provide those services customarily provided by an investor relations firm to a Corporation, including but not limited to the following:
(a) Aiding the Corporation in developing a marketing plan directed at informing the investing public of the business of the Corporation;
(b) Providing assistance and expertise in devising an advertising campaign in conjunction with the marketing campaign set forth in (1) above;
(c) Advise the Corporation and provide assistance in dealing with institutional investors in relation to the Corporation's offerings of its securities;
(d) Aid and assist the Corporation in the Corporation's efforts to secure "market makers" which will publicly trade the Corporation's stock. Said assistance shall include providing such information as may be required;
(e) Aid and advise the Corporation in establishing a means of securing nationwide interest in the Corporation's securities;
(f) Aid and assist the Corporation in creating an "institutional site program" to provide ongoing and continuous information to fund managers;
(g) Aid and consult with the Corporation in the preparation and dissemination of press releases and news announcements;
(h) Aid and consult with the Corporation in the preparation and dissemination of all "due diligence" packages requested by and furnished to NASD registered broker/dealers, the investigating public, and/or other institutional and/or fund managers requesting such information from the Corporation; and
(i) At the Corporation's direction, work with the Corporation's Public Relations firm to jointly support the Corporation's overall public relations.
3. Compensation: In consideration for costs and services provided by
the Consultant to the Corporation, the Corporation will issue 100,000 shares
of the Corporation's common restricted stock to the Consultant, and shall, on
behalf of the Consultant cause to be vested at the time of the execution of
the Agreement 50% of the warrants as set forth in a subparagraph (a) below and
shall cause the balance of the warrants to vest on may 1, 2004. The warrants
set forth in subparagraph (b) shall vest on September 1, 2004 if no
termination of this agreement has occurred prior to that date. If a notice of
termination, as described in Section 8 has been issued by either party, then a
pro rata number of the warrants to be vested in the final 50% amount shall be
vested through the date of termination. All warrants shall have a term of
five (5) years and shall contain piggyback demand registration rights. The
warrants shall be registered in the Company's next registration and may be
registered and issued to the Consultant at any time after being registered a t
the Company's discretion. The warrants shall be issued at the following
exercise price:
(a) 300,000 warrants post reverse split at $.70 a share
(b) 350,000 warrants post reverse split at $.80 a share
4. Compliance The common shares underlying the warrants set forth above in paragraph 3 will, at the time Consultant gives notice to the Company of its exercise thereof, shall be free trading, or if not, the shares shall be incorporated in the next registration statement filed by the Corporation. The warrants and underlying shares shall have "piggyback" registration rights and will, at the expense of the Corporation, be included in said registration.
5. Representations and Warranties of Corporation:
(a) The Corporation, upon entering into this Agreement, hereby warrants and guarantees to the Consultant that to the best knowledge of the Officers and Directors of the Corporation, all statements, either written or oral, made by the Corporation to the Consultant are true and accurate, and contain no misstatements of a material fact. Consultant acknowledges that estimates of performance made by Corporation are based upon the best information available to Corporation officers at the time of said estimates of performance. The Corporation acknowledges that the information it delivers to the Consultant will be used by the Consultant in preparing materials regarding the Company's business, including but not necessarily limited to, its financial condition, for dissemination to the public.
(b) Consultant shall agree to release information only with written or verbal approval of the Company.
6. Limited Liability: With regard to the services to be performed by the Consultant pursuant to the terms of this Agreement, the Consultant shall not be liable to the Corporation, or to anyone who may claim any right due to any relationship with the Corporation, for any acts or omissions in the performance of services on the part of the Consultant, except when said acts or omissions of the Consultant are due to its wilful misconduct or culpable negligence.
7. Termination: After ninety (90) days this Agreement may be terminated by either party upon the giving of not less than forty-five (45) days written notice, delivered to the parties at such address. Compensation shall be treated as outlined in Section 3, Compensation.
8. Notices: Notices to be sent pursuant to the terms and conditions of this Agreement shall be sent as follows:
Flexpoint Sensor Systems, Inc. Summit Resource Group, Inc. 47 East 7200 South 303 International Circle Suite 204 Suite 110 Midvale, Utah 84047 Hunt Valley, Maryland 21030 |
9. Attorney's Fees: In the event any litigation or controversy, including arbitration, arises out of or in connection with this Agreement between the Parties hereto, the prevailing party in such litigation, arbitration or controversy, shall be entitled to recover from the other party or parties, all reasonable attorney's fees, expenses and suits costs, including those associated within the appellate or post judgment collections proceedings.
10. Governing Law: This Agreement shall be construed under and in accordance with the laws of the State Maryland and the State of Utah, and all parties hereby consent to Utah as the proper jurisdiction for said proceeding provided herein.
11. Binding Affect: This agreement shall be binding on and inure to the benefit of the contracting parties and their respective heirs, executors, administrators, legal representatives, successors and assigns when permitted by this Agreement.
12. Legal Construction: In case any one or more of the provisions contained in this agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the invalidity, illegality, or unenforceability shall not affect any other provision, and this Agreement shall be construed as if the invalid, illegal or unenforceable provision has never been contained in it.
13. Prior Agreements Superseded: This Agreement constitutes the sole and only Agreement of the contracting parties and supersedes any prior understandings or written or oral agreements between the respective parties. Further, this Agreement may only be modified or changed by written agreement signed by all the parties hereto.
14. Multiple Copies or Counterparts of Agreement: The original and one or more copies of this Agreement may be executed by one or more of the parties hereto. In such event, all of such executed copies shall have the same force and effect as the executed original, and all of such counterparts taken together shall have the effect of a fully executed original. Further, this Agreement may be signed by the parties and copies hereof delivered to each party by way of facsimile transmission, and such facsimile copies shall be deemed original copies for all purposes if original copies of the parties' signatures are not delivered.
15. Liability of Miscellaneous Expenses: The Corporation shall be responsible to any miscellaneous fees and costs approved in writing prior by the Corporation or its agents to commitment that are unrelated to the agreement made between the Parties.
16. Headings: Headings used through this Agreement are for reference and convenience, and in no way define, limit or describe the scope or intent of this Agreement or effect its provisions.
IN WITNESS WHEREOF, the Parties have set their hands and seal as of the date written above.
SUMMIT RESOURCE GROUP, INC.
/s/ Jerry W. Miller
By: ________________________________
Jerry W. Miller, President
|
FLEXPOINT SENSOR SYSTEMS, INC.
/s/ John A. Sindt
By: ________________________________
John A. Sindt, President
|
Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, John A. Sindt, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Flexpoint Sensor Systems, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report.
4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuers's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
/s/ John A. Sindt
Date: April 30, 2004 ____________________________________
John A. Sindt
Chief Executive Officer
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Exhibit 31.2
PRINCIPAL FINANCIAL OFFICER CERTIFICATION
I, John A. Sindt, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Flexpoint Sensor Systems, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report.
4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuers's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
/s/ John A. Sindt
Date: April 30, 2004 ____________________________________
John A. Sindt
Principal Financial Officer
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Exhibit 32.1
Flexpoint Sensor Systems, Inc.
CERTIFICATION OF PERIODIC REPORT
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350
I, John A. Sindt, Chief Executive Officer and Principal Financial Officer of Flexpoint Sensor Systems, Inc. certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
a. the quarterly report on Form 10-QSB of the Company for the quarter ended March 31, 2004, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
b. the information contained in the Form 10-QSB fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: April 30, 2004
/s/ John A. Sindt
____________________________________
John A. Sindt
Chief Executive Officer
Principal Financial Officer
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