Flexpoint Sensor Systems, Inc. Investor Presentation May 2011
Notice of DisclosureCONFIDENTIAL INFORMATION. This information is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy any security or related financial instruments. This presentation may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934 and are intended to be covered by the safe harbor provisions for forward looking statements. This information is supplied from sources we believe to be reliable but we can not guarantee accuracy. This document and the information contained herein is confidential.The agents and the agents’ counsel assume no responsibility or liability of any nature whatsoever for the accuracy, adequacy or completeness of the publicly available information or as to whether all information concerning the Company required to be disclosed by the Company has been generally disclosed. The agents’ counsel and the Company’s counsel are acting as counsel to the agents and the Company, respectively, and not as legal counsel to the subscriber. The agents have not engaged in any independent investigation or verification with respect to any of the concerning the Company. Prospective purchasers are responsible for their own due diligence investigation in respect of any investment in the Company.
Company ProfileCompany Flexpoint Sensor Systems (OTC BB: FLXT.OB)Location: 106 W Business Park Drive, Draper, Utah 84020Industry: flexible potentiometer technologyShare Price (5/6/11): $.37Fully Diluted Shares 35.8 MillionOutstanding:Market Capitalization: $13.2 MM2010 Revenues: $96,1002010 Net Income: ($1,552,835)2010 EPS: (Diluted) ($0.06)Auditor: Mantyla MCREYNOLDS, LLC - audit committee consists of Messrs. Mower and Gill, with Mr. Gill serving as Chairman.US Counsel Cindy Shy
Company Overview Flexpoint is engaged principally in designing, engineering, and manufacturing sensor technology and equipment using Bend Sensors® flexible potentiometer technology• Located in Draper, Utah• During the last 12 months they have matured from a research and development only company into a manufacturing and production company and continue to expand their product line.• They have nine issued patents for their Bend Sensor® technology and have filed three additional patent applications, and are in the process of preparing one additional patent for new types of sensors using their technology.• During 2010, many Fortune 500 and Global Fortune 1000 companies began using Flexpoint’s products.
Company Overview (cont.) Follow-up and recurring purchase orders are realized in late 2010. Established relationships with several Tier 1 suppliers in the automotive industry. The Company has been working on custom sensors under a joint development agreement with a major Tier 1 supplier in the automotive industry. Finalizing pre-production requirements to enter into production contracts for 2012 and 2013 model years. Received awards at the 2008 and 2009 EMS show and continue to gain acceptance in the industry. University of Rome used these sensors to develop an interactive glove to assist them in their neuroscience studies and understanding. The University’s conclusion was that data glove, and similar devices would have multiple applications in many fields including medical, work, sports and entertainment (the full article published in the Journal of Neuroscience Methods “Improving Performance of Data Glove on Bend Sensors," by Giovanni Saggio Ph.D. ) Flexpoint technology featured at 2010 Los Angeles and 2011 Shanghai Auto Show.
Competitive Advantages Technology• Innovation ◦ The Company owns the patent rights to the Bend Sensor® ◦ The Sensor is a thin single layer potentiometer with no mechanical assembly that is more reliable, significantly smaller, lighter in weight and usually less expensive than mechanical potentiometers ◦ Can work in very harsh environments (temperature, humidity) ◦ Unique “thinking” sensor• Resource Reutilization ◦ Additional R&D and manufacturing of the technology for products used by customers that emphasize functionality, reliability, quality, and user convenience• Sustainability ◦ Current potentiometers are mechanical devices and are subject to mechanical breakdown, include multiple layers, are larger in size, and more expensive to produce• Flexpoint also has added value by expanding their sensor product lines to include circuit boards, enclosures, etc. and have moved toward a fully integrated product while validating and showing the versatility of their Bend Sensor® technology. They currently have several such fully developed products that will directly compete with existing products in the automotive industry. The products provide: ◦ Greater reliability, and more functionality and can be implemented at a lower overall cost to the customer ◦ They are in the process of finalizing their marketing campaign that will include a technology based company that is interested in being their outside sales representative for the sensor technology ◦ These fully integrated products will create a much larger value added profit margin for the Company
Competitive Advantages – Management Team• Clark M. Mower – Mr. Mower was appointed President and CEO in January 2005. He was appointed as Director, President and CEO of Sensitron in February 2005. In November 2005 he was elected to serve a one year term as director (or until the next annual meeting). He formerly served as Senior Vice President - Mergers and Acquisitions - Merchant Energy Group for El Paso Energy Corporation (NYSE: EP). From August 2002 through 2004 he was the managing member of Polaris Energy, LLC, a non-affiliated consulting company to energy related mergers and acquisition. From August 2002 to July 2004 he was a management committee member for Saguaro Power Company, a non-affiliated company operating a 100 megawatts power plant in Henderson, Nevada. Prior to that he served as President and Chief Executive Officer of Bonneville Pacific Corporation (a public company) for eight years until El Paso Corporation acquired Bonneville Pacific Corporation in October 1999. He has not been involved in any legal proceedings during the past ten years that are material to an evaluation of his ability or integrity.•• John A. Sindt – Mr. Sindt has served as a director of the company since 1999 and served as President and Chief Executive and Financial Officer from 2001 to 2004. He served as Secretary/Treasurer from January 2005 through July 2005. In November 2005 he was elected to serve a two year term as director (or until the next annual meeting). Mr. Sindt is also the Chairman of the Board of Sensitron, one of our subsidiaries. He has been employed since 1965 as a Salt Lake County, Utah Constable and he currently heads that department. He has also served as President, Corporate Secretary and Director for the National Constables Association. He has owned and operated a successful chain of retail jewelry stores in Utah. He has not been involved in any legal proceedings during the past ten years that are material to an evaluation of his ability or integrity.• Ruland J. Gill, Jr. - Mr. Gill retired from Questar Corporation (NYSE: STR) where he served as Vice President of Government Affairs and Senior Attorney from 1973 until his retirement in 2008. He was appointed as a Director of Sensitron in February 2005. In addition to his professional career, Mr. Gill has held several important positions including President of the Utah Petroleum Association, and Trustee of the Rocky Mountain Mineral Law Foundation. He is also a current Board member of Prime Snax, a privately held company. He has not been involved in any legal proceedings during the past ten years that are material to an evaluation of his ability or integrity.• Thomas N. Strong – Prior to accepting the position of Controller and Chief Financial Officer of Flexpoint in August 2008, Mr. Strong was employed by Praxair Healthcare Services as a Regional Financial Analyst, and part of his responsibilities with this provider of medical gases and equipment was to direct that company’s regional compliance with the Sarbanes-Oxley Act of 2002. From 2002 to 2005 he was employed as Regional Corporate Controller for INVE America and Subsidiaries, an international agriculture and aquaculture company responsible for the accounting, financial reporting and treasury duties for all of North and South America. Mr. Strong has over 20 years experience in the accounting field, primarily in controller positions. He has not been involved in any legal proceedings during the past ten years that are material to an evaluation of his ability or integrity.
Market Competitive Advantages• The Sensor market is a rapidly growing multi-billion dollar industry encompassing all mechanical control situations from simple voice response mechanisms in dolls, to sophisticated robotics, to drug delivery systems and complex safety equipment.• Within this enormous market, the Bend Sensor has a broad range of potential applications in an array of industries. The Bend Sensor offers a versatile, robust variable resistance sensing technology capable of measuring changes in weight, pressure, distance, speed, patterns, etc.• Flexpoint intends to target those applications that management feels have the greatest revenue generating possibilities, including those in the medical, industrial controls and consumer products sectors, as well as continuing development of product and further penetration of the automotive industry.• A one inch movement can yield 200,000 data points• Facility houses offices, R&D, and manufacturing• Location provides access to skilled labor and industry resources• 14,000 sq ft manufacturing and office facility• Manufacturing is underway on multiple products
Current Market• Indications of interest have been received from automotive Tier 1 suppliers and Flexpoint is working to obtain joint development agreements for the concept. There has been significant interest in the concept and it appears that the timing is good for this type of a product. Products include both replacement of existing products and new applications.• Flexpoint is in negotiations with several Tier 1 suppliers and OEMs in the automotive industry on the following products: • Variable Speed Seat Switch • Comfort Seats • Seat Belt Reminder • Pedestrian Impact Detection Sensor • Emergency vehicle market• While other technologies are affected by dirt, dust, and liquids, the Bend Sensor® product is able to operate under these and other harsh conditions.• They anticipate that the success of their existing products will allow them to successfully introduce new products and applications to the market.• As this market grows they anticipate expanding a distribution network throughout the world.
Products PRINCIPAL PRODUCTSBend Sensor® Technology - The Company owns the patent rights to their Bend Sensor® technology through Sensitron, a wholly-owned subsidiary of the Company. The Bend Sensor® is a flexible potentiometer bend sensor product consisting of a coated substrate, such as plastic, that changes electrical conductivity as it is bent. Electronic systems can connect to this sensor and measure in detail the amount of bending or movement that occurs in a predictable manner. Certain applications of the Bend Sensor® potentiometer have been patented.The following includes a partial list of applications and devices for the Bend Sensor® technology that have been developed: • Medical Bed • Robotics • Switches • Flow Control Applications • Automotive Products: • Variable Speed Seat Switch • Seat Belt Reminder • Pedestrian Impact Detection Sensor • Emergency vehicle market
Products (cont.) ADDITIONAL PRODUCT APPLICATIONSManagement believes the potential market for their technology includes using the technology to replace or upgrade existing devices used in industrial control systems, medical equipment and instrumentation, computer peripherals, automotive transmission equipment, commercial vending equipment and other devices. They have developed, or are developing: • Vibration sensor • Toys and video gaming devises • Sports applications • Infant bed cover for the prevention of sudden infant death syndrome (SIDS)
Company Facility & EquipmentThe 14,000 sq ft manufacturing, office, and R & D facility is located at 106 W Business Park Drive, Draper, Utah 84020Automobile manufacturers, Tier 1 suppliers and many international companies require all manufactured parts be manufactured in ISO/TS-16949 certified facilities. Several manufacturers have been identified who have the required certifications and who have expressed interest in entering into cooperative agreements to manufacture products for Flexpoint until the required certifications can be obtained.
Sales CycleSince their intended customers are typically technology companies, the design phase of the sales cycle is extremely important and considerably longer than other industries. • The original equipment manufacturers typically approach them with a conceptual product and request that they assist in the: Initial engineering, Design, and then Production of a working prototype. • The prototype is then tested in the environment in which the ultimate product will be placed. • During this process, the customer is in constant contact with the Flexpoint application and electrical engineers. • Customers also meet with internal sales and support individuals to discuss marketing and distribution strategies for the end consumer products.
Environmental Protection & Safety SOURCE OF RAW MATERIALSThe single layer design of the Bend Sensor® eliminates many of the problems associated with conventional sensors such as dust, dirt, liquids, and heat and pressure affects. Depending on the application, over- laminates or over-molding may also be applied to the sensors for added environmental protection. • The base material dictates ultimate environmental stability. • Due to its unique construction and the ability to use multiple types of substrates all raw materials needed to produce the Bend Sensor® are readily available and therefore, the Company is not reliant on a single supplier.
Development Processes and Advantages There are two development processes: 1. OEM mechanical designers build interfaces to integrate Bend Sensor® components into their products. 2. Flexpoint develops and markets products incorporating their Bend Sensor® products.Bend Sensor® technical detail:• The Bend Sensor changes electrical conductivity as it is bent providing significant data points.• Uses Flexpoint’s proprietary carbon/polymer based ink (manufactured by Flexpoint) on substrates ranging from flexible metals to plastic films. The most unique characteristic of this ink occurs when the material is bent over a given radius repeatedly as it returns to its original value within the same slope or curve of resistance.• The Bend Sensor is highly customizable/scalable as many patterns can be applied with several thickness and resistance values as required by any number of applications.• The Bend Sensor is highly desirable over “force” sensors as the Bend Sensor has a record of having high reliability, consistency, and repeatability.
Product Expansion PlanManagement believes the potential market for their technology includes using the technology to replace or upgrade existing devices used in industrial control systems, medical equipment and instrumentation, computer peripherals, automotive equipment, commercial vending equipment and other devices. Product expansion plans in these areas include: • Elderly Remote Monitoring Systems • Theater Seats • A vibration sensor • Toys and video gaming devises • Sports applications • Infant bed cover for the prevention of sudden infant death syndrome (SIDS) • Military and security applications • Telecom • NASA
Competitive Product MarketCertain force transducer sensors and fiber optic sensors are comparable to our Bend Sensor® technology; however, management believes that the force transducer sensor is not as reliable as our Bend Sensor® technology and that the fiber optic sensors are not as cost effective as our Bend Sensor® technology.We intend to compete by offering products that have enhanced features, ease of use, functionality, compatibility, reliability, comparable price, quality and support. Management also believes our intellectual property provides an advantage over our competitors.
Demand and Forecasts/Market Share The US Sensors Industry is valued at $9.7 Billion with a forecast rise in demand of 6.1% annually to 2014 1. The motor vehicle market will grow the fastest based on a rebound in motor vehicle production and the rising use of newer sensor-laden systems. Proximity and positioning and chemical property sensors will be the fastest growing types according to industry reports 1. Proximity and positioning sensors will also see above average gains. The large automotive market will drive much of the growth, as safety products such as side airbags continue to achieve greater penetration, thereby increasing demand for related sensing products. In addition, more advanced occupant position and crash detection sensors will continue to penetrate the US motor vehicle market, although these technologies are not expected to become as widespread as airbags. Beyond the motor vehicle sector, proximity/positioning sensor demand will be supported by the ongoing recovery in the industrial sector - the other significant market for these products.2 Global Service Robotics Market worth US $21 Billion by 2014 – CAGR 49.6% from 2009 – 2014. Domestic Robotics to reach US $1.97 Billion by 2014; Entertainment to reach US $1.85B; Defense, Security & Surveillance (Professional service robotics) is the largest and will be taken over by field robotics by 2014 1 .1(http://www.freedoniagroup.com/Sensors.html;http://www.strategyr.com/Smart_Sensors_Market_Report.asp)2http://www.sensorsportal.com/HTML/DIGEST/may_06/Sensors_market.htm
Sales Strategy and PricingManagement believes their future success will depend upon their ability to coordinate their product design, manufacturing, distribution and service strategies in a long-term business model.• Offer a line of standard sensor products with corresponding hardware, electronics and software to facilitate ease of implementation of our technology into a customers system.• The standard product line is expected to be sold directly to the customer and through manufacturers representatives and distributors.• Expand product offering to include substantially complete value-added assemblies.• Continue to consider licensing or partnership arrangements.• Anticipate selling primarily to original equipment manufacturers for worldwide distribution.• For the international customers, we plan to contract, sell and distribute our products through various manufacturer representatives and distributors.• Have added value by expanding our sensor product lines to include circuit boards, enclosures, etc. and have moved toward a fully integrated product while validating and showing the versatility of our Bend Sensor® technology. We currently have several such fully developed products that will directly compete with existing products in the automotive industry.
Sales Strategy and Pricing (cont.) MARKETING AND SALESMarket their automotive products primarily to original equipment manufacturers (“OEM’s”), either directly or through Tier 1 suppliers.Other products will be marketed directly to manufacturers or distributors.Primary marketing objectives are to: • generate demand for our products, • enhance name recognition and • support OEM’s and manufacturers – It is believed the successful use of their products by OEM’s and Tier 1 suppliers will create additional demand for higher quantities of their existing products.Market their products through the use of their web site, and by developing a field sales force including direct marketing employees in strategic areas and manufacturer’s representatives nationwide to generate OEM and Tier 1 supplier customers. As their market grows, anticipate expanding their distribution network throughout the world.
Financial Summary2010 revenue $96,100 • EPS (.06)2011E $1 - $2MM • Expected year-end backlog for 2012 $2 - $4MM • Cash flow positive and profitable during 2nd half 20112012E $3-6MM+ • Expected year-end backlog for 2013 $4 - $8MM2013E $6-10MM+ • Expected year-end backlog for 2014 $15 - $20MM Notes: Estimates based on contracts and customers either currently on market or coming to market in the very near future. If some of the recently started negotiations and beginning testing yield positive results, these numbers could be substantially higher. Gross Margins should remain in excess of 60%.
Accomplishments During late 2009/early 2010, transitioned from a decade of R&D to fully commercialized and integrated products Received market validation through multiple small-scale clients during last 6 – 12 months Completed implementation of testing and advanced testing programs with dozens of current and potential customers Positive client feed-back on reliability and functionality results Transitioning into larger, renewable, long-term contracts Increasing size and scope of customer base ◦ Expect number of clients to double to over 20 during the next 12 months
Milestones - Automotive 2008 – 2011 company working closely with Tier1 automotive manufacturers both domestically and internationally to bring multiple products to market for model year 2012 and 2013. ◦ Products featured at November 19 – 28, 2010 LA auto show and April 19 – 28, 2011 Shanghai auto show ◦ Production to begin during Q3 2011 ◦ Anticipated revenue $15 - $20MM annually, increasing with additional applications Q1 2011 joint venture agreement with Victor S.r.l. of Italy for steering wheel product to be commercialized during 2012 Extended Sukhminder "Bobby" Bedi consulting agreement ◦ He has extensive experience, contacts and knowledge involving product design and development with large automotive manufacturers and suppliers.
Milestones 2010 through 2011 2010 the company commercialized many new products in multiple industries. These products include Sensing Technology in Theater Seats, Emergency vehicles incorporating Intertek’s Protek Passenger Awareness System. 2010 the company delivered to the market Sensing Technology used by a major entertainment group with multiple international locations. Q1 2010 company receives multiple orders from Bridgepoint Systems, a Bridgewater company. Subsequently resulted in follow up orders of escalating size. Early 2010 advancements made in methods of attachment of Bend Sensors to various materials including capabilities in applying Bend Sensors directly to various products. Early 2010 company receives Blue Ribbon Innovation Award for safety for its “Triangle of Safety” product ◦ Company receives multiple orders for product from various municipalities for emergency vehicles during 2010 and continues into 2011 April, 2010 began developing application for the US military ◦ Product application expected 2012 August, 2010 company improves product by compensating for drift and still detecting impact
Milestones 2010 through 2011 (cont.) August, 2010 company expands solid working relationship with Sensor Products, Inc. that began during Q1 2010 Accelerated additional Global Fortune 1000 relationships that could lead to multimillion dollar contracts during the first half of 2011 Mid to late 2010 company receives multiple orders from USSC (http://www.usscgroup.com/) (leading designer and manufacturer of ergonomic operator seats for the transportation industry) October 2010 company receives order for 15,000 sensors as a counting mechanism in paintball guns Q1 2011 company jointly working with Card Access™ to bring to market product for home, hospitality, and commercial automation during latter part of 2011 Development underway with NASA, US Military, Fortune 500 companies, toy companies, medical bed companies, other automotive manufacturers and suppliers, and numerous other companies for which we have NDA’s.
Summary Highlights• Flexible sensor allows for more applications than a rigid sensor• Product is more reliable and less costly than competition• Unique “thinking” sensor is currently integrated into a variety of products• Sensor market is rapidly growing multi-billion dollar industry with dramatic push toward flexible data collecting sensors• Long negotiation and testing cycles completed or just about completed with several companies during last 2 years• Expect during 2011 and beyond to “commercialize” on large scale many of these products
Contact Information Flexpoint Sensor Systems, Inc.Clark M. Mower, President, CEO & Director Thomas N. Strong, Controller, CFO (801) 568-5111 Chesapeake Group, Inc. (410) 825-3930 http://www.chesapeakegp.com