10-K: Flexpoint Sensor Systems Reports 2023 Annual Results, Cites Growth in Key Markets

Flexpoint Sensor Systems' 2023 annual report highlights ongoing efforts to commercialize its bend sensor technology, with a focus on automotive, medical, and VR/AR markets, despite continued financial challenges.

Summary

• Flexpoint Sensor Systems, Inc. is focused on designing, engineering, and manufacturing bend sensor technology.
• The company is working to secure long-term manufacturing contracts and licensing agreements.
• Flexpoint experienced a slowdown in orders due to the COVID-19 pandemic but has recently seen an upturn.
• The company is targeting larger domestic and international companies to increase sensor manufacturing volume.
• Flexpoint has established relationships with medical IoT vendors and is seeing growth in the VR/AR market.
• The company is also working with Tier 1 automotive suppliers on various products.
• Flexpoint's bend sensor technology is a flexible potentiometer that changes electrical conductivity when bent.
• The company has developed applications for glove systems, automotive products, flow control, and monitoring systems.
• Flexpoint is also developing a swell sensor for lithium-ion batteries to prevent thermal runaway.
• The company's revenue for 2023 decreased by $45,470 compared to 2022, primarily due to lower product sales and development fees.
• Total operating costs and expenses were $776,138 in 2023, compared to $880,406 in 2022.
• The net loss for 2023 was $784,939, compared to a net loss of $804,832 in 2022.
• The company's auditors have expressed doubt about its ability to continue as a going concern.
• Flexpoint anticipates needing to raise between $500,000 to $800,000 in funding to support operations and growth in 2024.
• As of December 31, 2023, the company had total current liabilities of $4,765,242, including $398,513 in convertible notes.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positive developments in terms of market interest and product development, the financial results are weak, and there are significant concerns about the company's ability to continue as a going concern. The need for additional capital raises further lowers the sentiment.

Positives

• Flexpoint is experiencing an upturn in orders after a pandemic-related slowdown.
• The company is focusing on larger domestic and international companies to increase sensor volume.
• Flexpoint has established relationships with medical IoT vendors and is seeing growth in the VR/AR market.
• The company is working with Tier 1 automotive suppliers on various products.
• Flexpoint's bend sensor technology is a flexible potentiometer that changes electrical conductivity when bent.
• The company has developed applications for glove systems, automotive products, flow control, and monitoring systems.
• Flexpoint is also developing a swell sensor for lithium-ion batteries to prevent thermal runaway.
• Operating costs and expenses decreased by approximately $104,000 in 2023 compared to 2022.

Negatives

• The company's revenue for 2023 decreased by $45,470 compared to 2022.
• The net loss for 2023 was $784,939, compared to a net loss of $804,832 in 2022.
• The company's auditors have expressed doubt about its ability to continue as a going concern.
• Flexpoint anticipates needing to raise between $500,000 to $800,000 in funding to support operations and growth in 2024.
• As of December 31, 2023, the company had total current liabilities of $4,765,242, including $398,513 in convertible notes.
• The company has a limited customer base, with three customers representing 86% of revenue in 2023.

Risks

• The company's auditors have expressed doubt about its ability to continue as a going concern.
• Flexpoint needs to raise additional capital to fund operations and growth.
• The company is dependent on a few major customers, and losing their business would have a significant adverse effect.
• The sensor business is highly competitive, and competition is expected to increase.
• The company's internal controls over financial reporting were deemed not effective.
• There is no guarantee that the projected volume of purchase orders will meet the volumes that the company anticipates.
• The company may experience dilution in the value per share of their common stock if they issue more shares.

Future Outlook

Management anticipates that revenue will increase as they continue to provide engineering services and customers order more frequently and in larger quantities. They also expect to begin producing larger repeatable volumes of sensors and devices in the automotive and medical industries over the next twelve months. The company anticipates needing to raise approximately $500,000 to $800,000 in funding to support operations and growth during 2024.

Management Comments

• Management believes that even though we are making positive strides forward with our business plan we will need to raise additional operating capital.
• Management believes many sensor applications can be improved using our technology and that the use of our technology will result in new products and new sensor applications.
• Management believes that our products will be sufficiently distinguishable from the existing products so that it will not compete directly with existing sensor products.
• Management believes that because of the rapid pace of technological change in our markets, legal protection of our proprietary information is less significant to our competitive position than factors such as continuing product innovation in response to evolving industry standards, technical and cost-effective manufacturing expertise, effective product marketing strategies and customer service.

Industry Context

The report highlights Flexpoint's focus on the automotive, medical, and VR/AR markets, which are all experiencing significant growth and technological advancements. The company's bend sensor technology is positioned to address the need for more durable, adaptable, and cost-effective sensors in these industries. The report also notes the impact of the COVID-19 pandemic on the business market, which has led to delays in the implementation of new technologies.

Comparison to Industry Standards

• The report mentions that Flexpoint's bend sensor technology is more reliable and cost-effective than traditional mechanical potentiometers and fiber optic sensors.
• The company is competing with potentiometer manufacturers in the medical electronics field and with capacitive, piezo, infrared, force sensor resistor, and ultrasonic sensor manufacturers in the auto seat field.
• The report notes that the automotive industry requires ISO/TS-16949 certified facilities, which Flexpoint is working towards achieving.
• The company is working with Tier 1 automotive suppliers, which are major players in the automotive industry.
• The VR/AR market is predicted to reach more than $25 billion by 2025, indicating a significant growth opportunity for Flexpoint's glove sensors.

Related Party Transactions

• The company had accounts payable to its Chief Executive Officer for reimbursement of operating expenses and a loan.
• The company had accounts payable to its Chairman of the Board for funds provided for operating expenses.
• There are related party convertible notes outstanding with principal balances due to the CEO and the Chairman of the Board.

Stakeholder Impact

• Shareholders may experience dilution if the company issues more shares to raise capital.
• Employees may be affected by the company's financial challenges and potential restructuring.
• Customers may be impacted by delays in product development and delivery.
• Suppliers may be affected by the company's financial challenges and ability to pay for goods and services.
• Creditors may be at risk due to the company's financial difficulties and need for additional funding.

Next Steps

• The company will continue to focus on securing long-term manufacturing contracts.
• Flexpoint will continue to develop and enhance its intellectual properties.
• The company will continue to work with Tier 1 automotive suppliers on various products.
• Flexpoint will continue to develop relationships in a number of application fields.
• The company will seek additional funding to support operations and growth.
• Flexpoint will work to improve its internal control over financial reporting.

Key Dates

Keywords

bend sensor, sensor technology, automotive, medical, VR/AR, wearables, potentiometer, manufacturing, licensing, intellectual property