SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 17, 2019
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
Nevada 001-31540 91-1922863
-------------------------- ----------------- ------------------
(State or other jurisdiction (Commission File No.) (IRS Identification No.)
Employer of incorporation)
6001 54 Ave.
Taber, Alberta, Canada T1G 1X4
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (250) 477-9969
(Former name or former address if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under any of the
[ ] Written communications pursuant to Rule 425 under the Securities Act (17CFR
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b)
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-14c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each Trading Name of each exchange on which
class Symbol(s) registered
Common Stock FSI NYSE American
Indicate by check mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 (ss.203.405 of this chapter)
or Rule 12b-2 of the Securities Exchange Act of 1934 (ss.204.12b-2 of this
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. [ ]
Item 2.02 Results of Operations and Financial Condition
On May 17, 2019, the Company issued a press release announcing the
Company's financial results for the three months ended March 31, 2019.
Item 8.01 Other Events
On May 20, 2019, the Company held a conference call to discuss its
financial results for the three months ended March 31, 2019, as well as other
information regarding the Company.
Item 9.01 Exhibits
Number Description of Document
99.1 May 17, 2019 Press Release
99.2 Text of opening remarks by Dan O'Brien/May 20, 2019 conference
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 20, 2019
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
By: /s/ Daniel B. O'Brien
Daniel B. O'Brien, President and Chief
May 17, 2019
FSI ANNOUNCES FIRST QUARTER, 2019 FINANCIAL RESULTS Conference call
scheduled for Monday May 20th, 2019, 11:00am Eastern time,
8:00 am Pacific Time
See dial in number below
VICTORIA, BRITISH COLUMBIA, May 17, 2019 - FLEXIBLE SOLUTIONS INTERNATIONAL,
INC. (NYSE Amex: FSI, FRANKFURT: FXT), is the developer and manufacturer of
biodegradable polymers for oil extraction, detergent ingredients and water
treatment as well as crop nutrient availability chemistry. Flexible Solutions
also manufactures biodegradable and environmentally safe water and energy
conservation technologies. Today the Company announces financial results for the
first quarter ended March 31, 2019.
Mr. Dan O'Brien, CEO comments, "We are very pleased with the results of our
first quarter. Having a record profit to go with record revenue truly shows the
quality of our team and, in addition, the quality of the new team members who
joined us last October." CEO O'Brien continues, "Nine cents a share is excellent
earnings, however, Shareholders should be aware that earnings were reduced by
two items. The costs of the October ENP acquisition reduced earnings by
approximately 1/2 cent per share which will not recur. Second, during the
quarter we placed more than $250,000 in tariffs with the US Government, most of
which will be recovered over a period of time through the rebate program for
export sales." Mr. O'Brien concludes, "At some future point we will receive the
tariff rebates and since the acquisition won't recur, we consider that the
underlying non-GAAP earning for the quarter to be 11 cents rather than 9."
o Sales for the first quarter (Q1), 2019 were up approximately 102% to
$8,471,476 when compared to sales of $4,201,180 for Q1, 2018. The
result was an after tax GAAP accounting net income of $1,011,150, or
$0.09 per weighted average share for Q1, 2019, compared to an after
tax GAAP accounting net income of $703,664, or $0.06 per weighted
average share for Q1, 2018. See comment above regarding tariff
rebates. o o Basic weighted average shares used in computing earnings
per share amounts for the quarter were: 11,705,613 and 11,620,291 for
Q1, 2019 and Q1, 2018 respectively.
o Non-GAAP operating cash flow: For the 3 months ending March 31, 2019,
net income reflects $154,026 of non-cash charges (depreciation and
stock option expenses), loss on involuntary disposition, interest
income, interest expense, (gain)/loss on investment, write down of
inventory, deferred tax expense, and income tax. These items are items
not related to operating or current operating activities. When these
items are removed, the Company shows operating cash flow of
$1,300,360, or $0.11 per share. This compares with operating cash flow
of $1,104,379 or $0.10 per share, in the corresponding 3 months of
2018 (See the table that follows for details of these calculations.
Anticipated tariff rebates are not included in the operating cash flow
The NanoChem division continues to be more than 60% of revenue and cash flow for
the Company. New opportunities continue to unfold in detergent, water treatment,
oil field extraction and agricultural use to further increase sales in this
division. In past years the NanoChem division sales have been less volatile
quarter over quarter, however due to increasing sales to agriculture, revenue
seasonality may become larger.
* a conference call has been scheduled for 11:00 am Eastern Time, 8:00 am
Pacific Time, on Monday May 20th , 2019. CEO, Dan O'Brien will be presenting and
answering questions on the conference call. To participate in this call please
dial toll free1-888-220-8474 (or +1 856-344-9221) just prior to the scheduled
call time. The conference call title, "First Quarter 2019 Financial Results,"
may be requested.
The above information and following table contain supplemental information
regarding income and cash flow from operations for the period ended March 31,
2019. Adjustments to exclude depreciation, stock option expenses and one time
charges are given. This financial information is a Non-GAAP financial measure as
defined by SEC regulation G. The GAAP financial measure most directly comparable
is net income. The reconciliation of each of the Non-GAAP financial measures is
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
Consolidated Statement of Operations
For 3 Months Ended March 31 (3 Months Operating Cash Flow)
3 months ended March 31
Revenue $8,471,476 $4,201,180
Income (loss) before income tax - GAAP $1,293,495 a $1,005,560 a
Provision for Income tax(Recovery) net - GAAP $(253,081) a $ (301,896)
Net income (loss) - GAAP $1,011,150 a $ 703,664 a
Net income (loss) per common share - basic. - $ 0.09 a $ 0.06 a
3 month weighted average shares used in 11,705,613 11,620,291
computing per share amounts - basic.- GAAP
3 month Operating Cash Flow
Ended March 31
Operating Cash Flow (3 months). NON-GAAP $1,300,360 b,c $1,104,379 b
Operating Cash flow per share excluding $ 0.11 b,c $ 0.10 b
non-operating items and items not related to
current operations (3 months) - basic.
Non-cash Adjustments (3 month) GAAP $ 154,026 d $ 85,400 d
Shares (3 month basic weighted average) used 11,620,291 in computing per share
amounts - basic GAAP 11,705,613
Notes: certain items not related to "operations" of the Company have been
excluded from net income as follows.
a) Non-GAAP -::See comment on page 1 regarding treatment of tariffs. Provision
for Income tax less Deferred income tax recovery = $379,080 less $125,999.
See the financials for these numbers.
b) Non-GAAP - amounts exclude certain cash and non-cash items: depreciation
and stock option expense (2019 = $154,026, 2018 = $85,400), Gain on
investment ( 2019 = $230,652, 2018 = N/A), net gain/(loss) on involuntary
disposition of equipment (2019 = N/A, 2018 = $7,716), write down of
inventory (2019 = N/A, 2018 = N/A), interest income (2019 = $16,252, 2018 =
$1,697), Interest expense (2019 = $129,007, 2018 = $7,400) deferred tax
(expense)/recovery (2019 = $125,999, 2018 = N/A), and Income tax expense
(2019 = $379,080, 2018 = $301,896. See the financial statements for all
c) The revenue and gain from the 50% investment in the private Florida LLC
announced in January 2019 is not treated as revenue or profit from
operations by Flexible Solutions given the Company only purchased 50% of
the LLC. The profit is treated as investment income and therefore occurs
below Operating income in the Statement of Operations. As a result the
$230,652 gain from Flexible Solutions share in the LLC is removed from the
calculation to arrive at Operating Cash Flow.
d) Non-GAAP - amounts represent depreciation and stock compensation expense.
Safe Harbor Provision The Private Securities Litigation Reform Act of 1995
provides a "Safe Harbor" for forward-looking statements. Certain of the
statements contained herein, which are not historical facts, are forward
looking statements with respect to events, the occurrence of which involve
risks and uncertainties. These forward-looking statements may be impacted,
either positively or negatively, by various factors. Information concerning
potential factors that could affect the company is detailed from time to
time in the company's reports filed with the Securities and Exchange
Flexible Solutions International
6001 54th Ave, Taber, Alberta, CANADA T1G 1X4
Toll Free: 800 661 3560
Fax: 403 223 2905
If you have received this news release by mistake or if you would like to be
removed from our update list please reply to: firstname.lastname@example.org To find
out more information about Flexible Solutions and our products, please visit
Q1 2019 speech
Good morning. I'm Dan O'Brien, CEO of Flexible Solutions.
Safe Harbor provision:
The Private Securities Litigation Reform Act of 1995 provides a "Safe Harbor"
for forward-looking statements. Certain of the statements contained herein,
which are not historical facts, are forward looking statements with respect to
events, the occurrence of which involve risks and uncertainties. These
forward-looking statements may be impacted, either positively or negatively, by
various factors. Information concerning potential factors that could affect the
company is detailed from time to time in the company's reports filed with the
Securities and Exchange Commission.
Welcome to the FSI conference call for Q1 2019.
In advance of speaking about our financials, I'd like to talk about our product
lines and what we think might occur over the next several quarters.
Insurance compensation from the fire has been received in full, but the
accounting and tax effects of the payments will continue to distort and
complicate our financials until year over year comparisons that do not contain
compensation or tax adjustments are available. The first quarter this will be
true is Q1 2020.
Our NanoChem division: NCS represents more than 1/2 of the revenue of FSI. This
division makes thermal poly-aspartic acid, called TPA for short, a biodegradable
polymer with many valuable uses. NCS also manufactures SUN 27(TM) and N Savr
30(TM) which are used to reduce nitrogen fertilizer loss from soil.
TPA is used in agriculture to significantly increase crop yield. The method of
action is by slowing crystal growth between fertilizer ions and other ions in
the soil resulting in the fertilizer remaining available longer for the plants
to use. The attraction between the TPA and the fertilizer ions also retains the
nutrients closer to the plant roots. Keeping fertilizer more easily available
for crops to use, results in better yield with the same level of fertilization.
TPA in agriculture has a strong economic value for all links in the sales to end
user chain. There are good profits from manufacturer through the distribution
system to the grower, yet the grower still earns a great profit from the extra
crops produced using the same land but no extra fertilizer. For example, a
summer 2018 trial on strawberries done by the University of California at Davis
resulted in a 15% increase in berries along with increased quality. The use of
$40 worth of TPA yielded 45 hundred dollars in additional gross profit per acre.
TPA is also a biodegradable way of treating oilfield water to prevent pipes from
plugging with mineral scale. Our sales into this market are well established and
normally grow steadily but slowly. A simple explanation of TPA's effect is that
it prevents the scaling out of minerals that are part of the water fraction of
oil as it exits the rock formation. Scale must be prevented to keep the oil
recovery pipes from clogging. SUN 27(TM) and N Savr 30(TM) are our nitrogen
conservation products. Nitrogen is a critical fertilizer but it is subject to
loss through bacterial breakdown, evaporation and soil runoff. Both our nitrogen
products are becoming well respected and sales continue to grow. They utilize
much more environmentally friendly solvents than some of the competing products.
SUN 27(TM) is used to conserve nitrogen from attack by soil bacterial enzymes
while N Savr 30(TM) is directed toward nitrogen loss through leaching and
evaporation. Each of our nitrogen products are equal to, or better than, the
ENP, the October 2018 acquisition: ENP is focused on sales into the turf and
golf markets whereas our NCS sales are into row crop agriculture - two very
distinct markets. We account for ENP as a subsidiary and expect it to generate
consolidated revenue of greater than $8 million in full year 2019. Historic
results suggest that FSI should expect annual pretax profits of greater than $1
MM from this division with moderate annual growth. However, the strong quarters
for ENP are 2 and 3 to match the US spring and summer along with Q4 when large
customers engage in early buying for the year ahead. Q1 is the quarter when ENP
is expected to contribute the least to the bottom line. We expect much higher
profitability from ENP throughout the rest of 2019.
Watersavr(TM): Spring has arrived in most of the areas we are trying to sell
into. News regarding Watersavr(TM) trials and sales will be released if and when
Delivered wholesale water costs now exceed $1200 per acre foot in many
California cities while the total cost of saving an acre foot using
WaterSavr(TM) is less than $200. WaterSavr(TM) can reduce annual losses from
reservoirs by up to 2 feet per treated acre. A municipality that pays $1200 -
$2400 per acre foot for water and does not use WaterSavr(TM) is wasting
significant tax revenue - about $12 million a year for San Diego - regardless of
the drought conditions in any particular year.
Q1 2019 and the rest of 2019
TPA, SUN 27(TM) and N Savr 30(TM) for agricultural use traditionally have peak
uptake in Q1 and Q2. Q1 2019 results were very strong. Q2 is expected to be just
as good. We are finding success selling agricultural products into international
markets with opposite seasons which leads us to predict that our historic slow
quarter, Q3, will increase substantially; perhaps becoming nearly as strong as
Q1 and Q2. The effect of international sales is expected to be felt in Q4 as
well. This, along with Q4 sales for US early buy and winter crop programs is
expected move Q4 revenue upward toward the same level we have just reported for
Oil, gas and industrial sales of TPA increased compared to the previous year.
The recovery of sales into this market vertical is expected to continue
Effect of the LLC investment announced in January: This investment generated
quarterly cash flow and profits starting in Q1 2019 and shown in the financials.
The company we invested in will also order substantially more product from us in
Q1 2019 than it did in Q1 2018. We expect this to continue for many quarters to
come which will further increase revenue and profitability. It is worth noting
that the seasonality of the LLC's sales is opposite to our North American sales
which will tend to smooth out our quarterly revenue numbers in a positive
Full year 2019 revenue will increase very strongly compared to 2018 driven by;
historic operations, the ENP acquisition and the January LLC investment. We
expect that profits and cash flow will increase very significantly along with
the increases in top line revenue. Our regular warning applies - that we can't
control customer behavior, shipping dates, weather, crop pricing, oil platform
maintenance and the other variables of our business, so quarterly results will
be unlikely to form a straight line on a graph. However, we do expect the slope
of the graph to be up sharply for all of 2019.
Tariffs: Since Sept 30th, all our raw materials imported from China have
included a 10% additional tariff. US customers have received price increases
from us now that this inventory is being used. US customers will receive
additional price increases when we begin using inventory that is subject to the
25% tariffs just announced. International customers are not charged the tariff
because we are applying for the export rebates available to recover the tariffs.
To hedge against the chance of even higher tariffs, and to service the increased
production expected in 2019, we have increased inventory substantially. As a
result, the accumulating tariff payments to the Government are affecting our
cost of goods, our cash flow and our profits negatively until the rebates are
received. Rebates can take many months and the total dollar amount due back to
us has become significant. The rebates will increase profitability and cash flow
while decreasing cost of goods for the future quarters in which the rebates are
Highlights of the financial results:
Sales for the quarter increased 102% to $8.47 million, compared with $4.2
million for Q1 2018. The result is a gain of $1.01 million or 9 cents per share
in the 2019 period, compared to a gain of $704 thousand or 6 cents per share, in
In addition to the GAAP numbers I just mentioned, there was a one-time cost of
the ENP acquisition [$70,000] recognized in Q1. We also paid $250,000 in tariffs
during the quarter, most of which we expect to get back some months in the
future. Without these two items, earnings would have been 11 cents per share
rather than 9 cents.
Working capital is adequate for all our purposes and is expected to increase
during the year as our revenue grows. We also have a line of credit with BMO
Harris Bank of Chicago. We are confident that we can execute our plans with our
existing capital. The ENP acquisition was funded with a loan from BMO Harris
plus a convertible note to the seller and did not reduce our cash position. The
LLC investment in January was made with cash on hand.
The text of this speech will be available on our website by Tuesday, May 20th.
Email or fax copies can be requested from Jason Bloom at
Thank you, the floor is open for questions.
Flexible 8-K Item 2.02 re 5-20 Conf. Call 5-20-19