UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT 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 N/A ------------------------------------- (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 following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] 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 -------------------------------------------------------------------------------- 1 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 chapter. 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. [ ] 2 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 Exhibit 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 call 3 SIGNATURES 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 Executive Officer EXHIBIT 99.1 NEWS RELEASE 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 number). 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 as follows: 1 FLEXIBLE SOLUTIONS INTERNATIONAL, INC. Consolidated Statement of Operations For 3 Months Ended March 31 (3 Months Operating Cash Flow) (Unaudited) ------------------------------------------------------------------------------- 3 months ended March 31 2019 2018 ----------------------------------- 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 GAAP 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-GAAP 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 adjustments. 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 Commission. Flexible Solutions International 6001 54th Ave, Taber, Alberta, CANADA T1G 1X4 Company Contacts Jason Bloom Toll Free: 800 661 3560 Fax: 403 223 2905 E-mail: info@flexiblesolutions.com -------------------------- If you have received this news release by mistake or if you would like to be removed from our update list please reply to: info@flexiblesolutions.com To find out more information about Flexible Solutions and our products, please visit www.flexiblesolutions.com. 2 EXHIBIT 99.2 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. 1 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 competing products. 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 it occurs. 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 Q1 2019. 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 throughout 2019. 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 6 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 manner. 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 received. 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 2018. 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 Jason@flexiblesolutions.com. Thank you, the floor is open for questions. Flexible 8-K Item 2.02 re 5-20 Conf. Call 5-20-19