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): August 14, 2019 FLEXIBLE SOLUTIONS INTERNATIONAL INC. ------------------------------------- (Exact name of Registrant as specified in its charter) Alberta 001-31540 71-1630889 -------------------------- ----------------- ------------------ (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 -------------------------------------------------------------------------------- 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. [ ] 1 Item 2.02 Results of Operations and Financial Condition On August 14, 2019, the Company issued a press release announcing the Company's financial results for the three months ended June 30, 2019. Item 8.01 Other Events On August 15, 2019, the Company held a conference call to discuss its financial results for the three months ended June 30, 2019, as well as other information regarding the Company. Item 9.01 Exhibits Exhibit Number Description of Document 99.1 August 14, 2019 Press Release 99.2 Text of opening remarks by Dan O'Brien/August 15, 2019 conference call 2 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: August 15, 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 August 14, 2019 FSI ANNOUNCES SECOND QUARTER, 2019 FINANCIAL RESULTS Conference call scheduled for Thursday August 15, 2019, 11:00am Eastern time, 8:00 a.m. Pacific Time See dial in number below VICTORIA, BRITISH COLUMBIA, August 14, 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 second quarter ended June 30, 2019. Mr. Dan O'Brien, CEO comments, "Our bottom line was negatively impacted by a significant bad debt charge and by additional tariffs on raw materials. We intend to recover the bad debt through litigation and the tariffs through the tariff drawback program, however, the timing of these recoveries is uncertain." Mr. O'Brien continues, "All of our divisions and investments with exposure to the agriculture markets were affected by the weather in the US and the international uncertainties of trade. We expect that sales will recover in Q3 and Q4." o Sales for the second quarter (Q2), 2019 were up approximately 63% to $6,770,440 when compared to sales of $4,137,545 for Q2, 2018. The result was an after tax GAAP accounting net loss of $27,733,0, or $0.00 per weighted average share for Q2, 2019, compared to an after tax GAAP accounting net income of $2,135,906, or $0.18 per weighted average share for Q2, 2018. See 2019 past bad debt expense recognized in Q2, 2019 as well as, insurance gain in Q2, 2018 of $1.72million. These numbers are not related to Q2, 2019 or Q2, 2018 operating income respectively. o Basic weighted average shares used in computing earnings per share amounts for the quarter were: 11,769,635 and 11,630,991 for Q2, 2019 and Q2, 2018 respectively. o Non-GAAP operating cash flow: For the 6 months ending June 30, 2019, net income reflects $373,351 of non-cash charges (depreciation and stock option expenses), loss/gain 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 $1,692,740 or $0.14 per share. This compares with operating cash flow of $1,763,550 or $0.15 per share, in the corresponding 6 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 the dominant source 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.. * a conference call has been scheduled for 11:00 am Eastern Time, 8:00 am Pacific Time, on Thursday August 15th , 2019. CEO, Dan O'Brien will be presenting and answering questions on the conference call. To participate in this call please dial toll free1-800-353-6461 (or +1-334-323-0501) just prior to the scheduled call time. The conference call title, "Second 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 June 30, 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 June 30 (6 Months Operating Cash Flow) (Unaudited) -------------------------------------------------------------------------------- 3 months ended March 31 2019 2018 --------------------------------- Revenue $6,770,440 $4,137,545 Income (loss) before income tax - GAAP $ 331,264 $2,293,161 Provision for Income tax net - GAAP $ (150,466) $ (157,255) Net income (loss) - GAAP $ (27,733) $2,135,960 Net income (loss) per common share - basic. - $ 0.00 $ 0.18 GAAP 3 month weighted average shares used in 11,769,635 11,630,991 computing per share amounts - basic.- GAAP 6 month Operating Cash Flow Ended June 30 --------------------------------- Operating Cash Flow (6 months). NON-GAAP $1,692,740 b,c $ 1,763,550 b Operating Cash flow per share excluding non-operating items and items not related to current operations (6 months) - basic. $ 0.14 b,c $ 0.15 b NON-GAAP Non-cash Adjustments (6 month) GAAP $ 373,351 d $ 171,496 d Shares (6 month basic weighted average) used 11,625,671 in computing per share amounts - basic GAAP 11,737,635 Notes: certain items not related to "operations" of the Company have been excluded from net income as follows. a) Non-GAAP - Provision for Income tax less Deferred income tax recovery = $529,546 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 = $373,351, 2018 = $171,496), Gain on investment ( 2019 = $259,514, 2018 = N/A), net gain/(loss) on involuntary disposition of equipment (2019 = N/A, 2018 = $1,714,261), write down of inventory (2019 = N/A, 2018 = N/A), interest income (2019 = $55,533, 2018 = $6,893), Interest expense (2019 = $247,472, 2018 = $14,487) deferred tax (expense)/recovery (2019 = $125,999, 2018 = N/A), and Income tax expense (2019 = $529,546, 2018 = $459,151). 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 $259,514 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.co 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. EXHIBIT 99.2 Q2 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 Q2 2019. Before I speak 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 occur 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. 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 1 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 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 data suggest that FSI should expect annual pretax profits of greater than $1 MM from this division with moderate annual growth. 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. Unfortunately, second quarter this year coincided with very poor spring weather in most of ENP's territory resulting in fewer sales. The onset of summer in Q3 will allow sales to recover but the business not done in Q2 won't be available again until next year. Effect of the LLC investment announced in January: This investment generated quarterly cash flow and profits starting in Q1 2019 as shown in the financials. The company we invested in will also order substantially more product from us in each quarter of 2019 than it did in 2018. We expect this growth to continue for many quarters to come which will further increase revenue and profitability. The LLC has recently started representing more of our product line internationally with small sales already booked. We expect this to grow over several seasons and benefit our NCS division while increasing our share of profits from the LLC. It is worth noting that the seasonality of the LLC's sales is opposite to our North American sales most years which will tend to smooth out our quarterly revenue numbers in a positive manner. Unfortunately, this year the tariff and currency strife delayed some international business in Q2. This business is expected to be realized in Q3 and Q4 instead. Watersavr(TM): 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. We find it extraordinary that with a decade and more of successful Watersavr(TM) trials, no government water providers in areas with high water costs have implemented our technology. Q3 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. Q2 2019 results were damaged by the poor weather in the mid-west. 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 4 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 reported for Q1 2019. Oil, gas and industrial sales of TPA increased compared to the previous year. Increased sales into this market vertical is expected to continue throughout 2019. 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 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 2018, 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%. 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 and continues to increase. The rebates will increase profitability and cash flow while decreasing cost of goods for the future quarters in which the rebates are received. Bad debt: Historically our group has had nearly zero bad debt. This year we made a poor choice in extending credit to an agriculture customer who has not yet paid their bills. We intend to recover this debt but wish to account for it now to ensure that our financials are fully transparent. Highlights of the financial results: Sales for the quarter increased 63% to $6.77 million, compared with $4.14 million for Q2 2018. The result is a loss of 27 thousand or 0 cents per share in the 2019 period, compared to a gain of $2.14 million or 18 cents per share, in 2018. We attribute the lack of earnings to the bad debt mentioned above and the tariffs paid on raw materials that will be converted and sold internationally. We expect to recover these funds but do not control the timing. 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 Friday, August 16th. Email or fax copies can be requested from Jason Bloom at Jason@flexiblesolutions.com. Thank you, the floor is open for questions.