FSI Flexible Solutions International Inc

 

 

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 15, 2024

 

FLEXIBLE SOLUTIONS INTERNATIONAL INC.

(Exact name of Registrant as specified in its charter)

 

Alberta		001-31540		71-1630889
(State or other jurisdiction		(Commission		(Employer
of incorporation)		File No.)		Identification No.)

 

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 (17 CFR 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-14(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol		Name of exchange on which 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 (§203.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§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. ☐

 

 

 

Item 8.01 Other Events

 

On May 15, 2024, the Company issued a press release announcing its financial results for the first quarter ended March 31, 2024.

 

On May 16, 2024 the Company held a conference call to discuss its financial results for the first quarter ended March 31 2024, as well as other information regarding the Company.

 

Item 9.01 Exhibits

 

Exhibit
Number		Description of Document
99.1		May 15, 2024 Press Release
99.2		Text of remarks by Dan O’Brien – May 16, 2024 conference call
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

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 16, 2024	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 15, 2024

 

 

FSI ANNOUNCES FIRST QUARTER, 2024 FINANCIAL RESULTS

A Conference call is scheduled for Thursday, May 16, 2024,

11:00am Eastern Time

See dial in number below

 

VICTORIA, BRITISH COLUMBIA, May 15, 2024 – FLEXIBLE SOLUTIONS INTERNATIONAL, INC. (NYSE Amex: FSI), 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 first quarter ended March 31, 2024.

 

Mr. Daniel B. O’Brien, CEO, states, “Progress is being made. We streamlined operations by closing our Naperville R&D facility and moving all the work to our Peru, IL building. The exit costs from this action were nearly all taken in Q1 so, the benefits will become evident in Q2 and Q3. Some price increases have been possible but not enough to recover past margins yet. Several large new opportunities have been found in the food/nutraceutical market and are proceeding toward revenue in the 2024 year.”

 

	●	Sales for the first quarter (Q1) were $9,224,872 down approximately 6% when compared to sales of $9,847,517 in the corresponding period a year ago.
	●	Q1, 2024 net income was $457,226 or $0.04 per share, compared to a net income of $884,369, or $0.07 per share, in Q1, 2023.
	●	The lower earnings reported for Q1, 2024 were due to higher cost of goods, lower sales and product mix as well as significantly higher Depreciation and amortization expenses. In addition, higher Stock based compensation expenses and one-time costs associated with closing our Naperville office affected the quarter.
	●	Basic weighted average shares used in computing earnings per share amounts were 12,449,699 and 12,432,914 for Q1, 2024 and Q1, 2023 respectively.
	●	Q1, 2024 Non-GAAP operating cash flow: The Company shows 3 months operating cash flow of $1,341,485, or $0.11 per share. This compares with operating cash flow of $1,729,956, or $0.14 per share, in the corresponding 3 months of 2023 (see the table and notes that follow for details of these calculations).

 

The NanoChem division and ENP subsidiary continue to be the dominant sources of revenue and cash flow for the Company. New opportunities continue to unfold in detergent, food, nutraceuticals, oil field extraction, turf, ornamental and agricultural use to further increase sales in these divisions.

 

 

Conference call

 

A conference call has been scheduled for 11:00 am Eastern Time, 8:00 am Pacific Time, on Thursday May 16th, 2024. CEO, Dan O’Brien will be presenting and answering questions on the conference call. To participate in this call please dial 1-800-225-9448 (or 1-203-518-9708) just prior to the scheduled call time. To join the call participants will be requested to give their name and company affiliation. The conference ID: SOLUTIONS and/or call title Flexible Solutions International – First Quarter, 2024 Financials 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, 2024. 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 Non-GAAP financial measure is as follows:

 

FLEXIBLE SOLUTIONS INTERNATIONAL, INC.

consolidated Statement of Operations

For Three Months Ended March 31, 2024 and 2023

(three Months Operating Cash Flow - Unaudited)

 

		THREE MONTHS ENDED MARCH 31
		2024				2023
Revenue		$	9,224,872			$	9,847,517
Income (loss) before income tax – GAAP		$	780,387			$	1,264,271
Provision for Income tax – net- GAAP		$	(264,178	)		$	(299,777	)
Net income (loss)- GAAP		$	457,226			$	884,369
Net income (loss) per common share – basic. – GAAP		$	0.04			$	0.07
3 month weighted average shares used in computing per share amounts – basic.-GAAP			12,449,699				12,432,914

 

		3 month Operating Cash Flow Ended March 31
Operating Cash Flow (3 months). NON-GAAP		$	1,341,485	a,b,c		$	1,729,956	a,b,c
Operating Cash Flow per share excluding non-operating items and items not related to current operations (3 months) – basic. -NON-GAAP		$	0.11	a,b,c		$	0.14	a,b,c
Non-cash Adjustments (3 month) -GAAP		$	676,027	d		$	528,108	d
Shares (3 month basic weighted average)  used in computing per share amounts – basic -GAAP			12,449,699				12,432,914

 

Notes: certain items not related to “operations” of the Company’s net income are listed below.

 

a)	Non-GAAP – Flexible Solutions International purchased 65% of ENP in 4th quarter, 2018 (October 2018). Therefore Operating Cash Flow is adjusted by the pre-tax Net income or loss of the non-controlling interest in ENP for 2023 only. The 2024 entry in the “Statement of operations and comprehensive income” is a pretax number therefore no adjustment is required.
b)	Non-GAAP – amounts exclude certain cash and non-cash items: Depreciation and Stock compensation expense (2024 = $676,027, 2023 = $528,108), Interest expense (2024 = $175,266, 2023 = $134,870), Interest income (2024 = $48,197, 2023 = $12,011), Gain on investment (2024 = $182,975, 2023 = $69,995), Income tax (2024 = ($264,178), 2023 = ($299,777)), and pretax Net income attributable to non-controlling interests (2024 = $58,983, 2023 = $115,287).  Although included in operating expenses these onetime expenditures were not related to operations of FSI.  *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 are 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 gains from all investments (2024 = $182,975, 2023 = $69,995), including those from the Florida LLC, are 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 statement 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 54^th 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.

 

 

 

EXHIBIT 99.2

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 2024.

 

To start, I would like to discuss our Company condition and our product lines along with what we think might occur in the remainder of 2024. I will comment on our financials afterward.

 

NanoChem division: NCS represents approximately 70% of FSI’s revenue. This division makes thermal poly-aspartic acid, called TPA for short, a biodegradable polymer with many valuable uses. NCS also manufactures SUN 27™ and N Savr 30™ which are used to reduce nitrogen fertilizer loss from soil. In 2022, NCS started food grade toll operations using the spray dryer we installed over the last several years.

 

TPA is used in agriculture to significantly increase crop yield. It acts 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.

 

TPA is a biodegradable way of treating oilfield water to prevent pipes from plugging with mineral scale. Preventing scale keeps the oil recovery pipes from clogging.

 

TPA is also sold as a biodegradable ingredient in cleaning products, and as a water treatment chemical.

 

In our food division, a special version of TPA is sold as a liquid stability aid.

 

SUN 27™ and N Savr 30™ are nitrogen conservation products. Nitrogen is a critical fertilizer that can be lost through bacterial breakdown, evaporation and soil runoff.

 

SUN 27™ is used to conserve nitrogen from attack by soil bacterial enzymes that cause evaporation while N Savr 30™ is effective at reducing nitrogen loss from leaching.

 

 

Food products: Our IL plant is food grade qualified and we have received our FDA certification. We have commercialized one food product based on polyaspartates that was developed fully in house. This product had weak sales in Q1 which contributed to the underwhelming results for the quarter. However, the customer has indicated that orders for the full year will substantially exceed FY 2023 so the weakness is probably only in a single quarter. We have a pipeline of additional products in development that has increased during the quarter. NCS now has five products, each with seven figure revenue potential, at the final stages prior to purchase orders. We believe that purchase orders will be received for at least two of these products in 2024.

 

ENP Division: ENP represents most of our other revenue. ENP is focused on sales into the greenhouse, turf and golf markets, while, NCS sells into row crop agriculture. We expect some ENP revenue growth in 2024 with the growth concentrated in Q3 and Q4.

 

The Florida LLC investment: The LLC was profitable in first quarter. We were pleased to see much better margins for this investment in Q1 and hope this will continue for the remainder of 2024. The Company is focused on international sales into multiple countries all of which face different issues and respond in varied ways. We expect sales of the LLC to grow again in 2024 leading to a larger profit on our investment.

 

Agricultural products in the US are facing resistance from growers to spending on inputs when crop prices are not increasing at the rate of inflation. We think that growth in 2024 is probable but, most of it will be international, and recognized through sales to the Florida LLC.

 

Oil, gas and industrial sales of TPA were stable in Q1 and this is likely to continue throughout 2024.

 

Food division sales are sure to grow based on our customer’s order schedule. They may grow even further if POs are received for any of the products in development.

 

Tariffs: Since 2019, several of our raw materials imported from China have included a 25% tariff. International customers are not charged the tariffs because we have applied for the export rebates available to recover the tariffs. The tariffs are affecting our cost of goods, our cash flow and our profits negatively. Rebates are extremely difficult to obtain even though we are entitled to them. We submitted our initial applications more than 5 years ago. The total dollar amount due back to us is well in excess of $1 MM and grows each quarter. We will persevere until we succeed in recovering our funds.

 

Shipping and Inventory: Shipping prices are stable but higher than prior to covid. Shipping times are reasonable on the routes we use. None of our products or raw materials ship through the Red Sea area.

 

Raw material prices do not appear to be reverting to historic levels. Instead, they are stable but increasing with inflation. Passing price increases, even small inflation related ones, along to customers always takes several months and is not always possible. We have raised prices to all customers over the last six months and are planning to continue this program if we can.

 

 

We believe that the sum of the issues we faced last year which resulted in lower revenue, lower cash flow and lower profits for the full year have partly resolved. Progress is being made. We have streamlined operations by closing our Naperville R&D facility and moving all the work to our Peru, IL building. The exit costs from this action were nearly all taken in Q1 so, the benefits will become evident in Q2 and Q3. Some price increases have been possible but not enough to recover margins yet. Several large new opportunities have been found in the food/nutraceutical market and are proceeding toward revenue in the 2024 year. Therefore, we expect that growth will resume in sales, cash flow and profit for the rest of 2024.

 

Highlights of the financial results:

 

FSI and its subsidiaries will continue to examine all our costs and economize where possible. Even more critical is increasing sales in our existing businesses and obtaining sales in the food industry to ensure that our wage and other base costs are spread over more revenue dollars. We set the stage for this in Q1 and expect to show incremental success in all of these areas during the course of the 2024 year.

 

Sales for the quarter decreased 6% to 9.2 million, compared with 9.8 million in Q1 2023.

 

Profits: Q1 2024 shows a profit of $457 thousand or 4 cents per share, compared to a profit of $884 thousand, or $0.07 per share, in Q1 2023.

 

Operating Cash Flow: This non-GAAP number is useful to show our progress with non-cash items removed for clarity. For Q1 2024, it was $1.34 million or 11 cents per share down from $1.73 million or 14 cents per share in Q1 2023.

 

Long term debt: We continue to pay down our long-term debt according to the terms of the loans.

 

Additional factory space in Illinois: In the second quarter 2023 we invested to acquire 80% of an LLC called 317 Mendota that in turn purchased a large building on 37 acres of land in Mendota IL. We have determined that 240,000 square feet is available for our use or for rental. The ENP division has moved all operations to 60,000 square feet of this building. The remaining 180,000 square feet will be rented when suitable tenants are found.

 

Working capital is adequate for all our purposes. We have lines of credit with Stock Yards Bank for the ENP and NCS subsidiaries. We are confident that we can execute our plans with our existing capital.

 

The text of this speech will be available as an 8K filing on www.sec.gov by Friday May 17th. Email or fax copies can be requested from Jason Bloom at Jason@flexiblesolutions.com. Thank you, the floor is open for questions.

 

 

v3.24.1.1.u2

Cover	May 15, 2024
Document Type	8-K
Amendment Flag	false
Document Period End Date	May 15, 2024
Entity File Number	001-31540
Entity Registrant Name	FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Entity Central Index Key	0001069394
Entity Tax Identification Number	71-1630889
Entity Incorporation, State or Country Code	A0
Entity Address, Address Line One	6001 54 Ave.
Entity Address, City or Town	Taber,
Entity Address, State or Province	AB
Entity Address, Country	CA
Entity Address, Postal Zip Code	T1G 1X4
City Area Code	(250)
Local Phone Number	477-9969
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Common Stock [Member]
Title of 12(b) Security	Common Stock
Trading Symbol	FSI
Security Exchange Name	NYSEAMER

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