0001004878-19-000178.txt : 20191118 0001004878-19-000178.hdr.sgml : 20191118 20191115173804 ACCESSION NUMBER: 0001004878-19-000178 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20191114 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20191118 DATE AS OF CHANGE: 20191115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEXIBLE SOLUTIONS INTERNATIONAL INC CENTRAL INDEX KEY: 0001069394 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 911922863 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31540 FILM NUMBER: 191225489 BUSINESS ADDRESS: STREET 1: 2614 QUEENSWOOD DR CITY: VICTORIA B C STATE: A1 ZIP: V8N 1X5 BUSINESS PHONE: 2504779969 MAIL ADDRESS: STREET 1: 2614 QUEENSWOOD DR CITY: VICTORIA BC CANADA STATE: A1 ZIP: V8N 1X5 8-K 1 form8k202confcall11-19.txt 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): November 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 November 14, 2019, the Company issued a press release announcing the Company's financial results for the nine months ended September 30, 2019. Item 8.01 Other Events On November 15, 2019, the Company held a conference call to discuss its financial results for the nine months ended September 30, 2019, as well as other information regarding the Company. Item 9.01 Exhibits Exhibit Number Description of Document 99.1 November 14, 2019 Press Release 99.2 Text of opening remarks by Dan O'Brien/November 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: November 15, 2019 FLEXIBLE SOLUTIONS INTERNATIONAL INC. By: /s/ Daniel B. O'Brien -------------------------------------- Daniel B. O'Brien, President and Chief Executive Officer EX-99 2 form8k202ex991nov-19.txt EXHIBIT 99.1 NEWS RELEASE November 14, 2019 FSI ANNOUNCES Third Quarter, 2019 FINANCIAL RESULTS A Conference call is scheduled for Friday November 15th , 11:00am Eastern time, 8:00 am Pacific Time See dial in number and explanation below VICTORIA, BRITISH COLUMBIA, November 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 third quarter (Q3) ended September 30, 2019. Mr. Daniel B. O'Brien, CEO, states, "We are pleased to show significant positive revenue growth for the quarter and anticipate that this will continue in Q4, however, it is important to note that Q4 2018 was the first time that the ENP acquisition appeared in our revenue." Mr. O'Brien continues, "Profit for the quarter and year to date is good but operating cash flow for the 9 months plus our investment income is the number that shows how strong we have become." o Sales in the Third quarter (Q3) were $7,403,492, up approximately 94% when compared to sales of $3,816,626 in the corresponding period a year ago. The financials show a Q3, 2019 net profit of $412,048, or $0.03 per share, compared to a net loss of $145,470, or $0.01 per share, in Q3, 2018. o Basic weighted average shares used in computing earnings per share amounts in Q3 were 12,108,110 and 11,630,991 for Q3, 2019 and Q3, 2018 respectively. o Non-GAAP operating cash flow: For the 9 months ending September 30, 2019, net income reflects $591,472 of non-cash charges (depreciation, stock option expenses), as well as gain (loss) on disposition (and involuntary disposition) of equipment, gain on investment, interest expense, interest income, write down of inventory, and income tax; Net income attributable to non-controlling interests. These are items not related to operating or current operating activities. When these items are removed, the Company shows operating cash flow of $2,534,644, or $0.21 per share. This compares with operating cash flow of $1,658,924, or $0.14 per share, in the corresponding 9 months of 2018 (see the table that follows for details of these calculations). 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. 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. Also new sales opportunities have appeared in the WaterSavrTM division as a result of the ongoing drought in the southern United States. Many municipalities are water stressed and are seeking ways to conserve water. Conference call A conference call has been scheduled for 11:00 am Eastern Time, 8:00 am Pacific Time, on Friday November 15th . CEO, Dan O'Brien will be presenting and answering questions on the conference call. To participate in this call please dial 1 800-667-5617 (or 1 334-323-0501) just prior to the scheduled call time. The conference call title, "Third Quarter 2019 Financials," may be requested. The above information and following table contain supplemental information regarding income and cash flow from operations for the period ended September 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 September 30 (9 Months Operating Cash Flow) (Unaudited) ------------------------------------------------------------------------------- 3 months ended September 30 2019 2018 -------------------------------- Revenue $7,403,492 $3,816,626 Income (loss) before income tax - GAAP $ 915,802 $ (182,838) Provision for Income tax (expense) / $ (213,771) $ 37,368 recovery - GAAP Net income (loss) - GAAP $ 412,048 a $ (145,470) Net income (loss) per common share - basic. - $ 0.03 a $ (0.01) GAAP 3 month weighted average shares used in 12,108,110 11,630,991 computing per share amounts - basic.- GAAP 9 month Operating Cash Flow Ended September 30 -------------------------------- Operating Cash flow (9 months). NON-GAAP $2,534,664 b,c $1,658,924 b Operating Cash flow per share excluding $ 0.21 b,c $ 0.14 b non-operating items and items not related to current operations (9 months) - basic. NON-GAAP Non-cash Adjustments (9 month) GAAP $ 591,472 d $ 257,875 d Shares (9 month basic weighted average) used in computing per share amounts - basic GAAP 11,862,484 11,627,464 Notes: certain items not related to "operations" of the Company have been excluded from net income as follows. a) Non-GAAP -:: Flexible Solutions International purchased 65% of ENP in 4th quarter, 2018 (October 2018). Therefore 3 month Net Income is reduced by the dollar amount of non-controlling interest in ENP. b) Non-GAAP - amounts exclude certain cash and non-cash items: depreciation and stock compensation expense (2019 = $591,472, 2018 = $257,875), interest expense (2019 = $341,791, 2018 = $22,222), interest income (2019 = 69,154, 2018 = $17,459), gain on investment (2019 = $342,248, 2018 = $5,336), 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), deferred income tax recovery (2019 = $125,999, 2018 = N/A), Income tax (2019 = 743,317, 2018 = 421,783), and Net income attributable to non-controlling interests. 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 $342,248 in gains from all investments, including that of 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 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. EX-99 3 form8k202ex992nov-19.txt 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 Q3 2019. Prior to speaking about our financials, I'd like to talk about our corporate condition and product lines plus 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. We do not recommend reducing fertilizer; instead the grower obtains more salable crop per acre farmed and a more profitable operation. TPA in agriculture has a strong economic value for all links in the sales to end user chain. Even after our margin and the distributor's profits, the grower receives a good return on his investment in our products. 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. 1 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 reducing 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. Q3 rebounded well from the weather problems encountered in the spring and ENP is positioned for growth in 2020. 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 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 also increasing the profits from the LLC which will show on our bottom line. 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 manner. After a poor Q2, the LLC's purchases from us rebounded in Q3 as predicted and look strong for 4th quarter and on into 2020. Watersavr(TM): News regarding Watersavr(TM) trials and sales will be released if and when it occurs. As the rest of the company grows, Watersavr(TM) will be less of a focus but will remain available for sale to existing and prospective customers. Q4 2019 and the start of 2020 TPA, SUN 27(TM) and N Savr 30(TM) for agricultural use have peak uptake in Q1 and Q2 with early buy volumes occurring in Q4. This is expected again at the end of 2019 and the first half of 2020. Our seasonality has been significantly reduced by the ENP acquisition and the LLC investment, indicating that Q4 should be strong. This, along with Q4 sales for US early buy and winter crop programs is expected to provide growth in Q4 relative to the year earlier. It is important to remember that Q4 2018 was the first quarter that ENP was consolidated into FSI and as a result, the growth rates to be expected in Q4 and through 2020 will be at organic rather than acquisition levels. Oil, gas and industrial sales of TPA increased compared to the previous year. Increased sales into this market vertical are expected to continue through the 2 end of the year and through 2020. 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 also increase significantly driven by the increases in top line revenue. Tariffs: Since Sept 30th 2018, all our raw materials imported from China have included a 10% additional tariff which rose to 25% in 2019. US customers have received price increases from us now that this inventory is being used. US customers have received additional price increases when we began using inventory that was subject to the 25% tariff. International customers are not charged the tariffs 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 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 to arrive after the inventory is converted and exported. 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. Highlights of the financial results: Sales for the quarter increased 94% to $7.4 million, compared with $3.82 million for Q3 2018. The result is a gain of 412 thousand or 3 cents per share in the 2019 period, compared to a loss of $145 thousand or 1 cent per share, in 2018. Profit for the quarter and year to date is good but, operating cash flow for the 9 months [detailed in our press release yesterday] plus our investment income is the number that shows how strong we have become by joining with ENP and investing in the Florida LLC that is also a major customer. Working capital is adequate for all our purposes and is expected to increase during 2020 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 Monday, November 18th. Email or fax copies can be requested from Jason Bloom at Jason@flexiblesolutions.com. Thank you, the floor is open for questions.