Flexible Solutions International Inc 10-Q for FY2026 Q2
Flexible Solutions International Inc (FSI)
About this 10-Q
Flexible Solutions International Inc filed this 10-Q on August 14, 2026, covering the quarter ended June 30, 2026 (FY2026 Q2).
Headline figures
Quarter ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $7.61M
- down 33.1% from $11.37M a year earlier
- Net loss
- $1.91M
- compared with net income of $2.03M a year earlier
- Diluted EPS
- -$0.15
- compared with $0.15 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission
File Number:
(Exact Name of registrant as Specified in Its Charter)
| Alberta | ||
| (State or other jurisdiction of | (Employer | |
| incorporation or organization) | Identification No.) | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s
telephone number:
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| 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. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ☐ Yes
| Class of Stock | No. Shares Outstanding | Date | ||
| Common | August 14, 2026 |
FORM 10-Q
Index
| 1 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for the purposes of the federal and state securities laws, including, but not limited to: any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include but are not limited to:
| ● | Increased competitive pressures from existing competitors and new entrants; | |
| ● | Increases in interest rates or our cost of borrowing or a default under any material debt agreement; | |
| ● | Deterioration in general or regional economic conditions; | |
| ● | Adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; | |
| ● | Loss of customers or sales weakness; | |
| ● | Inability to achieve future sales levels or other operating results; | |
| ● | The unavailability of funds for capital expenditures; | |
| ● | Operational inefficiencies in distribution or other systems; and | |
| ● | New tariffs relating to raw materials imported from China. |
For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
| 2 |
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(U.S. Dollars - Unaudited)
| June 30, 2026 | December 31, 2025 | |||||||
| Assets | ||||||||
| Current | ||||||||
| Cash | $ | $ | ||||||
| Term deposits (Note 2) | ||||||||
| Accounts receivable, net (Note 4) | ||||||||
| Inventories (Note 5) | ||||||||
| Prepaid expenses and deposits | ||||||||
| Property held for sale | ||||||||
Investments (Note 7) | ||||||||
| Total current assets | ||||||||
| Property, equipment and leaseholds, net (Note 6) | ||||||||
| Right of use assets, net (Note 3) | ||||||||
| Investments (Note 7) | ||||||||
| Intangible assets | ||||||||
| Long term deposits | ||||||||
| Goodwill | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Deferred revenue | ||||||||
| Income taxes payable | ||||||||
| Short term lines of credit (Note 8) | ||||||||
| Current portion of lease liabilities (Note 3) | ||||||||
| Current portion of long-term debt (Note 9) | ||||||||
| Total current liabilities | ||||||||
| Right of use liabilities, net (Note 3) | ||||||||
| Deferred income tax liability | ||||||||
| Long term debt (Note 9) | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Notes 8 and 9) | ||||||||
| Stockholders’ Equity | ||||||||
| Capital stock (Note 11) | ||||||||
| Authorized: common shares with a par value of $ each; preferred shares with a par value of $ each Issued and outstanding: (December 31, 2025: ) common shares | ||||||||
| Capital in excess of par value | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated earnings | ||||||||
| Total stockholders’ equity – Flexible Solutions International Inc. | ||||||||
| Non-controlling interests (Note 12) | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
| 3 |
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(U.S. Dollars — Unaudited)
| 2026 | 2025 | |||||||
| Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Sales | ||||||||
| Products | $ | $ | ||||||
| Research and development services (Note 2) | ||||||||
| Total sales | ||||||||
| Cost of sales | ||||||||
| Gross profit (loss) | ( | ) | ||||||
| Operating expenses | ||||||||
| Professional fees | ||||||||
| Research and development | ||||||||
| Selling, general, and administrative | ||||||||
| Wages, administrative salaries and benefits | ||||||||
| Total operating expenses | ||||||||
| Operating profit (loss) | ( | ) | ||||||
| Non-operating income (expense) | ||||||||
| (Loss) income from investments (Note 7) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Total non-operating expense | ( | ) | ( | ) | ||||
| Income (loss) before income tax | ( | ) | ||||||
| Income taxes | ||||||||
| Current income tax benefit (expense) | ( | ) | ||||||
| Net income (loss) | ( | ) | ||||||
| Net income attributable to non-controlling interests | ( | ) | ( | ) | ||||
| Net income (loss) attributable to Flexible Solutions International Inc. | $ | ( | ) | $ | ||||
| Net income (loss) per share (basic) | $ | ( | ) | $ | ||||
| Net income (loss) per share (diluted) | $ | ( | ) | $ | ||||
| Weighted average number of common shares (basic) | ||||||||
| Weighted average number of common shares (diluted) | ||||||||
| Other comprehensive income (loss): | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Unrealized gain (loss) on foreign currency translations | ( | ) | ||||||
| Total comprehensive income (loss) | ( | ) | ||||||
| Comprehensive income – non-controlling interests | ( | ) | ( | ) | ||||
| Comprehensive income (loss) attributable to Flexible Solutions International Inc. | $ | ( | ) | $ | ||||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
| 4 |
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(U.S. Dollars — Unaudited)
| 2026 | 2025 | |||||||
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Sales | ||||||||
| Products | $ | $ | ||||||
| Research and development services (Note 2) | ||||||||
| Total sales | ||||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Professional fees | ||||||||
| Research and development | ||||||||
| Selling, general, and administrative | ||||||||
| Wages, administrative salaries and benefits | ||||||||
| Total operating expenses | ||||||||
| Operating profit (loss) | ( | ) | ||||||
| Non-operating income (expense) | ||||||||
| (Loss) income from investments (Note 7) | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Total non-operating expense | ( | ) | ( | ) | ||||
| Income (loss) before income tax | ( | ) | ||||||
| Income taxes | ||||||||
| Current income tax benefit (expense) | ( | ) | ||||||
| Net income (loss) | ( | ) | ||||||
| Net income attributable to non-controlling interests | ( | ) | ( | ) | ||||
| Net income (loss) attributable to Flexible Solutions International Inc. | $ | ( | ) | $ | ||||
| Net income (loss) per share (basic) | $ | ( | ) | $ | ||||
| Net income (loss) per share (diluted) | $ | ( | ) | $ | ||||
| Weighted average number of common shares (basic) | ||||||||
| Weighted average number of common shares (diluted) | ||||||||
| Other comprehensive income (loss): | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Unrealized gain (loss) on foreign currency translations | ( | ) | ||||||
| Total comprehensive income (loss) | ( | ) | ||||||
| Comprehensive income – non-controlling interests | ( | ) | ( | ) | ||||
| Comprehensive income (loss) attributable to Flexible Solutions International Inc. | $ | ( | ) | $ | ||||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
| 5 |
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. Dollars — Unaudited)
| 2026 | 2025 | |||||||
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Operating activities | ||||||||
| Net income (loss) for the period | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Stock based compensation | ||||||||
| Depreciation and amortization | ||||||||
| Non cash operating lease expense | ||||||||
| Loss (income) from investments | ( | ) | ||||||
| (Gain) loss on sale of automobiles | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and deposits | ||||||||
| Long term deposits | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Income taxes payable | ( | ) | ||||||
| Cash provided by operating activities | ||||||||
| Investing activities | ||||||||
| Maturities of term deposits, net | ||||||||
| Purchase of property, equipment and leaseholds | ( | ) | ( | ) | ||||
| Cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Repayment of short-term lines of credit, net | ( | ) | ( | ) | ||||
| Repayment of long-term debt | ( | ) | ( | ) | ||||
| Dividends paid | ( | ) | ||||||
| Distribution to non-controlling interest | ( | ) | ( | ) | ||||
| Distribution received upon dissolution of subsidiary | ||||||||
| Proceeds from shares issued upon exercise of stock options | ||||||||
| Cash used by financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Increase (decrease) in cash | ||||||||
| Cash, beginning of year | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental schedule of non-cash financing and investing activities | ||||||||
| Equity investment carrying amount transferred to intangible asset on settlement | $ | $ | ||||||
| Equity Investment accounts receivable amount transferred to intangible asset on settlement | $ | $ | ||||||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
| 6 |
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM Consolidated Statements of Stockholders’ Equity
(U.S. Dollars – Unaudited)
| Shares | Capital Stock | Capital in Excess of Par Value | Accumulated Earnings | Accumulated Other Comprehensive Loss | Total | Non- Controlling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||
| Balance December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Translation adjustment | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income (loss) | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Distribution to noncontrolling interest | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Distribution received upon dissolution of subsidiary | ||||||||||||||||||||||||||||||||
| Common stock issued upon exercise of options | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||
| Balance March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Translation adjustment | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income (loss) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Common stock issued upon exercise of options | ||||||||||||||||||||||||||||||||
| Stock awards distributed | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||
| Balance, June 30, 2026 | ( | ) | ||||||||||||||||||||||||||||||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
| 7 |
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM Consolidated Statements of Stockholders’ Equity
(U.S. Dollars – Unaudited)
| Shares | Capital Stock | Capital in Excess of Par Value | Accumulated Earnings | Accumulated Other Comprehensive Loss | Total | Non- Controlling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||
| Balance December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Translation adjustment | — | |||||||||||||||||||||||||||||||
| Net income (loss) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Common stock issued upon exercise of options | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||
| Balance March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Translation adjustment | — | |||||||||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||
| Net income (loss) | — | |||||||||||||||||||||||||||||||
| Common stock issued upon exercise of options | ||||||||||||||||||||||||||||||||
| Dividends paid | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||
| Balance June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
| 8 |
NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2026
(U.S. Dollars - Unaudited)
1. BASIS OF PRESENTATION
These
unaudited condensed interim consolidated financial statements include the accounts of Flexible Solutions International, Inc. (the
“Company”), its wholly-owned subsidiaries Flexible Fermentation Ltd., NanoChem Solutions Inc. (“NanoChem”),
Flexible Solutions Ltd., Flexible Biomass LP, FS Biomass Inc., NCS Deferred Corp., Natural Chem SEZC Ltd. (“Natural
Chem”), Pana Chem Solutions Inc. (“Pana Chem”), InnFlex Holdings Inc., ENP Peru Investments LLC (“ENP
Peru”), its
In
2023, the Company purchased an
The Company has two divisions. The first is Specialty Chemicals (“SPCH”), SPCH develops, manufactures and markets specialty chemicals which slow the evaporation of water. One product, HEATSAVR®, is marketed for use in swimming pools and spas where its use, by slowing the evaporation of water, allows the water to retain a higher temperature for a longer period of time and thereby reduces the energy required to maintain the desired temperature of the water in the pool. Another product, WATERSAVR®, is marketed for water conservation in irrigation canals, aquaculture, and reservoirs where its use slows water loss due to evaporation. In addition to the water conservation products (“EWCP”), the Company also manufactures and markets water-soluble chemicals utilizing thermal polyaspartate biopolymers (hereinafter referred to as “TPAs”), which are beta-proteins manufactured from the common biological amino acid, L-aspartic. TPAs can be formulated to prevent corrosion and scaling in water piping within the petroleum, chemical, utility and mining industries. TPAs are also used as proteins to enhance fertilizers in improving crop yields and can be used as additives for household laundry detergents, consumer care products and pesticides. The SPCH division also manufactures two nitrogen conservation products for agriculture that slows nitrogen loss from fields and has installed custom equipment for production of food and nutritional materials. All the ingredients the Company produces are custom products for specific clients and are confidential. The Company anticipates that this market vertical will grow over time. The SPCH division recognizes research and development income from time to time.
The second division is food grade products and ingredients (“FGPI”) that the Company manufactures for specific clients and are confidential.
| 9 |
2. SIGNIFICANT ACCOUNTING POLICIES
These unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis, except where otherwise noted, in accordance with accounting principles generally accepted in the United States.
In the opinion of management, the accompanying unaudited condensed interim consolidated financial statements contain all adjustments (all of which are of a normal recurring nature) and disclosures necessary for a fair statement of the Company’s financial position as of June 30, 2026 and the results of its operations and cash flows for the six months then ended. The consolidated balance sheet as of December 31, 2025 is derived from the December 31, 2025 audited financial statements. The unaudited condensed interim consolidated financial statements do not include all disclosures required of annual consolidated financial statements and, accordingly, should be read in conjunction with our annual financial statements for the year ended December 31, 2025. Operating results for the six months ended June 30, 2026 may not be indicative of results expected for the full year ending December 31, 2026.
The Company recorded an income tax benefit for the six months ended June 30, 2026. The estimated effective tax rate for the period differs from the U.S. federal statutory rate primarily due to a full valuation allowance against the net deferred tax assets of the Company’s Canadian and Panamanian operations, partially offset by the accrual of interest and penalties on unfiled U.S. federal and state tax returns. The uncertain tax position underlying these returns was resolved during the year ended December 31, 2025; however, interest and penalties continue to accrue until the returns are filed, and these amounts are recognized as a component of income tax expense.
(a) Term Deposits.
Term deposits with original maturities greater than three months but less than one year are classified as current assets and carried at amortized cost, which approximates fair value. Interest income is recognized on the accrual basis.
At
June 30, 2026, the Company had two term deposits that are maintained by commercial banks. The first term deposit is for $
(b) Inventories and Cost of Sales.
The Company has three major classes of inventory: completed goods, work in progress and raw materials and supplies. In all classes, inventories are stated at the lower of cost or net realizable value with cost determined using either weighted average cost or the first-in, first-out (FIFO) method, depending on the entity. Cost of sales includes all expenditures incurred in bringing the goods to the point of sale. Inventory costs and costs of sales include direct costs of the raw material, inbound freight charges, warehousing costs, handling costs (receiving and purchasing) and utilities and overhead expenses related to the Company’s manufacturing and processing facilities. The Company periodically reviews its inventory for slow-moving or obsolete items and writes down the inventory carrying value to its estimated net realizable value based on assumptions about future demand and market conditions.
| 10 |
The Company accounts for shipping and handling activities as fulfillment costs and shipping and handling charges included in the unaudited condensed interim consolidated statements of operations and comprehensive income (loss) are as follows:
SCHEDULE OF SHIPPING AND HANDLING CHARGES
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Shipping income in product sales | $ | $ | $ | $ | ||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Shipping costs in cost of sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | $ | $ | $ | $ | ||||||||||||
(c) Risk Management and Concentrations.
The Company’s credit risk is primarily attributable to its accounts receivable. The amounts presented in the consolidated balance sheets are net of allowances for doubtful accounts, estimated by the Company’s management based on prior experience and the current economic environment. The Company is exposed to credit-related losses in the event of non-payment by customers. Credit exposure is minimized by dealing with only credit worthy counterparties.
Excluding research and development services revenue that is listed separately, total revenue for the Company’s primary customers that have over 10% of sales in each period is as follows:
SCHEDULE OF REVENUE
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue for primary customers with sales over 10% in each period | ||||||||||||||||
| Company A - SPCH (Note 12) | $ | $ | $ | $ | ||||||||||||
| Company B - SPCH | $ | * | $ | $ | * | $ | ||||||||||
| Company C - SPCH | $ | $ | * | $ | $ | |||||||||||
| Company D - FGPI | $ | $ | * | $ | $ | * | ||||||||||
| Total revenue for primary customers with sales over 10% in each period | $ | $ | $ | $ | ||||||||||||
| Total revenue for primary customers with sales over 10% in each period as a percentage of sales | % | % | % | % | ||||||||||||
| Research and development services | $ | $ | ** | $ | $ | ** | ||||||||||
| Research and development services as a percentage of sales | % | % | ||||||||||||||
| * |
| ** |
Total accounts receivable for the Company’s product customers with balances over 10% of accounts receivable at June 30, 2026 and December 31, 2025 is as follows:
| June 30, 2026 | December 31, 2025 | |||||||
| Accounts receivable of customers with balances over 10% | $ | | )% | $ | | )% | ||
| Customers with balances over 10% | Customers C, D and E | Customers A and D |
The credit risk on cash is limited because the Company limits its exposure to credit loss by placing its cash with major financial institutions. The Company maintains cash balances at financial institutions which at times exceed federally insured amounts. The Company has not experienced any losses in such accounts.
(d) Reclassification.
Certain prior year amounts have been reclassified to conform to the 2026 financial statements presentation. Reclassifications had no effect on net income (loss), cash flows, or stockholders’ equity as previously reported.
| 11 |
(e) Recent Accounting Pronouncements.
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on its unaudited condensed interim consolidated financial statements and disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
3. LEASES
Panama Operating Lease
In
2024, the Company executed a contract to lease
The
lease liability related to this operating lease, which represents the present value of the lease payments, and the corresponding ROU
asset were both $
Mendota, Illinois Operating Leases
In
October 2025, in connection with the sale of a building previously occupied by the Company’s subsidiary ENP Investments, ENP Investments entered into operating leases with the new owner for a total of
Section
A (
Section
B (
| 12 |
The following table summarizes expense and cash payments for operating leases during the periods noted:
SCHEDULE OF CASH PAYMENTS FOR OPERATING LEASE
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Operating lease expense | $ | $ | $ | $ | ||||||||||||
| Cash paid for rents with terms less than 1 year | $ | $ | $ | $ | ||||||||||||
| Cash paid for operating lease liability | $ | $ | $ | |||||||||||||
The following table contains the weighted average remaining lease term and discount rate for operating leases as of the end of the period:
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERM AND DISCOUNT RATE
| As of June 30, 2026 | ||||
| Remaining lease term – Panama operating lease | ||||
| Remaining lease term – Mendota, IL operating leases | ||||
| Discount rate - operating leases | % | |||
The table below presents a maturity analysis of the future minimum lease payments for operating leases as of June 30, 2026:
SUMMARY OF FUTURE MINIMUM LEASE PAYMENTS FOR OPERATING LEASES
| Twelve months ending December 31, | Total | |||
| Remainder of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total operating lease payments | ||||
| Less: discount on lease liability | ( | ) | ||
| Total operating lease liability | ||||
| Less: current portion of operating lease liability | ( | ) | ||
| Non-current operating lease liability | $ | |||
4. ACCOUNTS RECEIVABLE
SCHEDULE OF ACCOUNTS RECEIVABLE
| June 30, 2026 | December 31, 2025 | |||||||
| Accounts receivable | $ | | $ | |||||
| Allowances for doubtful accounts | ( | ) | ( | ) | ||||
| Total accounts receivable | $ | $ | ||||||
| 13 |
5. INVENTORIES
SCHEDULE OF INVENTORY
| June 30, 2026 | December 31, 2025 | |||||||
| Completed goods | $ | $ | ||||||
| Works in progress | ||||||||
| Raw materials and supplies | ||||||||
| Total inventory | $ | $ | ||||||
6. PROPERTY, EQUIPMENT AND LEASEHOLDS
SCHEDULE OF PROPERTY AND EQUIPMENT
| June 30, 2026 | Accumulated | June 30, 2026 | ||||||||||
| Cost | Depreciation | Net | ||||||||||
| Buildings and improvements | $ | $ | $ | |||||||||
| Automobiles | ||||||||||||
| Office equipment | ||||||||||||
| Manufacturing equipment | ||||||||||||
| Land | ||||||||||||
| Technology | ||||||||||||
| $ | $ | $ | ||||||||||
| December 31, 2025 | Accumulated | December 31, 2025 | ||||||||||
| Cost | Depreciation | Net | ||||||||||
| Buildings and improvements | $ | $ | $ | |||||||||
| Automobiles | ||||||||||||
| Office equipment | ||||||||||||
| Manufacturing equipment | ||||||||||||
| Land | ||||||||||||
| Technology | ||||||||||||
| $ | $ | $ | ||||||||||
Amount
of depreciation expense for the three months ended June 30, 2026 was $
In
late 2025, management committed to a plan to sell the
7. INVESTMENTS
The Company’s investments at June 30, 2026 and December 31, 2025 consisted of the following:
SCHEDULE OF COMPANY’S INVESTMENTS
| June 30, 2026 | December 31, 2025 | |||||||
| Investments, at cost: | ||||||||
| Trio Opportunity Corp., | $ | $ | ||||||
| Investment, equity method: | ||||||||
| Florida-based LLC | ||||||||
| Investment, equity method | ||||||||
| Total | $ | $ | ||||||
| 14 |
The
Company previously held a
Effective June 26, 2026, the Company (through its subsidiaries InnFlex Holdings, Inc., NanoChem Solutions Inc. and NaturalChem) entered into a Global Settlement Agreement and Mutual Release (the “Settlement”) with Florida based LLC and its affiliates that resolved litigation the Company had filed in April 2026 and terminated the parties’ commercial and ownership arrangements. Under the Settlement the Company (i) surrendered its entire remaining 19.9% interest in Florida based LLC by redemption for no cash consideration, (ii) cancelled its remaining payment rights under the 2024 Membership Interest Purchase Agreement, (iii) settled and forgave the outstanding receivables owed by the Florida based LLC under the terminated supply agreement, and (iv) dismissed the litigation with prejudice. In exchange, the Company received a perpetual, exclusive, royalty-free license to certain marks and commercial rights to market and sell the licensed products within a defined territory comprising Mexico, Central America, South America and the Caribbean.
The
territorial license received is an intangible asset. As of June 30, 2026, the Company had not completed a fair value assessment of the
license; accordingly, the license was recorded at the carryover basis of the net assets surrendered, totaling $
The Company is completing a fair value assessment of the license, which it expects to finalize in the third quarter of 2026. Completion of that assessment may result in an adjustment to the carrying amount of the intangible asset when the fair value is determined.
The following summarizes the activity in the Company’s investment in the Florida based LLC:
SCHEDULE OF EQUITY METHOD INVESTMENT
| Investment in Florida based LLC (equity method) | Amount | |||
| Balance, December 31, 2025 — | $ | |||
| Proportionate share of loss (through March 31, 2026) | ( | ) | ||
| Carrying amount transferred to intangible asset on settlement | ( | ) | ||
| Balance, June 30, 2026 | $ | |||
Summarized profit and loss information related to the Florida based LLC is as follows:
SUMMARY OF PROFIT AND LOSS INFORMATION RELATED TO EQUITY ACCOUNTED INVESTMENT
| Six months ended June 30, 2026 | * | Six months ended June 30, 2025 | ||||||
| Net sales | $ | $ | ||||||
| Gross profit | $ | $ | ||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| * |
During
the three months ended June 30, 2026, the Company had sale of $
8. SHORT TERM LINES OF CREDIT
(a)
In
June 2026, ENP Investments renewed the line of credit with Stock Yards Bank and Trust (“Stock Yards”). The revolving line
of credit is for an aggregate amount of up to the lesser of (i) $
| 14 |
The
revolving line of credit contains customary affirmative and negative covenants, including the following: compliance with laws, provisions
of financial statements and periodic reports, payment of taxes, maintenance of inventory and insurance, maintenance of operating accounts
at Stock Yards, Stock Yard’s access to collateral, formation or acquisition of subsidiaries, incurrence of indebtedness, dispositions
of assets, granting liens, changes in business, ownership or business locations, engaging in mergers and acquisitions, making investments
or distributions and affiliate transactions. NanoChem is a guarantor of
To secure the repayment of any amounts borrowed under the revolving line of credit, the Company granted Stock Yards a security interest in substantially all of the assets of ENP Investments, exclusive of intellectual property assets.
The
balance outstanding under this revolving line as of June 30, 2026 was $ (December 31, 2025 - $
(b)
In August 2025, the Company renewed the line of credit with Stock Yards Bank and Trust (“Stock Yards”). The revolving
line of credit is for an aggregate amount of up to the lesser of (i) $
The revolving line of credit contains customary affirmative and negative covenants, including the following: compliance with laws, provision of financial statements and periodic reports, payment of taxes, maintenance of inventory and insurance, maintenance of operating accounts at Stock Yards, Stock Yards access to collateral, formation or acquisition of subsidiaries, incurrence of indebtedness, dispositions of assets, granting liens, changes in business, ownership or business locations, engaging in mergers and acquisitions, making investments or distributions and affiliate transactions. The covenants also require that the Company maintain a minimum ratio of qualifying financial assets to the sum of qualifying financial obligations.
To secure repayment of any amounts borrowed under the revolving line of credit, the Company granted Stock Yards a security interest in substantially all of the assets of NanoChem, exclusive of intellectual property assets.
The
balance outstanding under this revolving line as of June 30, 2026 was $
9. LONG TERM DEBT
Long term debt, all of which is with StockYards Bank and Trust, at June 30, 2026 and December 31, 2025 consisted of the following:
SCHEDULE OF LONG TERM DEBT
| June 30, 2026 | December 31, 2025 | |||||||
| ENP Mendota, | $ | $ | ||||||
| ENP Peru, | ||||||||
| ENP Peru, | ||||||||
| NanoChem, | ||||||||
| Long-term debt | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Long-term debt non current | $ | $ | ||||||
| 15 |
The following table summarizes the scheduled annual future principal payments as of June 30, 2026:
SCHEDULE OF ANNUAL FUTURE PRINCIPAL PAYMENTS
| Year Ended December 31, | Principal Amount Due | |||
| Remainder of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
SCHEDULE OF RECOGNIZED STOCK BASED COMPENSATION
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Line item on the statement of operations and comprehensive income (loss): | ||||||||||||||||
| Wages, administrative salaries and benefits | $ | $ | $ | $ | ||||||||||||
| Professional fees | ||||||||||||||||
| Stock based compensation | $ | $ | $ | $ | ||||||||||||
SCHEDULE OF STOCK OPTION ACTIVITIES
Number of shares | Exercise price per share | Weighted average exercise price | ||||||||||
| Balance, December 31, 2024 | $ | – | $ | |||||||||
| Granted | $ | $ | ||||||||||
| Cancelled or expired | ( | ) | $ | – | $ | |||||||
| Exercised | ( | ) | $ | – | $ | |||||||
| Balance, December 31, 2025 | $ | – | $ | |||||||||
| Cancelled or expired | ( | ) | $ | $ | ||||||||
| Exercised | ( | ) | $ | – | $ | |||||||
| Balance, June 30, 2026 | $ | – | $ | |||||||||
| Exercisable, June 30, 2026 | $ | – | $ | |||||||||
During the six months ended June 30, 2026 and 2025, the Company did not grant any stock based compensation to employees or consultants.
As of June 30, 2026, the weighted-average remaining contractual life of outstanding and exercisable options is years and years, respectively. As of June 30, 2026, there was approximately $ of compensation expense related to non-vested options that is expected to be recognized over a weighted average period of years.
| 16 |
The aggregate intrinsic value of options outstanding and exercisable at June 30, 2026 is $ and $, respectively. During the six months ended June 30, 2026, the intrinsic value of stock options exercised was $ (2025 - $).
During
the year ended December 31, 2025, the Company granted shares as a stock award. The total fair value of the stock award was $
11. CAPITAL STOCK
During the six months ended June 30, 2026, shares were issued upon the exercise of stock options (2025 – ).
During the six months ended June 30, 2026, shares were issued for the 2025 stock award grant.
In
the six months ended June 30, 2025, the Company declared a $ special dividend payable on
12. NON-CONTROLLING INTERESTS
(a)
ENP Investments is a limited liability corporation
(“LLC”) that manufactures and distributes golf, turf and ornamental agriculture products in Mendota, Illinois. The Company
owns a
ENP Investments makes cash distributions to its equity owners based on formulas defined within its Ownership Interest Purchase Agreement dated October 1, 2018. Distributions are defined in the Ownership Interest Purchase Agreement as cash on hand to the extent it exceeds current and anticipated long-term and short-term needs, including, without limitation, needs for operating expenses, debt service, acquisitions, reserves, and mandatory distributions, if any.
From the effective date of acquisition onward, the minimum distributions requirements under the Ownership Interest Purchase Agreement were satisfied. The total distribution from the effective date of acquisition onward was $.
SCHEDULE OF DISTRIBUTIONS
| Balance, December 31, 2024 | $ | |||
| Distribution | ( | ) | ||
| Non-controlling interest share of income | ||||
| Balance, December 31, 2025 | ||||
| Non-controlling interest share of income | ||||
| Balance, June 30, 2026 | $ |
During
the three months ended June 30, 2026, the Company had sales of $
| 17 |
b) 317
Mendota was a LLC that owned real estate that the Company occupied part of while the excess was rented out. In October 2025, the
Company sold the building but continues to rent from the new owner (see Note 3). 317 Mendota was dissolved in March 2026. In
connection with the dissolution, the Company received $
SCHEDULE OF NON CONTROLLING INTEREST RELATED TO ACQUISITION
| Balance, December 31, 2024 | $ | |||
| Distribution | ( | ) | ||
| Non-controlling interest share of income | ||||
| Balance, December 31, 2025 | ||||
| Distribution | ( | ) | ||
| Balance, June 30, 2026 | $ |
13. SEGMENTS
The
Company operates in
(a) The first segment is specialty chemicals (“SPCH”). This includes our biodegradable polymers (“TPAs”), used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. TPAs can also be used to increase biodegradability in detergents and in the agriculture industry to increase crop yields by enhancing fertilizer uptake. Along with biodegradable polymers, the Company produces nitrogen conservation products used for the agriculture industry. These products decrease the loss of nitrogen fertilizer after initial application and allow less fertilizer to be used.
The SPCH division also produces a chemical used in swimming pools and spas. The product forms a thin, transparent layer on the water’s surface. The transparent layer slows the evaporation of water, allowing the water to retain a higher temperature for a longer period of time thereby reducing the energy required to maintain the desired temperature of the water. A modified version of EWCP can also be used in reservoirs, potable water storage tanks, livestock watering pods, canals, and irrigation ditches for the purpose of reducing evaporation.
(b) The second segment is food grade products and ingredients (“FGPI”) that the Company manufactures for specific clients and are confidential.
The Company’s reportable segments are strategic business units that offer different, but synergistic products and services. They are managed separately because each business requires different technology and marketing strategies. The economic factors that impact the nature, amount, timing, and uncertainty of revenue and cash flows vary among the Company’s operating segments and the geographical regions in which they operate. This operating segment structure is used by the Chief Operating Decision Maker (“CODM”), who has been determined to be the Chief Executive Officer, to make key operating decisions and assess performance of the Company. The CODM evaluates segment operating performance, and makes resource allocation and performance evaluation decisions, based on gross profit and net operating income.
Three months ended June 30, 2026:
SCHEDULE OF REPORTABLE SEGMENTS
| SPCH | FGPI | Other (1) | Consolidated | |||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||
| Wages, administrative salaries and benefits | ||||||||||||||||
| Selling, general, and administrative | ||||||||||||||||
| Other segment items (2) | ||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| Depreciation and amortization (included in cost of sales) | ||||||||||||||||
| Capital expenditures | ||||||||||||||||
| Assets at June 30, 2026 (3) | ||||||||||||||||
| 18 |
Three months ended June 30, 2025:
| SPCH | FGPI | Other (1) | Consolidated | |||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Research and development services sales | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Wages, administrative salaries and benefits | ||||||||||||||||
| Selling, general, and administrative | ( | ) | ||||||||||||||
| Other segment items (2) | ||||||||||||||||
| Net operating income (loss) | ( | ) | ||||||||||||||
| Interest expense | ||||||||||||||||
| Depreciation and amortization (included in cost of sales) | ||||||||||||||||
| Capital expenditures | ||||||||||||||||
| Assets at December 31, 2025 (3) | ||||||||||||||||
Six months ended June 30, 2026:
| SPCH | FGPI | Other (1) | Consolidated | |||||||||||||
| Product Sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Wages, administrative salaries and benefits | ||||||||||||||||
| Selling, general, and administrative | ||||||||||||||||
| Other segment items (2) | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| Depreciation and amortization (included in COGS) | ||||||||||||||||
| Capital expenditures | ||||||||||||||||
| 19 |
Six months ended June 30, 2025:
| SPCH | FGPI | Other (1) | Consolidated | |||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Research and development sales | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Wages, administrative salaries and benefits | ||||||||||||||||
| Selling, general, and administrative | ||||||||||||||||
| Other segment items (2) | ||||||||||||||||
| Net operating income (loss) | ( | ) | ||||||||||||||
| Interest expense | ||||||||||||||||
| Depreciation and amortization (included in cost of sales) | ||||||||||||||||
| Capital expenditures | ||||||||||||||||
| (1) | ||
| (2) | ||
| (3) |
Sales by territory are shown below:
SCHEDULE OF REVENUE GENERATED IN UNITED STATES AND CANADA
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Canada | $ | $ | $ | $ | ||||||||||||
| United States and abroad | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The Company’s long-lived assets (property, equipment and leaseholds, right of use assets, intangibles, and goodwill) by territory as follows:
SCHEDULE OF LONG-LIVED ASSETS ARE LOCATED IN CANADA AND UNITED STATE
| June 30, 2026 | December 31, 2025 | |||||||
| Canada | $ | $ | ||||||
| United States and abroad | ||||||||
| Total | $ | $ | ||||||
Three
primary customers accounted for $
| 20 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
The Company develops, manufactures and markets biodegradable polymers which are used in the oil, gas and agriculture industries along with specialty chemicals that slow the evaporation of water. The second segment is food grade products and ingredients that the Company manufactures for specific clients and are confidential.
Results of Operations
We have two product lines.
The first is specialty chemicals (“SPCH”). This includes our biodegradable polymers (“TPAs”), used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. TPAs can also be used to increase biodegradability in detergents and in the agriculture industry to increase crop yields by enhancing fertilizer uptake. Along with biodegradable polymers, the Company produces nitrogen conservation products used for the agriculture industry. These products decrease the loss of nitrogen fertilizer after initial application and allows less fertilizer to be used. These products are made and sold by the Company’s SPCH division.
The SPCH division also produces a chemical used in swimming pools and spas. The product forms a thin, transparent layer on the water’s surface. The transparent layer slows the evaporation of water, allowing the water to retain a higher temperature for a longer period of time thereby reducing the energy required to maintain the desired temperature of the water. A modified version of EWCP can also be used in reservoirs, potable water storage tanks, livestock watering pods, canals, and irrigation ditches for the purpose of reducing evaporation.
The second product line is food grade products and ingredients (“FGPI”) that the Company manufactures for specific clients and are confidential.
Material changes in the Company’s Statement of Operations for six months ended June 30, 2026 compared to the same period in the prior year are discussed below:
Three Months ended June 30, 2026
| Item | Increase (I) or Decrease (D) |
Reason | ||
| Sales | ||||
| SPCH products | D | A slight delay in at the new Panama facility delayed some orders but the Company expects to recoup these orders in 2026. Reduced sales in the period to our former equity investment also decreased sales. | ||
| FGPI products | I | In the six months ended June 30, 2026, a new customer made up 29% of the Company’s sales. The additional manufacturing facility in Panama’s focus on legacy products allows the Peru, IL location to focus on food grade customers while still making sales to legacy customers. | ||
| Research and development services | D | A successful project completed in 2025 but not again in 2026. Research and development services income will be completely sporadic and solely dependent on our customer needs. Certain products have the cost built into the pricing and in some cases, like in 2025, are billed as a lump sum. | ||
| Gross profit as a percentage of sales | D | Additional man hours for training along with equipment maintenance and higher utility costs related to scaling up the new food grade product reduced our margin in 2026 over 2025 and the Company expects this this to end in Q3 2026. This new product has our plant running continually and the Company expects consistent, high volume, lower margin sales to be the perfect complement to our higher margin products where the sales fluctuate more period over period and year over year.
The Company has also had additional man hours for training and higher utilities costs associated with starting up the Panama facility that is expected to taper off in Q3 2026. | ||
| Professional fees | I | Increase due to increase in auditor and tax filing fees. | ||
| Selling, general and administrative | D | Decrease in 2026 is due to the ending of the 317M building utilities as the building sold in 2025. Utilities were allocated to selling, general and administrative for vacant areas only. | ||
| Wages, administrative salaries and benefits | I | Increase in employees in the SPCH division. | ||
| Income on investment | D | The investee in which the Company applied the equity method in 2025 is no longer accounted for as such. In June 2026 the Company entered in a Global Settlement Agreement and Mutual Release assigning a perpetual, exclusive, royalty-free license to certain marks and commercial rights to market and sell the licensed products within a defined territory comprising of Mexico, Central America, South America and the Caribbean in exchange for the remaining 19.9% of the equity investment and forgiveness of the remaining accounts receivable with the Company. | ||
| Interest expense | D | Decreased debt resulted in decreased interest expense. | ||
| Interest income | D | Decrease in term deposits held. | ||
| Income tax expense (benefit) | D | The Company recorded a net loss before income tax in 2026 which resulted in a benefit rather than an expense like in 2025. |
Six Months ended June 30, 2026
| Item | Increase (I) or Decrease (D) |
Reason | ||
| Sales | ||||
| SPCH products | D | A slight delay in at the new Panama facility delayed some orders but the Company expects to recoup these orders in 2026. Reduced sales in the period to our equity investment also decreased sales. It is unknown if this will continue. | ||
| FGPI products | I |
2025 was an anomaly as our original food grade customer had inventory on hand from 2024 at the start of the year. The Company began producing for a new food grade customer in fourth quarter 2025 which has continued into 2026. In the six month ended June 30, 2026, this new customer made up 29% of the Company’s sales. The additional manufacturing facility in Panama’s focus on legacy products allows the Peru, IL location to focus on food grade customers while still making sales to legacy customers. | ||
| Research and development services | D | A successful project completed in 2025 but not again in 2026. Research and development services income will be completely sporadic and solely dependent on our customer needs. Certain products have the cost built into the pricing and in some cases, like in 2025, are billed as a lump sum. | ||
| Gross profit as a percentage of sales | D | Additional man hours for training along with equipment maintenance and higher utility costs related to scaling up the new food grade product reduced our margin in 2026 over 2025 and the Company expects this this to end in Q3 2026. This new product has our plant running continually and the Company expects consistent, high volume, lower margin sales to be the perfect complement to our higher margin products where the sales fluctuate more period over period and year over year.
The Company has also had additional man hours for training and higher utilities costs associated with starting up the Panama facility that is expected to taper off in Q3 2026. | ||
| Professional fees | D | 2025 included audit fees relative to the 2024 audit that were underaccrued. | ||
| Wages, administrative salaries and benefits | I | Increase in employees in the SPCH division. | ||
| Income on investment | D | The investee in which the Company applies the equity method, had a net loss for the period as opposed to net income as in prior year and is no longer accounted for as an equity investment. In June 2026 the Company entered in a Global Settlement Agreement and Mutual Release assigning a perpetual, exclusive, royalty-free license to certain marks and commercial rights to market and sell the licensed products within a defined territory comprising of Mexico, Central America, South America and the Caribbean in exchange for the remaining 19.9% of the equity investment and forgiveness of the remaining accounts receivable with the Company. | ||
| Interest expense | D | Decreased debt resulted in decreased interest expense. | ||
| Interest income | D | Decrease in term deposits held. | ||
| Income tax expense (benefit) | D | The Company recorded a net loss before income tax in 2026 which resulted in a benefit rather than an expense like in 2025. |
| 21 |
Three primary customers accounted for 54% of the Company’s sales during the three months ended June 30, 2026 (2025 - 45%). The amount of revenue attributable to each customer is shown below:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| Customer | 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Company A – SPCH (Note 12) | $ | 1,254,011 | $ | 1,094,243 | $ | 2,149,964 | $ | 1,924,726 | ||||||||
| Company B - SPCH | $ | * | $ | 2,072,180 | $ | * | $ | 3,928,575 | ||||||||
| Company C - SPCH | $ | 822,480 | $ | 840,736 | $ | 1,986,142 | $ | 1,819,093 | ||||||||
| Company D - FGPI | $ | 2,068,794 | $ | * | $ | 4,648,303 | $ | * | ||||||||
| Company E - SPCH | $ | * | $ | 2,500,000 | ** | $ | * | $ | 2,500,000 | ** | ||||||
*not a primary product sales customer in that period
**Research and development services sales are not included in product sales
Customers with balances greater than 10% of our receivables as of June 30, 2026 and December 31, 2025 are shown below:
June 30, 2026 | December 31, 2025 | |||||||
| Company A | $ | 221,940 | * | $ | 6,652,611 | |||
| Company C | $ | 673,910 | $ | 193,001 | * | |||
| Company D | $ | 471,911 | $ | 1,866,972 | ||||
| Company F | $ | 477,902 | $ | 181,726 | * | |||
*less than 10% at period end
Other factors that will most significantly affect future operating results will be:
| ● | the sale price of crude oil which is used in the manufacture of aspartic acid we import from China. Aspartic acid is a key ingredient in our TPA products; | |
| ● | activity in the oil and gas industry, as we sell our TPA products to oil and gas companies; | |
| ● | drought conditions, since we also sell our TPA products to farmers; and | |
| ● | new tariffs relating to raw materials imported from China. |
Changes to crude oil prices did not materially impact the Company’s operating results for the three and six months ended June 30, 2026.
Other than the foregoing we do not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on our revenues or expenses.
| 22 |
Capital Resources and Liquidity
The Company’s sources and (uses) of cash for the six months ended June 30, 2026 and 2025 are shown below:
| 2026 | 2025 | |||||||
| Cash provided by operating activities | $ | 3,495,249 | $ | 4,738,637 | ||||
| Maturities of term deposits | 733,340 | 1,014,766 | ||||||
| Purchase of property, equipment and leaseholds | (2,979,557 | ) | (1,331,042 | ) | ||||
| Repayment of short-term lines of credit, net | (462,484 | ) | (1,342,067 | ) | ||||
| Repayment of long term debt | (198,422 | ) | (1,234,489 | ) | ||||
| Dividends paid | - | (1,274,753 | ) | |||||
| Distributions to non-controlling interest | (68,659 | ) | (252,169 | ) | ||||
| Distribution received upon dissolution of subsidiary | 72,953 | - | ||||||
| Proceeds from shares issued upon exercise of stock options | 106,300 | 393,890 | ||||||
| Effect of exchange rate changes on cash | (126,683 | ) | 269,354 | |||||
The Company has sufficient cash resources to meets its future commitments and cash flow requirements for the coming year. As of June 30, 2026, working capital was $18,691,445 (December 31, 2025 - $24,227,759) and the Company has no substantial commitments that require significant outlays of cash over the coming fiscal year.
The Company does not anticipate any capital requirements beyond cash on hand for the twelve months ending June 30, 2027.
We do not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonable likely to result in, our liquidity increasing or decreasing in any material way.
Other than as disclosed above, we do not know of any significant changes in our expected sources and uses of cash.
We do not have any commitments or arrangements from any person to provide us with any equity capital.
There have been no significant changes to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2025 Form 10-K.
Item 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Under the direction and with the participation of our management, including our Principal Executive and Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2026. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to our management, including our principal executive and financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching desired disclosure control objectives. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were ineffective. In 2026, the Company will implement new procedures to improve its disclosure controls and procedures.
Changes in Internal Control over Financial Reporting
At December 31, 2025, management identified material weaknesses in our internal control over financial reporting (“ICFR”) related to a material adjustment identified during the audit process indicating that controls over the financial statement close and review process were not operating effectively to prevent or detect misstatements on a timely basis. Because of the material weaknesses described above, we implemented new procedures to improve our financial statement close and review process during the period ended June 30, 2026. Remediation is in progress and is anticipated to be fully in place by the fourth quarter of 2026.
| 23 |
PART II
Item 5. Other Information
None
of our directors or officers
Item 6. Exhibits.
| Number | Description | |
| 3.1 | Articles of Continuance (Articles of Incorporation) (1) | |
| 3.2 | Bylaws (2) | |
| 31.1 | Certification of Principal Executive Officer Pursuant to §302 of the Sarbanes-Oxley Act of 2002.* | |
| 31.2 | Certification of Principal Financial Officer Pursuant to §302 of the Sarbanes-Oxley Act of 2002.* | |
| 32.1 | Certification of Principal Executive and Financial Officer Pursuant to 18 U.S.C. §1350 and §906 of the Sarbanes-Oxley Act of 2002.* | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed with this report.
| (1) | Incorporated by reference the same exhibit filed with the Company’s March 31, 2022 10-Q report. |
| (2) | Incorporated by reference to Exhibit 3(ii) filed the Company’s 8-K report dated April 10, 2022. |
| 24 |
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
August 14, 2026
| Flexible Solutions International, Inc. | ||
| By: | /s/ Daniel B. O’Brien | |
| Name: | Daniel B. O’Brien | |
| Title: | President and Principal Executive Officer | |
| By: | /s/ Daniel B. O’Brien | |
| Name: | Daniel B. O’Brien | |
| Title: | Principal Financial and Accounting Officer | |
| 25 |
Exhibit 31.1
CERTIFICATIONS
I, Daniel O’Brien, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Flexible Solutions International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant’s internal control over financial reporting.
| August 14, 2026 | /s/ Daniel B. O’Brien |
| Daniel O’Brien | |
| Principal Executive Officer |
Exhibit 31.2
CERTIFICATIONS
I, Daniel O’Brien, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Flexible Solutions International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant’s internal control over financial reporting.
| August 14, 2026 | /s/ Daniel B. O’Brien |
| Daniel O’Brien | |
| Principal Financial Officer |
Exhibit 32.1
CertificatION of Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned Principal Executive and Financial Officer of Flexible Solutions International, Inc. (the “Company”), hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2026 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| August 14, 2026 | /s/ Daniel B. O’Brien |
| Daniel B. O’Brien | |
| Principal Executive and Financial Officer |