8-K
FLEXIBLE SOLUTIONS INTERNATIONAL INC (FSI)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15\(d\) of the
Securities Exchange Act of 1934
Date of Report \(date of earliest event reported\): August 13, 2021
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
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\(Exact name of Registrant as specified in its charter\)
Alberta 001-31540 71 163 0889
(State or other jurisdiction (Commission File No.) (Employer of incorporation) 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
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N/A
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\(Former name or former address if changed since last report\)
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 (ss.203.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (ss.204.12b-2 of this chapter.
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition
On August 13, 2021, the Company issued a press release announcing its
financial results for the six months ended June 30, 2021.
Item 8.01 Other Events
On August 16, 2021 the Company held a conference call to discuss its
financial results for the six months ended June 30, 2021, as well as other information regarding the Company.
Item 9.01 Exhibits
Exhibit Number Description of Document
99.1 August 13, 2021 Press Release
99.2 Text of conference call speech by Dan O'Brien/August 16, 2021.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 16, 2021 FLEXIBLE SOLUTIONS INTERNATIONAL INC.
By: /s/ Daniel B. O'Brien
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Daniel B. O'Brien, President and Chief
Executive Officer
NEWS RELEASE August 13, 2021
FSI ANNOUNCES Second Quarter, 2021 FINANCIAL RESULTS
A Conference call is scheduled for Monday August, 16th, 11:00am Eastern time, 8:00am Pacific Time See dial in numbers below
VICTORIA, BRITISH COLUMBIA, August 13, 2021 - FLEXIBLE SOLUTIONS INTERNATIONAL, INC. (NYSE Amex: FSI, FRANKFURT: FXT), is the developer and manufacturer of biodegradable polymers for oil extraction, detergent ingredients and water treatment as well as crop nutrient availability chemistry. Flexible Solutions also manufactures biodegradable and environmentally safe water and energy conservation technologies. Today the Company announces financial results for the second quarter (Q2) ended June 30, 2021.
Mr. Daniel B. O'Brien, CEO, states, "We are happy with the second quarter and the first half of the year. Raw material and shipping costs may constrain our margins in the second half. Regardless, we are reasonably confident of maintaining our recent growth in the second half of 2021 and through 2022."
o Sales in the second quarter (Q2) were $8,535,451, compared to sales of $7,709,607 in the corresponding period a year ago. The financials show a Q2, 2021 net profit of $1,176,761, or $0.10 per share, compared to a net profit of $1,132,867, or $0.09 per share, in Q2, 2020.
o Basic weighted average shares used in computing earnings per share amounts were 12,304,163 and 12,240,545 for Q2, 2021 and Q2, 2020 respectively.
o Non-GAAP operating cash flow: For the six months ending June 30, 2021, net income reflects $558,580 of non-cash charges (depreciation and stock option expenses), PPP loan forgiveness, as well as gain on investment, interest expense, interest income, and income tax. Net income attributable to non-controlling interests (minority interest) is removed from the cash flow calculation. These are items not related to operating or current operating activities. When these items are removed, the Company shows operating cash flow of $3,293,783, or $0.27 per share. This compares with operating cash flow of $3,044,425, or $0.25 per share, in the corresponding 6 months of 2020 (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.
Conference call
A conference call has been scheduled for 11:00 am Eastern Time, 8:00 am Pacific Time, on Monday, August 16th. CEO, Dan O'Brien will be presenting and answering questions on the conference call. To participate in this call please dial 1 877-876-9173 (or 1 785-424-1667) just prior to the scheduled call time. The conference call title, "FSI Second Quarter 2021 Financial Results," may be requested.
The above information and following table contain supplemental information regarding income and cash flow from operations for the period ended June 30, 2021. 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:
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
Consolidated Statement of Operations
For 3 Months Ended June 30 \(6 Months Operating Cash Flow\)
\(Unaudited\)
3 months ended June 30
2021 2020
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Revenue $8,535,451 $7,709,607
Income (loss) before income tax - GAAP $1,923,937 $1,524,604
Provision for Income tax (expense) / recovery - GAAP $(478,727) $(259,660) Net income (loss) (controlling interest only)
GAAP $1,176,761 $1,132,867 Net income (loss) per common share - basic. - GAAP $ 0.10 $ 0.09 3 month weighted average shares used in computing per share amounts - basic.- GAAP 12,304,163 12,240,545
6 month Operating Cash Flow Ended June 30 --------------------------------
Operating Cash flow (6 months). NON-GAAP $3,293,783 a,b,c $3,044,425 a,b,c
Operating Cash flow per share excluding non-operating items and items not related to current operations (6 months) - basic. NON-GAAP $ 0.27 a,b,c $ 0.25 a,b,c
Non-cash Adjustments (6 month) GAAP $ 558,580 d $ 348,191 d
6 month weighted average shares used in computing per share amounts - basic GAAP 12,315,746 12,239,171
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 Operating Cash Flow is adjusted by the net income or loss of the non-controlling interest in ENP (2021 = $454,933, 2020 = $199,093).
b) Non-GAAP - amounts exclude certain cash and non-cash items: depreciation and stock compensation expense (2021 = $558,580, 2020 = $348,191), interest expense (2021 = $113,329, 2020 = $156,075), interest income (2021 = $32,445, 2020 = $12,614), gain on investment (2021 = $399,236, 2020 = $539,417), PPP loan forgiveness (2021 = $537,960, 2020 = N/A), write down of inventory (2021 = N/A, 2020 = N/A), deferred income tax recovery (2021 = N/A, 2020 = N/A), Income tax (2021 = $964,183, 2020 = $694,648), 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 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.
Q2 2021 speech
Good morning. I'm Dan O'Brien, CEO of Flexible Solutions.
Safe Harbor provision:
The Private Securities Litigation Reform Act of 1995 provides a "Safe Harbor" for forward-looking statements. Certain of the statements contained herein, which are not historical facts, are forward looking statements with respect to events, the occurrence of which involve risks and uncertainties. These forward-looking statements may be impacted, either positively or negatively, by various factors. Information concerning potential factors that could affect the company is detailed from time to time in the company's reports filed with the Securities and Exchange Commission.
Welcome to the FSI conference call for Q2 2021.
Prior to discussion of our financials, I'd like to update our corporate condition and product lines along with what, in our opinion, might occur over the next two quarters.
Covid virus: The NanoChem Subsidiary, the ENP Subsidiary and the Florida LLC investment are all engaged in producing for the agriculture and/or the cleaning products sectors. Therefore, we are considered essential services and are likely to remain so even if restrictions are reinstated. Nearly all our employees are fully vaccinated.
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. 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 also a biodegradable way of treating oilfield water to prevent pipes from plugging with mineral scale. TPA's effect is that it prevents the scaling out of minerals that are part of the water fraction of oil as it exits the rock formation. Scale must be prevented to keep the oil recovery pipes from clogging.
SUN 27(TM) and N Savr 30(TM) are nitrogen conservation products. Nitrogen is a critical fertilizer but it can be lost through bacterial breakdown, evaporation and soil runoff.
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.
ENP Division: ENP is focused on sales into the greenhouse, turf and golf markets, while, our NCS sales are into row crop agriculture - two very distinct markets. Q2 was strong, as expected and we predict Q3 as being another good quarter. Depending on early order sales, Q4 looks to be moderate or good. If Q4 is moderate, Q1 2022 will be good and vice versa.
The Florida LLC investment: Once again, this investment was profitable. The Company is focused on international sales into multiple countries all of which are facing different issues and responding in varied ways. This investment is expected to have a strong second half and continue growing in 2022.
Strategic investment in Lygos: In December, FSI invested $500,000 in Lygos in return for equity. We made a second investment of $500,000 in June. Lygos is using the investment to complete development of a microbial route to aspartic acid using corn sugar as a feedstock. FSI would be the major user of aspartic acid derived this way and believes that sustainable aspartic acid would allow us to obtain large new customers and develop valuable new products. Lygos' scientific team have already successfully developed other organic acids and cannabinoids from sustainable feedstock and are recognized as one of the world leaders in synthetic biology by their peers in the industry and academia. We have high confidence in their ability to achieve sustainable aspartic acid through a fermentation route. Once an economic microbial route is fully developed, we plan to work with Lygos to build capacity and produce aspartic acid which we can then polymerize into sustainable polyaspartates.
Q3 2021
TPA, SUN 27(TM) and N Savr 30(TM) for agricultural use had peak uptake in Q1 and Q2. Q3 will be lower but still good. In Q4, early order sales are likely to result in a strong quarter.
Oil, gas and industrial sales of TPA are expected to be flat in Q3 2021 then increase slowly in Q4 and into Q1 2022.
Tariffs: Since Sept 30th 2018, several of our raw materials imported from China have included a 10% additional tariff which rose to 25% in 2019. US customers received price increases from us as this inventory entered production. International customers are not charged the tariffs because we have applied for the export rebates available to recover the tariffs. 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; we submitted our completed applications more than 1.5 years ago. The total dollar amount due back to us now exceeds $1 MM 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. In early July, we received a response to our revised application of January 2021. We responded overnight and have not heard back yet.
Shipping and Inventory: Ocean shipping from Asia to the US and ocean shipments from the US to international ports continue to take much longer and prices per container are more than triple normal. Land transport inside the US is taking much longer than usual and pricing is extremely high as well. We are doing our best to cope with shipping issues by ordering far ahead but we warn that some disruption will be unavoidable and some of the extra costs will have to be borne by us in order to retain customers.
Raw material prices have also increased substantially over the last 4 months. Passing price increases along to customers can take several months and result in temporarily constrained margins. We expect to see this effect continue in Q3 and Q4.
New Equipment: 2.5 years ago, we began the purchase and installation of new equipment that will allow us to make additional products and increase sales. The machinery went live in December and will contribute to sales and profits in 2021 and onward. Revenue from this equipment is expected to be significant by early 2022.
Highlights of the financial results:
Sales for the quarter increased to 8.54 million, compared with $7.62 million for Q2 2020. The increased sales can be attributed to shipping orders that missed cutoff for the first quarter along with sales that could not be shipped in Q1 as a result of lack of raw materials due to inbound shipping delays.
Profits: The result is a profit of $1.18 million or 10 cents per share in 2021, compared to a gain of $1.13 million or 9 cents per share, in Q2 2020.
Operating Cash Flow: This non-GAAP number is useful to show our progress with non-cash items removed for clarity. For First Half 2021 it was $3.30 million or 27 cents per share compared to $3.04 million or 25 cents per share.
Long term debt: We continue to pay down our long-term debt according to the terms of the loans.
Working capital is adequate for all our purposes and is increasing continuously as we book retained profit from sales. We also have a line of credit with Midland States Bank. We are confident that we can execute our plans with our existing capital. The equity investment in Lygos was made with cash on hand provided by FSL, our Canadian operating company.
The text of this speech will be available as an 8K filing on www.sec.gov by Tuesday, Aug 17th. Email or fax copies can be requested from Jason Bloom at Jason@flexiblesolutions.com.
Thank you, the floor is open for questions.