8-K
FLEXIBLE SOLUTIONS INTERNATIONAL INC (FSI)
UNITEDSTATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,D.C. 20549
FORM8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 14, 2021
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
| Alberta | 001-31540 | 71<br> 163 0889 |
|---|---|---|
| (State<br> or other jurisdiction | (Commission | (Employer |
| of<br> incorporation) | File<br> No.) | Identification<br> No.) |
6001 54 Ave.
Taber, Alberta, Canada T1G 1X4
(Address of principal executive offices, including Zip Code)
Registrant’s telephone number, including area code: (250) 477-9969
| N/A |
|---|
| (Former<br> 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<br> communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| [ ] | Soliciting<br> material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement<br> communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement<br> 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<br> Stock | FSI | NYSE<br> American |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§203.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§204.12b-2 of this chapter.
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition
On May 14, 2021, the Company issued a press release announcing its financial results for the period ended March 31, 2021.
Item 8.01 Other Events
On May 17, 2021, the Company held a conference call to discuss its financial results for the three months ended March 31, 2021, as well as other information regarding the Company.
Item 9.01 Exhibits
| Exhibit | |
|---|---|
| Number | Description<br> of Document |
| 99.1 | May 14, 2021 Press Release |
| 99.2 | Text of opening remarks by Dan O’Brien/ May 17, 2021 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:<br> May 17, 2021. | ||
|---|---|---|
| FLEXIBLE SOLUTIONS INTERNATIONAL INC. | ||
| By: | /s/ Daniel B. O’Brien | |
| Daniel<br> B. O’Brien, President and Chief Executive Officer |
| 3 |
| --- |
EXHIBIT99.1
NEWSRELEASE
May 14, 2021
FSI ANNOUNCES First Quarter, 2021 FINANCIAL RESULTS
A Conference call is scheduled for Monday May 17, 2021, 11:00am Eastern time, 8:00am Pacific Time
See dial in numbers below
VICTORIA,BRITISH COLUMBIA, May 14, 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 first quarter (Q1) ended March 31, 2021.
Mr. Daniel B. O’Brien, CEO, states, “Each year brings challenges which we find ways to meet. A year ago, it was covid. This year it is shipping difficulty and price increases. We are confident that we will overcome these hurdles too.” Mr. O’Brien continues, “The problems I’m speaking of affected Q1 revenue but the sales that were delayed are being recognized in Q2 and our full year expectations remain positive.”
| ● | Sales<br> in the first quarter (Q1) were $7,624,607, compared to sales of $8,429,486 in the corresponding period a year ago. The financials<br> show a Q1, 2021 net profit of $1,450,571, or $0.12 per share, compared to a net profit of $1,264,675, or $0.10 per share, in Q1,<br> 2020. |
|---|---|
| ● | Basic<br> weighted average shares used in computing earnings per share amounts in Q1 were 12,292,452 and 12,237,798 for Q1, 2021 and Q1, 2020<br> respectively. |
| ● | Non-GAAP<br> operating cash flow: For the quarter ending March 31, 2021, net income reflects $272,554 of non-cash charges (depreciation,<br> stock option expenses), PPP loan forgiveness, as well as gain on investment, interest expense, interest income, and income tax. Net<br> income attributable to non-controlling interests (minority interest) is removed from the cash flow calculation. These are items not<br> related to operating or current operating activities. When these items are removed, the Company shows operating cash flow of $1,513,629,<br> or $0.12 per share. This compares with operating cash flow of $1,778,785, or $0.15 per share, in the corresponding 3 months of 2020<br> (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.
Conferencecall
A conference call has been scheduled for 11:00 am Eastern Time, 8:00 am Pacific Time, on Monday, May 17, 2021. CEO, Dan O’Brien will be presenting and answering questions on the conference call. To participate in this call please dial 1 877-876-9174(or 1 785-424-1669) just prior to the scheduled call time.
The conference call title, “FSI First 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 March 31, 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.
ConsolidatedStatement of Operations
For3 Months Ended March 31 (3 Months Operating Cash Flow)
(Unaudited)
| 3 months ended<br> March 31 | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Revenue | $ | 7,624,697 | $ | 8,429,486 | ||
| Income (loss) before income tax - GAAP | $ | 2,122,511 | $ | 1,766,678 | ||
| Provision for Income tax (expense) / recovery - GAAP | $ | (485,456 | ) | $ | (434,988 | ) |
| Net income (loss) - GAAP | $ | 1,450,571 | $ | 1,264,675 | ||
| Net income (loss) per common share – basic. - GAAP | $ | 0.12 | $ | 0.10 | ||
| 3 month weighted average shares used in computing per share amounts – basic.- GAAP | 12,292,452 | 12,237,798 | ||||
| 3 month Operating Cash Flow<br> <br>Ended March 31 | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Operating Cash flow (3 months). NON-GAAP | $ | 1,513,629 | a,b,c | $ | 1,778,785 | a,b,c |
| Operating Cash flow per share excluding non-operating items and items not related to current operations (3 months) – basic. NON-GAAP | $ | 0.12 | a,b,c | $ | 0.15 | a,b,c |
| Non-cash Adjustments (3 month) GAAP | $ | 272,554 | d | $ | 177,640 | d |
| Shares (3 month basic weighted average) used in computing per share amounts – basic GAAP | 12,292,452 | 12,237,798 |
**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 4^th^ quarter, 2018 (October 2018). Therefore Operating Cash Flow is adjusted by the net income or loss of the non-controlling interest in ENP (2021 = $186,484, 2020 = $67,015). |
|---|---|
| b) | Non-GAAP - amounts exclude certain cash and non-cash items: depreciation and stock compensation expense (2021 = $272,554, 2020 = $177,640), interest expense (2021 = $62,274, 2020 = $101,425), interest income (2021 = $10,298, 2020 = $414), gain on investment (2021 = $208,968, 2020 = $199,529), 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 = $485,456, 2020 = $434,988), 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.
FlexibleSolutions International
600154^th^ Ave, Taber, Alberta, CANADA T1G 1X4
Company Contacts
Jason Bloom
Toll Free: 800 661 3560
Fax: 403 223 2905
E-mail: info@flexiblesolutions.com
If you have received this news release by mistake or if you would like to be removed from our update list please reply to: info@flexiblesolutions.com
To find out more information about Flexible Solutions and our products, please visit www.flexiblesolutions.com.
EXHIBIT99.2
Q1 2021 speech
Good morning. I’m Dan O’Brien, CEO of Flexible Solutions.
SafeHarbor 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.
Welcometo the FSI conference call for Q1 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.
Covidvirus: 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.
OurNanoChem 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™ and N Savr 30™ which are used to reduce nitrogen fertilizer loss from soil.
TPAis 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.
SUN27™ and N Savr 30™ are nitrogen conservation products. Nitrogen is a critical fertilizer but it can be lost through bacterial breakdown, evaporation and soil runoff.
SUN 27™ is used to conserve nitrogen from attack by soil bacterial enzymes while N Savr 30™ is directed toward reducing nitrogen loss through leaching and evaporation.
ENPDivision: 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. The strong quarters for ENP are 2 and 3 to match the US spring and summer. FY 2020 growth in both revenue and profit was good. Based on good results for Q1, ENP expects the level of growth in in 2021 to be at least equal to 2020.
TheFlorida LLC investment: This investment was profitable as usual. The Company is focused on international sales into multiple countries all of which are facing different issues and responding in varied ways. The large number of variables prevents any useful prediction for FY 2021 except that the LLC management expects continued growth. In Q1 2021 some customers made their spring orders so late that shipments occurred in Q2. No revenue loss ensued but recognition will be in Q2 rather than Q1.
Strategicinvestment in Lygos: In December, FSI invested $500,000 in Lygos in return for equity. Lygos is using the investment to continue 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 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.
Q22021
TPA, SUN 27™ and N Savr 30™ for agricultural use have peak uptake in Q1 and Q2. As we suspected, ordering in 2021 is not the same as in 2020 and some orders are early while others are later than usual.
Oil, gas and industrial sales of TPA are expected to be flat to slightly up in Q2 2021.
**Tariffs:**Since Sept 30^th^ 2018, many 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. 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 are very complicated to apply for and can take many months to arrive; we submitted our completed applications more than 1 year ago. The total dollar amount due back to us now exceeds $1 MM and continues to increase. Changes in customs categories in Q3 2020 have resulted in another of our raw materials being added to the tariff list, increasing the strain on us. The rebates will increase profitability and cash flow while decreasing cost of goods for the future quarters in which the rebates are received. Most recently, we received a request for small changes to our application in early January 2021 and responded in 24 hours. We are still waiting for the government’s response to our changes.
Shippingand Inventory: Ocean shipping from Asia to the US and ocean shipments from the US to international ports continues to take much longer and prices per container are more than double normal. Land transport inside the US is taking much longer than usual and pricing is unusually 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 until price rises have been accepted by our 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 in Q2 and Q3.
NewEquipment: 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.
Highlightsof the financial results:
Salesfor the quarter decreased to $7.62 million, compared with $8.43 million for Q1 2020. The reduced sales can be attributed to orders received too late for shipment in the quarter along with sales that could not be shipped as a result of lack of raw materials due to shipping delays.
**Profits:**The result is a profit of $1.45 million or 12 cents per share in 2021, compared to a gain of $1.26 million or 10 cents per share, in Q1 2020.
The improvement is entirely due to the forgiveness of the PPP loans issued to our NCS and ENP divisions during 2020.
OperatingCash Flow: This non-GAAP number is useful to show our progress with non-cash items removed for clarity. For Q1 2021 it was $1.51 million or 12 cents per share compared to $1.78 million or 15 cents per share.
Longterm debt: $500 thousand in PPP loans have been forgiven. We continue to pay down our other long-term debt according to the terms of the loans.
Workingcapital 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. Increased inventory to service expected increased sales has caused us to utilize more of the LOC this spring with the intention to pay it down as sales are crystallized. We are confident that we can execute our plans with our existing capital. The purchase of ENP in 2018 was funded by the term loan and a $1 MM convertible debenture taken by the seller. One half the debenture was converted to 200,000 FSI shares in 2019 while the remainder was paid back in cash. The LLC investment in January 2019 was made with cash on hand provided by FSL, our Canadian operating company. The equity investment in Lygos was funded with cash on hand from the same source.
The text of this speech will be available as an 8K filing on www.sec.gov by Tuesday, May 16^th^. Email or fax copies can be requested from Jason Bloom at Jason@flexiblesolutions.com.
Thank you, the floor is open for questions.
Flexible 8-K 2.02 Q1 Results 5-17-21