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): March 30, 2020
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
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(Exact name of Registrant as specified in its charter)
Alberta 001-31540 71 163 0889
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(State or other jurisdiction (Commission File No.) (Employer
of incorporation) Identification No.)
6001 54 Ave.
Taber, Alberta, Canada T1G 1X4
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(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:
Name of Each Exchange
Title of Each Class Trading Symbol(s) on Which Registered
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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 March 30, 2020, the Company issued a press release announcing it's 2019
year end results.
Item 8.01 Other Events
On March 31, 2020 the Company held a conference call to discuss its
financial results for the year ended December 31, 2019, as well as other
information regarding the Company.
Item 9.01 Exhibits
Exhibit
Number Description of Document
99.1 March 30, 2020 Press Release
99.2 Text of opening remarks by Dan O'Brien, March 31, 2020 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: March 31, 2020
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
By: /s/ Daniel B. O'Brien
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Daniel B. O'Brien, President and Chief
Executive Officer
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EXHIBIT 99.1
FLEXIBLE SOLUTIONS
(a) NEWS RELEASE
a March 30, 2020
(b) FSI ANNOUNCES Full Year, 2019 FINANCIAL RESULTS A Conference call is
scheduled for Tuesday March 31st, 11:00am Eastern time, 8:00am Pacific Time
See dial in number and explanation below
VICTORIA, BRITISH COLUMBIA, March 30, 2020 - 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
full year ended December 31, 2019.
Mr. Daniel B. O'Brien, CEO, states, "2019 was a positive year for the Company.
Our acquisition and investment performed well as did our core business." Mr.
O'Brien continues, "The spread of Covid 19 through the world economy will cause
unknown disruption to our operations in 2020."
o Sales for the Full Year were $27,440,110, up approximately 54% when
compared to sales of $17,829,518 in the corresponding period a year
ago. The financials show a Full Year, 2019 net profit of $1,912,392,
or $0.16 per share, compared to a net income of $2,490,268, or $0.21
per share, in Full Year, 2018. Note: the financials do not take into
account potential tariff rebates that are currently being applied for.
The tariffs were charged on product remanufactured and shipped in
2019. Also, 2018 net income includes a "Gain from involuntary
disposition" of $1,714,261 from an insurance payout. The payout
resulted from a fire at the Company's Taber, Alberta facility.
o Basic weighted average shares used in computing earnings per share
amounts were 11,945,636 and 11,630,136 for full year, 2019 and full
year, 2018 respectively..
o Non-GAAP operating cash flow: For the 12 months ending December 31,
2019, net income reflects $866,708 of non-cash charges (depreciation,
stock option expenses), as well as gain (loss) on disposition (and
involuntary disposition) of equipment, gain on investment, interest
expense, interest income, write down of inventory, income tax, and Net
income attributable to non-controlling interests. These are items not
related to operating or current operating activities. When these items
are removed, the financials show operating cash flow of $2,818,040, or
$0.24 per share. This compares with operating cash flow of $1,922,473,
or $0.17 per share in the corresponding 12 months of 2018 (see the
table that follows for details of these calculations).
The NanoChem division continues to be the dominant source of revenue and cash
flow for the Company. New opportunities continue to unfold in detergent, water
treatment, oil field extraction and agricultural use to further increase sales
in this division.
Conference call
A conference call has been scheduled for 11:00 am Eastern Time, 8:00 am Pacific
Time, on Tuesday March 31st . CEO, Dan O'Brien will be presenting and answering
questions on the conference call. To participate in this call please dial 1
888-207-0293 (or 1 334-323-9869) just prior to the scheduled call time. To join
the call participants will be requested to give their name then enter the
participant code 798944. The conference call title is "Full Year 2019
Financials,"
The above information and following table contain supplemental information
regarding income and cash flow from operations for the period ended December 31,
2019. Adjustments to exclude depreciation, stock option expenses and one time
charges are given. This financial information is a Non-GAAP financial measure as
defined by SEC regulation G. The GAAP financial measure most directly comparable
is net income. The reconciliation of each of the Non-GAAP financial measures is
as follows:
1
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
Consolidated Statement of Operations
For 12 Months Ended December 31 (12 Months Operating Cash Flow)
(Unaudited)
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12 months ended December 31
2019 2018
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Revenue $17,829,518
$27,440,110
Income (loss) before income tax - GAAP $ 2,314,621 $ 3,054,847 a
Provision for Income tax - net - GAAP $ (17,436) $ (633,130)
Net income (loss) - GAAP $ 2,490,268 $ 1,912,392 a
Net income (loss) per common share - basic.
- GAAP $ 0.21 $ 0.16 a
12 month weighted average shares used in
computing per share amounts - basic.- GAAP 11,945,636 11,630,136
12 month Operating Cash Flow
Ended December 31
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Operating Cash Flow (12 months). NON-GAAP $ 2,818,040 b,c,d $1,922,981 b,c
Operating Cash Flow per share excluding $ 0.24 b,c,d $ 0.17 b,c
non-operating items and items not related
to current operations (12 months) - basic.
NON-GAAP
Non-cash Adjustments (12 month) GAAP $ 866,708 e $ 453,753 e
Shares (12 month basic weighted average)
used in computing per share amounts -
basic GAAP 11,945,636 11,630,136
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Notes: certain items not related to "operations" of the Company net income are
listed below.
a) Non-GAAP - A "Gain on involuntary disposition" of $1,714,261 was the
result of a fire that destroyed one of FSI's buildings located in Alberta,
Canada. This is not income from operations.
b) 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.
c) Non-GAAP - amounts exclude certain cash and non-cash items: depreciation
and stock compensation expense (2019 = $866,708, 2018 = $453,753), interest
expense (2019 = $428,371, 2018 = $93,653), interest income (2019 = $80,731, 2018
= $36,843), gain on investment (2019 = $323,824, 2018 = $(3,281), gain on sale
of equipment (2019 = $2,312, 2018 = $N/A), net gain/(loss) on involuntary
disposition of equipment (2019 = N/A, 2018 = $1,714,261), write down of
inventory (2019 = N/A, 2018 = N/A), deferred income tax recovery (expense) (2019
= $602,421, 2018 = ($100,000), Income tax (2019 = 619,857, 2018 = $533,130), and
Net income attributable to non-controlling interests (2019 = $384,793, 2018 =
($68,551)). See the financial statements for all adjustments.
2
d) 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 2019 $323,824 in gains from all
investments, including that of the Florida LLC, are removed from the calculation
to arrive at Operating Cash Flow. The $3,281 of investment loss for 2018 is also
removed to arrive at operating cash flow for that year.
e) 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.
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EXHIBIT 99.2
FY 2019 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 Full Year 2019.
Prior to speaking about our financials, I'd like to talk about our corporate
condition and product lines plus what we think might occur over the next several
quarters.
Covid Virus: The NanoChem Subsidiary, the ENP Subsidiary and the Florida LLC
investment are all engaged in producing for the agriculture sector. Therefore,
we are currently considered essential services. Production and sales are
continuing to meet customer orders. In hindsight, Inventory at Dec 31 2019 was
too high. We were expecting growth in all product lines in 2020. Instead, the
virus is likely to prevent growth or even cause reduced revenue. We will shrink
our inventory and increase our cash position by ordering less inventory than we
consume over the coming year.
Insurance compensation from the fire was received in full back in 2018. But, the
accounting and tax effects of the payments will continue to distort and
complicate our financials until year over year comparisons that do not contain
compensation or tax adjustments are available. The first quarter this will occur
is Q1 2020. The full year 2020 financials will be comparable to 2019 with no
fire payment distortion from 2018.
Our NanoChem division: NCS represents more than 1/2 of the revenue of FSI. This
division makes thermal poly-aspartic acid, called TPA for short, a biodegradable
polymer with many valuable uses. NCS also manufactures SUN 27(TM) and N Savr
30(TM) which are used to reduce nitrogen fertilizer loss from soil.
TPA is used in agriculture to significantly increase crop yield. The method of
action is by slowing crystal growth between fertilizer ions and other ions in
the soil resulting in the fertilizer remaining available longer for the plants
to use. The attraction between the TPA and the fertilizer ions also retains the
nutrients closer to the plant roots. Keeping fertilizer more easily available
for crops to use, results in better yield with the same level of fertilization.
We do not recommend reducing fertilizer; instead the grower obtains more salable
crop per acre farmed and a more profitable operation.
TPA in agriculture has a strong economic value for all links in the sales to end
user chain. Even after our margin and the distributor's profits, the grower
receives a good return on his investment in our products. TPA is also a
biodegradable way of treating oilfield water to prevent pipes from plugging with
mineral scale. Our sales into this market are well established and normally grow
steadily but slowly. A simple explanation of TPA's effect is that it prevents
the scaling out of minerals that are part of the water fraction of oil as it
exits the rock formation. Scale must be prevented to keep the oil recovery pipes
from clogging.
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SUN 27(TM) and N Savr 30(TM) are our nitrogen conservation products. Nitrogen is
a critical fertilizer but it is subject to loss through bacterial breakdown,
evaporation and soil runoff. Both our nitrogen products are becoming well
respected and sales continue to grow. They utilize much more environmentally
friendly solvents than some of the competing products.
SUN 27(TM) is used to conserve nitrogen from attack by soil bacterial enzymes
while N Savr 30(TM) is directed toward reducing nitrogen loss through leaching
and evaporation.
ENP, the October 2018 acquisition: ENP is focused on sales into the greenhouse,
turf and golf markets, whereas, our NCS sales are into row crop agriculture -
two very distinct markets. We account for ENP as a subsidiary and, as expected,
it generated consolidated revenue greater than $8 million in full year 2019. FSI
booked annual pretax profits of greater than $1 MM from this division which saw
moderate annual growth. The strong quarters for ENP are 2 and 3 to match the US
spring and summer. Q3 2019 rebounded well from the weather problems encountered
in the spring and ENP is hoping for growth again in 2020 with the caution that
it could face sales difficulties as a result of the virus.
Effect of the LLC investment announced in January: This investment generated
cash flow and profits starting in 2019 as shown in the financials. The company
we invested in ordered substantially more product from us in each quarter of
2019 than it did in 2018. The LLC is focused on international agricultural sales
to many countries. Every country is affected differently by the virus so we
expect results from the investment to be unpredictable in 2020.
Watersavr(TM): News regarding Watersavr(TM) trials and sales will be released if
and when it occurs. As the rest of the company grows, Watersavr(TM) will become
less of a focus but will remain available for sale to existing and prospective
customers.
The start of 2020
TPA, SUN 27(TM) and N Savr 30(TM) for agricultural use have peak uptake in Q1
and Q2 with early buy volumes occurring in Q4. There was less early buy activity
in 2019. 2020 appears to have more focus on just in time ordering which may
reduce Q1 sales or pull them into Q2.
Oil, gas and industrial sales of TPA are expected to be flat or mildly down in
Q1 compared to the previous year while predictions regarding Q2 are not possible
under the circumstances. Like agriculture, our sales to cleaning products and
water treatment are considered essential leaving only O&G as a market vertical
at significant risk.
Tariffs: Since Sept 30th 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 are applying 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. The total
dollar amount due back to us has become significant and continues to increase.
The rebates will increase profitability and cash flow while decreasing cost of
goods for the future quarters in which the rebates are received.
2
Highlights of the financial results:
Sales for the year increased 54% to $27.44 million, compared with $17.83 million
for 2018. The result is a gain of 1.91 MM or 16 cents per share in the 2019
period, compared to a gain of 2.49 MM or 21 cents per share, in 2018. 2018 is
not directly comparable due to the fire related payment received that year.
Working capital is adequate for all our purposes and is expected to increase
during 2020 as we book retained profit from sales. Effort will be made to reduce
inventory and accounts receivable while increasing cash until the effects of the
virus become more predictable. We also have a line of credit with BMO Harris
Bank of Chicago. We are confident that we can execute our plans with our
existing capital. The ENP acquisition was funded with a loan from BMO Harris
plus a convertible note to the seller and did not reduce our cash position. The
LLC investment in January was made with cash on hand.
The text of this speech will be available on our website by Wednesday, April
1st. Email or fax copies can be requested from Jason Bloom at
Jason@flexiblesolutions.com. Thank you, the floor is open for questions.