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): April 1, 2019
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
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(Exact name of Registrant as specified in its charter)
Nevada 001-31540 91-1922863
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(State or other jurisdiction (Commission File No.) (IRS Identification No.)
Employer of incorporation)
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
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 (17CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b)
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-14c))
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. [ ]
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Item 2.02 Results of Operations and Financial Condition
On April 1, 2019, the Company issued a press release announcing the
Company's financial results for the year ended December 31, 2018.
Item 8.01 Other Events
On April 2, 2019, the Company held a conference call to discuss its
financial results for the year ended December 31, 2018, as well as other
information regarding the Company.
Item 9.01 Exhibits
Exhibit
Number Description of Document
99.1 April 1, 2019 Press Release
99.2 Text of opening remarks by Dan O'Brien/April 2, 2019 conference call
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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: April 2, 2019
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
By: /s/ Danial B. O'Brien
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Daniel B. O'Brien, President and Chief
Executive Officer
EXHIBIT 99.1
NEWS RELEASE
April 1, 2019
FSI ANNOUNCES Full Year, 2018 FINANCIAL RESULTS
Conference call scheduled for Tuesday April
2nd, 2019, 11:00am Eastern time,
8:00am Pacific Time
See dial in number below
VICTORIA, BRITISH COLUMBIA, April 1, 2019 - FLEXIBLE SOLUTIONS INTERNATIONAL,
INC. (NYSE Amex: FSI, FRANKFURT: FXT), is the developer and manufacturer of
biodegradable polymers for oil extraction, detergent ingredients and water
treatment as well as crop nutrient availability chemistry. Flexible Solutions
also manufactures biodegradable and environmentally safe water and energy
conservation technologies. Today the Company announces financial results for the
full year ended December 31, 2018.
Mr. Daniel B. O'Brien, CEO, states, "We are pleased with the revenue for the
quarter and the year. Even after allowing for discontinued Ecosavr business,
2018 year ended very positively. We will do our best to continue the growth in
2019. The accounting treatment for cleanup after the fire makes the financials
very confusing and we caution that the effects of the fire will show up in our
financials for several more quarters - at least until the end of 2019." Mr.
O'Brien continues, "There were also raw material price increases in the quarter
that affected margins and profits. We will move topass these costs on over the
next several months."
o Sales for the full year, 2018 were up approximately 15% to $17,829,518
when compared to sales of $15,494,325 for full year, 2017. The result
was an after tax GAAP accounting net income of $2,490,268, or $0.21
per weighted average share for 2018, compared to an after tax GAAP
accounting net income of $1,754,741, or $0.15 per weighted average
share for full year 2017. Note: Both 2017 and 2018 financial
statements include a significant insurance payout as a result of the
fire at the Taber, Alberta factory (see "Gain on involuntary
disposition"). This insurance payout will make year over year
financial comparisons difficult in the short term. o o Basic weighted
average shares used in computing earnings per share amounts for the
full year were: 11,630,136 and 11,485,580 for full year, 2018 and full
year, 2017 respectively.
o Non-GAAP operating cash flow: For the 12 months ending December 31,
2018, net income reflects $453,753 of non-cash charges (depreciation
and stock option expenses), as well as gain (loss) on disposition (and
involuntary disposition) of equipment, interest income, loss on
investment, write down of inventory, deferred tax expense, and income
tax. These items are items not related to operating or current
operating activities. When these items are removed, the Company shows
operating cash flow of $1,829,328, or $0.16 per share. This compares
with operating cash flow of $1,914,148, or $0.17 per share, in the
corresponding 12 months of 2017 (see the table that follows for
details of these calculations).
The NanoChem division continues to be the dominant source of revenue and cash
flow for the Company. New opportunities continue to unfold in detergent, water
treatment, oil field extraction and agricultural use to further increase sales
in this division. In past years the NanoChem division sales have been less
volatile quarter over quarter, however due to increasing sales to agriculture,
revenue seasonality may become larger.
* a conference call has been scheduled for 11:00 am Eastern Time, 8:00 am
Pacific Time, on Tuesday April 2, 2019.
CEO, Dan O'Brien will be presenting and answering questions on the conference
call. To participate in this call please dial 1-888-256-1007 (or 1-323-994-2093)
just prior to the scheduled call time. The conference call title, "Full Year
2018 Financial Results," may be requested.
The above information and following table contain supplemental information
regarding income and cash flow from operations for the periods ended December
31, 2017 and 2018. 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:
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FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
Consolidated Statement of Operations
For 12 Months Ended December 31 (12 Months Operating Cash Flow unaudited)
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3 and 12 month revenue ended
Dec. 31
2018 2017
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3 month 3 month revenue
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Revenue NON-GAAP $ 5,674,167 $ 2,838,865
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12 month revenue
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12 month
Revenue GAAP $ 17,829,518 $ 15,494,325
Net income (loss) GAAP $ 2,490,268 a $ 1,754,741 a
Net income (loss) per share GAAP $ 0.21 a $ 0.15 a
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12 month weighted average shares used in 11,630,136 11,485,580
computing per share amounts - basic GAAP
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12 month Operating Cash Flow
The following calculations begin with: Net ended Dec. 31
income (loss). GAAP
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Operating cash flow (12 month). NON-GAAP. $ 1,829,328 b $ 1,914,148 b
Operating Cash flow per share (12 months) - $ 0.16 b $ 0.17 b
basic. NON-GAAP
Net Non-cash Adjustments (as per Consolidated $ 453,753 c $ 402,708 c
Statement of Cash Flow - 12 month) - NON-GAAP
12 month basic weighted average shares used in 11,630,136 11,485,580
computing per share amounts - basic. GAAP
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Notes: certain items not related to "operations" of the Company have been
excluded from net income as follows.
a) Non-GAAP - there were a significant insurance payouts in both 2017 and 2018
as a result of the fire at the Taber, Alberta factory (see "Gain on
involuntary disposition").
b) Non-GAAP - amounts exclude certain cash and non-cash items: Depreciation
and stock option expense (2018 = $453,753, 2017 = $402,708), Gain/(loss) on
the Involuntary disposition (or sale) of equipment (2018 = $1,714,261, 2017
= $2,043,614), Write down of inventory (2018 = N/A, 2017 = $51,346),
Interest income (2018 = $36,843, 2017 = $913), Loss on investment (2018 =
$3,281, 2017 = $84,066), Deferred tax expense (2018 = $100,000, 2017 =
$985,495), and Income tax (2018 = $533,130, 2017 = $680,319). See the
financial statements for all adjustments.
c) 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
Jason Bloom
Toll Free: 800 661 3560
Fax: 250 477 9912
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.
EXHIBIT 99.2
2018 FY 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 2018.
Before concentrating on our financials, I'd like to speak about our product
lines and what we think might occur over the next several quarters.
Insurance compensation from the fire has been received in full, but the
accounting and tax effects of the payments will continue to distort and
complicate our financials for two or three more quarters.
Our NanoChem division, NCS, represents most 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.
TPA in agriculture has a strong economic value for all links in the sales to end
user chain. There are good profits from manufacturer through the distribution
system to the grower, yet the grower still earns a great profit from the extra
crops produced using the same land but no extra fertilizer. For example, a
summer 2018 trial on strawberries done by the University of California at Davis
resulted in a 15% increase in berries along with increased quality. The use of
$40 worth of TPA yielded several hundred dollars in additional gross profit per
acre.
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. 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.
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SUN 27(TM) is used to conserve nitrogen from attack by soil bacterial enzymes
while N Savr 30(TM) is directed toward nitrogen loss through leaching and
evaporation. Each of our nitrogen products are equal to, or better than, the
competing products.
Watersavr(TM): Spring is starting in most of the areas we are trying to sell
into. News regarding Watersavr(TM) trials and sales will be released if and when
it occurs.
Delivered wholesale water costs now exceed $1200 per acre foot in many
California cities while the total cost of saving an acre foot using
WaterSavr(TM) is less than $200. WaterSavr(TM) can reduce annual losses from
reservoirs by up to 2 feet per treated acre. A municipality that pays $1200 -
$2400 per acre foot for water and does not use WaterSavr(TM) is wasting
significant tax revenue - about $12 million a year for San Diego - regardless of
the drought conditions in any particular year.
Full year 2018 and the first half of 2019
TPA, SUN 27(TM) and N Savr 30(TM) for agricultural use have peak uptake in Q1
and Q2. First half 2018 results were strong as reported. Q3 was weaker because
the crops had received most of their 2018 nutrition. In Q4, agriculture product
sales strengthened to service early buy and winter crop programs as expected. In
first half 2019, we will show significant improvements over the year earlier
periods.
Oil, gas and industrial sales of TPA were not as strong in Q3 2018 as they were
in the same period of 2017. We continue working to change this and saw some
improvement in 4th quarter 2018. The recovery of sales into this market vertical
is expected to continue throughout 2019.
Effect of the ENP acquisition: This synergistic acquisition added more than$1.5
million in consolidated revenue to FSI for Q4 2018 and contributed to EBITDA
immediately. In 2019, we expect that ENP will provide more than $8.0 million in
consolidated revenue and significant positive cash flow.
Effect of the LLC investment announced in January: This investment will generate
quarterly cash flow and profits starting in Q1 2019. The company we invested in
will also order substantially more product from us in 2019 than in 2018 which
will further increase revenue and profitability.
Full year 2019 revenue will increase very strongly compared to 2018 driven by;
historic operations, the ENP acquisition and the January LLC investment. We
expect that profits and cash flow will increase very significantly along with
the increases in top line revenue. Our regular warning applies - that we can't
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control customer behavior, shipping dates, weather, crop pricing, oil platform
maintenance and the other variables of our business, so quarterly results will
be unlikely to form a straight line on a graph. However, we do expect the slope
of the graph to be up sharply.
Tariffs: Since Sept 30th, all raw materials imported from China have included a
10% additional tariff. US customers have received price increases from us now
that this inventory is being used. International customers are not charged the
tariff because we are applying for the export rebates available to recover the
tariffs. To hedge against the chance of even higher tariffs, and to service the
increased production expected in 2019, we have increased inventory
substantially. As a result, the accumulating tariff payments to the Government
are affecting our cost of goods, our cash flow and our profits negatively until
the rebates are received. Rebates can take many months and the total dollar
amount due back to us will become significant later in the year. The rebates
will increase profitability and cash flow while decreasing cost of goods for the
future quarters in which the rebates are received.
Highlights of the financial results:
Sales for the year increased 15% to $17.83 million,compared with $15.49 million
for FY 2017. The result is a gain of $2.49 million or 21 cents per share in the
2018 period, compared to a gain of $1.75 million or 15 cents per share, in 2017.
Working capital is adequate for all our purposes and is expected to increase
rapidly during the year as our revenue grows. We also have a line of credit with
BMO Harris Bank of Chicago. We are confident that we can execute our plans with
our existing capital. The ENP acquisition was funded with a loan from BMO Harris
plus a convertible note to the seller and did not reduce our cash position. The
LLC investment in January was made with cash on hand.
The insurance recovery and site remediation costs from the Taber fire had a
large effect on our results in 2017 and 2018. The final cash recovery in April
2018, any tax adjustments and the amounts received already will affect our GAAP
financials until at least Q2 this year - the period allowed by Canadian tax law
before a final tax occurs on any profits from an insured event. It is highly
probable that the deferred tax asset shown on our balance sheet will offset any
tax owing on the insurance recovery.
The text of this speech will be available on our website by Wednesday, April
3rd: email or fax copies can be requested from Jason Bloom at
Jason@flexiblesolutions.com. Thank you, the floor is open for questions.