0001004878-18-000226.txt : 20181119 0001004878-18-000226.hdr.sgml : 20181119 20181119162630 ACCESSION NUMBER: 0001004878-18-000226 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20181114 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20181119 DATE AS OF CHANGE: 20181119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEXIBLE SOLUTIONS INTERNATIONAL INC CENTRAL INDEX KEY: 0001069394 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 911922863 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31540 FILM NUMBER: 181192796 BUSINESS ADDRESS: STREET 1: 2614 QUEENSWOOD DR CITY: VICTORIA B C STATE: A1 ZIP: V8N 1X5 BUSINESS PHONE: 2504779969 MAIL ADDRESS: STREET 1: 2614 QUEENSWOOD DR CITY: VICTORIA BC CANADA STATE: A1 ZIP: V8N 1X5 8-K 1 form8k202confcall11-18.txt 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): November 14, 2018 FLEXIBLE SOLUTIONS INTERNATIONAL INC. ------------------------------------- (Exact name of Registrant as specified in its charter) Nevada 001-31540 91-1922863 -------------------------- ----------------- ------------------ (State or other jurisdiction (Commission File No.) (IRS 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 N/A ------------------------------------- (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. [ ] 1 Item 2.02 Results of Operations and Financial Condition On November 14, 2018, the Company issued a press release announcing the Company's financial results for the three months ended September 30, 2018. Item 8.01 Other Events On November 19, 2018, the Company held a conference call to discuss its financial results for the three months ended September 30, 2018, as well as other information regarding the Company. Item 9.01 Exhibits Exhibit Number Description of Document 99.1 November 14, 2018 Press Release 99.2 Text of opening remarks by Dan O'Brien/November 19, 2018 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: November 19, 2018 FLEXIBLE SOLUTIONS INTERNATIONAL INC. By: /s/ Daniel B. O'Brien ---------------------------------------- Daniel B. O'Brien, President and Chief Executive Officer EX-99 2 form8k202ex99111-18.txt EXHIBIT 99.1 NEWS RELEASE November 14, 2018 FSI ANNOUNCES Third Quarter, 2018 FINANCIAL RESULTS Change: a Conference call is scheduled for the following week Monday November 19th, 11:00am Eastern time, 8:00am Pacific Time See dial in number and explanation below VICTORIA, BRITISH COLUMBIA, November 14, 2018 - 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 third quarter (Q3) ended September 30, 2018. Mr. Daniel B. O'Brien, CEO, states, "We are pleased to show significant positive revenue growth for the quarter and anticipate that this will continue in Q4." Mr. O'Brien continues, Third Quarter is the one which has the poorest mix between low and high margin products so cash flow per dollar of revenue is also less; we expect a better combination in Q4. The first raw material inventory that is subject to increased tariffs is now part of our stock. We hope that we are able to maintain sales to US customers while raising prices to cover the new tariffs." o Sales in the Third quarter (Q3) were $3,816,626, up approximately 17% when compared to sales of $3,269,386 in the corresponding period a year ago. The financials show a Q3, 2018 net loss of $145,470, or $0.01 per share, compared to a net loss of $278,924, or $0.02 per share, in Q3, 2017. Note: An expense related to a fire at the Taber, Alberta facility is given in Q3, 2017. If the expense (which is a non-operating expense) were removed, income before income tax would be approximately $307,000 higher for that year. This is a non-GAAP adjustment. Furthermore, as a result of the fire damage, any additional insurance payouts or related expenses will make year over financial comparisons difficult in the short term. o o Basic weighted average shares used in computing earnings per share amounts in Q3 were 11,630,991 and 11,498,491 for Q3, 2018 and Q3, 2017 respectively. o Non-GAAP operating cash flow: For the 9 months ending September 30, 2018, net income reflects $257,875 of non-cash charges (depreciation and stock option expenses), income tax, as well as gain (loss) on disposition (and involuntary disposition) of equipment, interest income, write down of inventory, and income tax; which are items not related to operating or current operating activities. When these items are removed, the Company shows operating cash flow of $1,636,702, or $0.14 per share. This compares with operating cash flow of $1,863,293, or $0.16 per share, in the corresponding 9 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. Also new sales opportunities have appeared in the WaterSavrTM division as a result of the ongoing drought in the southern United States. Many municipalities are water stressed and are seeking ways to conserve water. Conference call * CEO, Dan O'Brien will be travelling and is unavailable to attend a conference call at the usual time. Instead a conference call has been scheduled for 11:00am Eastern Time, 8:00am Pacific Time, on Monday November 19, 2018. CEO, Dan O'Brien will be presenting and answering questions on the conference call. To participate in this call please dial 1 888-394-8218 (or 1 323-794-2591) just prior to the scheduled call time. The conference call title, "Third Quarter 2018 Financials," may be requested. 1 The above information and following table contain supplemental information regarding income and cash flow from operations for the period ended September 30, 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: FLEXIBLE SOLUTIONS INTERNATIONAL, INC. Consolidated Statement of Operations For 3 Months Ended September 30 (9 Months Operating Cash Flow) (Unaudited) -------------------------------------------------------------------------------- 3 months ended September 30 2018 2017 --------------------------------- Revenue $3,816,626 $ 3,269,386 Income (loss) before income tax - GAAP $ (182,838) $ (489,641) a Provision for Income tax(Recovery) - GAAP $ (37,368) $ (210,717) Net income (loss) - GAAP $ (145,470) $ (273,623) a Net income (loss) per common share - basic. - $ (0.01) $ (0.02) GAAP 3 month weighted average shares used in computing per share amounts - basic.- GAAP 11,630,991 11,498,491 9 month Operating Cash Flow Ended June 30 --------------------------------- Operating Cash flow (9 months). NON-GAAP $ 1,636,702 b $ 1,863,300 b Operating Cash flow per share excluding $ 0.14 b $ 0.16 b non-operating items and items not related to current operations (9 months) - basic. NON-GAAP Non-cash Adjustments (9 month) GAAP $ 257,875 c $ 258,263 c Shares (9 month basic weighted average) used 11,470,196 in computing per share amounts - basic GAAP 11,627,464 -------------------------------------------------------------------------------- Notes: certain items not related to "operations" of the Company have been excluded from net income as follows. a) Non-GAAP -::The financials give an expense of $307,432 related to the clean-up of the fire damaged site in Taber Alberta in 2017. This is a non-operating expense, which if added back to net income would result in higher net income for that year - This is a non-GAAP number. b) Non-GAAP - amounts exclude certain cash and non-cash items: depreciation and stock option expense (2018 = $257,875, 2017 = $258,263), gain on investment ( 2018 = $5,336, 2017 = N/A), net gain/(loss) on involuntary disposition of equipment (2018 = $1,714,261, 2017 = $1,938,286), write down of inventory (2018 = N/A, 2017 = $51,346), interest income (2018 = $17,459, 2017 = $323), deferred tax expense (2018 = N/A, 2017 = $23,404), and Income tax (2018 = 421,783, 2017 = $221,530). 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 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. EX-99 3 form8k202ex99211-18.txt EXHIBIT 99.2 Q3 2018 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 third quarter 2018. Before focusing 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. There will be no further payments, but the accounting and tax effects of the payments will continue to distort and complicate our financials for several more quarters. The property where the fire took place has been listed and will be sold when a reasonable offer is received. Our NanoChem division, NCS, represents nearly all 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 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. 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 revenue 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. 1 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): Winter is starting in most of the areas we are trying to sell into. News regarding Watersavr(TM) is unlikely until February 2019 at the earliest. Delivered water costs now exceed $1000 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. Q4 and the start of 2019 TPA, SUN 27(TM) and N Savr 30(TM) for agricultural use that have peak uptake in Q1 and Q2 were strong as reported. Q3 was weaker because the crops had received most of their 2018 nutrition. We anticipate that Q4 agriculture product sales should strengthen to service early buy and winter crop programs. Q1 and Q2 in 2019 should show good improvements from 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 are working to change this and expect to see improvement by 4th quarter of this year. The recovery of sales to this market vertical is expected to continue into 2019. Effect of the acquisition announced this morning: This will add at least $1.3 million in consolidated revenue to FSI for Q4 2018 and contribute to EBITDA immediately. In 2019, we hope that ENP will provide more than $7.5 million in new revenue and significant positive cash flow. Full year 2018 revenue will increase compared to 2017, even with the need to replace the shortfall from the first 6 months of the year. We also expect that profits and operating cash flow will increase provided that the cost of raw materials and our product mix remain relatively stable in Q4. The accounting effects of the fire will distort the numbers unpredictably until Q2 2019 and our regular warning applies - that we can't 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. Tariffs: Since Sept 30th, all raw materials imported from China have a 10% additional tariff. US customers are receiving price increases from us as we begin to use the new inventory. Because there is a significant probability of the tariffs on Chinese goods increasing to 25% on Jan 1, we have ordered more of 2 the goods we obtain from China for delivery prior to the end of the year. Extra inventory will give us time to react if the tariff rises again. Highlights of the financial results: Sales for the quarter increased 17% to $3.82 million, compared with $3.27 million for Q3 2017. The result is a loss of $145 thousand or $0.1 per share in the 2018 period, compared to a loss of $279 thousand or $0.02 per share, in 2017. Working capital is excellent, including substantial cash on hand as well as a line of credit with BMO Harris Bank of Chicago. We are confident that we can execute our plans with our existing capital. The acquisition was funded with a loan from BMO Harris plus a convertible note to the seller and has not reduced our cash position. The insurance recovery and site remediation costs from the Taber fire had a large effect on our results in 2017 and 2018 and this will continue into 2019. The final cash recovery in April 2018, any tax adjustments and the amounts received already will affect our GAAP financials until at least Q2 2019 - 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 Tuesday, November 20th and email or fax copies can be requested from Jason Bloom at Jason@flexiblesolutions.com. Thank you, the floor is open for questions.