10-Q

   UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

OR

[ ]TRANSITION REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

        For the transition period from ________ to  ________

Commission File Number:  001-31540

FLEXIBLE SOLUTIONS INTERNATIONAL INC.

 (Exact Name of registrant as Specified in Its Charter)

Nevada	91-1922863
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
#206 – 920 Hillside Ave. Victoria, British Columbia, Canada	V8T 1Z8
(Address of Principal Executive Offices)	(Zip Code)
Registrant’s telephone number: (250) 477-9969
N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) had been subject to such filing requirements for the past 90 days.

                      Yes ____X_____                                                                No __________

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  

                      Yes ___X______                                                                No __________

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer [  ]                                                          Accelerated filer [  ]

Non-accelerated filer [  ]                                                          Smaller reporting company [X]

(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).

                     Yes ________                                                                       No ____X_____

Class of Stock	No. Shares Outstanding	Date
Common	13,177,991	November 1, 2015

FORM 10-Q

Index

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements.
	(a)	Unaudited Interim Condensed Consolidated Balance Sheets at September 30, 2015 and December 31, 2014.
	(b)	Unaudited Interim Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2015 and 2014.
	(c)	Unaudited Interim Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 2015 and 2014.
	(d)	Unaudited Interim Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014.
	(e)	Notes to Unaudited Interim Condensed Consolidated Financial Statements for the Period Ended September 30, 2015.
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation.
Item 4.	Controls and Procedures.
PART II.	OTHER INFORMATION
Item 6.	Exhibits.
SIGNATURES

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements other than statements of historical fact are “forward-looking statements” for the purposes of the federal and state securities laws, including, but not limited to: any projections of earnings, revenue or other financials items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words.  These forward-looking statements present our estimates and assumptions only as of the date of this report.  Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.  Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.  The factors impacting these risks and uncertainties include but are not limited to:

● Increased competitive pressures from existing competitors and new entrants;

● Increases in interest rates or our cost of borrowing or a default under any material debt agreement;

● Deterioration in general or regional economic conditions;

● Adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;

● Loss of customers or sales weakness;

● Inability to achieve future sales levels or other operating results;

● The unavailability of funds for capital expenditures; and

● Operational inefficiencies in distribution or other systems.

For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014.

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PART I                      FINANCIAL INFORMATION

Item 1.                       Financial Statements.

FLEXIBLE SOLUTIONS INTERNATIONAL, INC.

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

(U.S. Dollars -- Unaudited)

	September 30, 2015  (Unaudited)			December 31, 2014
Assets
Current
Cash and cash equivalents	$	1,683,971		$	747,517
Accounts receivable (Note 3)		2,051,982			2,322,373
Inventory (Note 4)		3,111,565			3,467,438
Prepaid expenses		324,927			123,511
		7,172,445			6,660,839
Property, equipment and leaseholds (Note 5)		3,916,820			4,764,900
Patents (Note 6)		108,129			137,404
Long term deposits (Note 7)		10,326			4,425
Deferred tax asset		2,356,266			2,667,286
	$	13,563,986		$	14,234,854
Liabilities
Current
Accounts payable and accrued liabilities	$	336,846		$	815,141
Deferred revenue		41,952			44,593
Taxes payable		278,267			140,842
Short term line of credit (Note 8)		250,000			750,000
Current portion of long term debt (Note 9)		337,686			358,214
		1,244,751			2,108,790
Long Term
Loans (Note 9)		603,580			754,475
	$	1,848,331		$	2,863,265
Stockholders’ Equity
Capital stock
Authorized
50,000,000 Common shares with a par value of $0.001 each
1,000,000 Preferred shares with a par value of $0.01 each
Issued and outstanding
13,177,991 common shares at September 30, 2015 (13,169,991 at December 31, 2014)		13,178			13,170
Capital in excess of par value		16,287,899			16,227,121
Other comprehensive income		(1,044,411	)		(267,552	)
Deficit		(3,541,011	)		(4,601,150	)
Total Stockholders’ Equity		11,715,655			11,371,589
Total Liabilities and Stockholders’ Equity	$	13,563,986		$	14,234,854
Commitments and contingencies (Note 13)

-- See Notes to Unaudited Interim Condensed Consolidated Financial Statements --

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FLEXIBLE SOLUTIONS INTERNATIONAL, INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended September 30, 2015 and 2014

(U.S. Dollars -- Unaudited)

	Three Months Ended September 30,
	2015			2014
Sales	$	3,303,216		$	3,850,514
Cost of sales		2,094,258			2,524,026
Gross profit		1,208,958			1,326,488
Operating expenses
Wages		368,861			356,021
Administrative salaries and benefits		172,607			199,281
Advertising and promotion		4,082			4,293
Investor relations and transfer agent fee		21,879			63,886
Office and miscellaneous		94,211			131,032
Insurance		73,695			76,840
Interest expense		11,867			19,686
Rent		31,748			37,529
Consulting		38,689			75,651
Professional fees		35,459			53,020
Travel		29,497			52,225
Telecommunications		7,442			7,885
Shipping		4,938			5,210
Research		28,572			23,309
Commissions		2,585			42,790
Currency exchange		(36,807	)		(16,839	)
Utilities		4,777			8,631
Total operating expenses		894,102			1,140,450
Income (loss) before other items and income tax		314,856			186,038
Interest income		-			-
Income (loss) before income tax		314,856			186,038
Provision for income taxes		77,654			8,810
Net income (loss)		237,202			177,228
Other comprehensive income (loss)		(350,433	)		(290,156	)
Comprehensive income (loss)		(113,231	)		(112,928	)
Net income (loss) per share (basic and diluted)	$	0.02		$	0.01
Weighted average number of  common shares - basic		13,177,208			13,169,991
Weighted average number of  common shares – diluted		13,220,047			13,220,797

-- See Notes to Unaudited Interim Condensed Consolidated Financial Statements --

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FLEXIBLE SOLUTIONS INTERNATIONAL, INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Nine Months Ended September 30, 2015 and 2014

(U.S. Dollars -- Unaudited)

	Nine Months Ended September 30,
	2015			2014
Sales	$	12,168,025		$	11,950,226
Cost of sales		7,432,944			7,914,874
Gross profit		4,735,081			4,035,352
Operating expenses
Wages		1,165,021			1,158,137
Administrative salaries and benefits		546,985			597,890
Advertising and promotion		30,033			32,243
Investor relations and transfer agent fee		99,978			167,083
Office and miscellaneous		207,803			303,326
Insurance		218,350			223,757
Interest expense		44,044			72,458
Rent		96,114			138,054
Consulting		105,882			214,554
Professional fees		129,925			201,675
Travel		86,924			106,887
Telecommunications		23,971			23,070
Shipping		14,707			23,077
Research		66,982			99,851
Commissions		73,530			113,468
Currency exchange		(47,724	)		(20,988	)
Utilities		19,774			51,888
		2,882,299			3,506,430
Income (loss) before other items and income tax		1,852,782			528,922
Gain (loss) on sale of equipment		(45,249	)		-
Interest income		2,963			- -
Income (loss) before income tax		1,810,496			528,922
Provision for income taxes		750,357			107,519
Net income (loss)		1,060,139			421,403
Other comprehensive income (loss)		(776,859	)		(361,524	)
Comprehensive income (loss)		283,280			59,879
Net income (loss) per share (basic and diluted)	$	0.08		$	0.03
Weighted average number of common shares - basic		13,172,423			13,169,991
Weighted average number of common shares – diluted		13,284,267			13,169,991

-- See Notes to Unaudited Interim Condensed Consolidated Financial Statements --

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 FLEXIBLE SOLUTIONS INTERNATIONAL, INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2015 and 2014

(U.S. Dollars -- Unaudited)

	Nine Months Ended September 30,
	2015			2014
Operating activities
Net income (loss)	$	1,060,139		$	421,403
Stock compensation expense		52,787			68,273
Depreciation		430,347			426,649
Changes in non-cash working capital items:
(Increase) Decrease in accounts receivable		249,171			(820,375	)
(Increase) Decrease in inventory		311,450			(232,604	)
(Increase) Decrease in prepaid expenses		(208,917	)		(25,981	)
(Increase) Decrease in deferred tax assets		-			107,519
Increase (Decrease) in accounts payable		(454,802	)		(31,353	)
Increase (Decrease) in taxes payable		137,425			-
Increase (Decrease) in deferred revenue		(2,641	)		(6,865	)
Cash provided by (used in) operating activities		1,574,959			(93,334	)
Investing activities
Long term deposits		(5,440	)		-
Sale (purchase) of property and equipment		41,432			(24,594	)
Cash provided by (used in) investing activities		35,992			(24,594	)
Financing activities
Short term line of credit		(500,000	)		(50,000	)
Loan repayment		(150,895	)		(1,095,050	)
Proceeds received from loan		-			1,005,967
Proceeds from issuance of common stock		8,000			-
Cash provided (used) by financing activities		(642,895	)		(139,083	)
Effect of exchange rate changes on cash		(31,602	)		(11,066	)
Inflow (outflow) of cash		936,454			(268,077	)
Cash and cash equivalents, beginning		747,517			568,087
Cash and cash equivalents, ending	$	1,683,971		$	300,010
Supplemental disclosure of cash flow information:
Income taxes paid	$	785,000		$	-
Interest paid	$	44,044		$	72,638

-- See Notes to Unaudited Interim Condensed Consolidated Financial Statements --

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FLEXIBLE SOLUTIONS INTERNATIONAL, INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the Period Ended September 30, 2015

(U.S. Dollars -- Unaudited)

1.            Basis of Presentation.

These unaudited interim condensed consolidated interim financial statements include the accounts of Flexible Solutions International, Inc. (the “Company”, “we”, or “our”), and its wholly-owned subsidiaries Flexible Fermentation Ltd. (“Flexible Ltd.”), NanoChem Solutions Inc. (“NanoChem”), Flexible Solutions Ltd., Flexible Biomass LP, and FS Biomass Inc.  All inter-company balances and transactions have been eliminated.  The company was incorporated May 12, 1998 in the State of Nevada and had no operations until June 30, 1998.

The Company and its subsidiaries develop, manufacture and market specialty chemicals which slow the evaporation of water.  One of the Company’s products, HEATSAVR®, is marketed for use in swimming pools and spas where its use, by slowing the evaporation of water, allows the water to retain a higher temperature for a longer period of time and thereby reduces the energy required to maintain the desired temperature of the water in the pool.  Another product, WATERSAVR®, is marketed for water conservation in irrigation canals, aquaculture, and reservoirs where its use slows water loss due to evaporation.  In addition to the water conservation products, the Company also manufactures and markets water-soluble chemicals utilizing thermal polyaspartate biopolymers (hereinafter referred to as “TPAs”), which are beta-proteins manufactured from the common biological amino acid, L-aspartic.  TPAs can be formulated to prevent corrosion and scaling in water piping within the petroleum, chemical, utility and mining industries.  TPAs are also used as proteins to enhance fertilizers in improving crop yields and as additives for household laundry detergents, consumer care products and pesticides.

These unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements.  These financial statements are condensed and do not include all disclosures required for annual financial statements.  The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Company’s audited consolidated financial statements filed as part of the Company’s December 31, 2014 Annual Report on Form 10-K.  This quarterly report should be read in conjunction with such annual report.

In the opinion of the Company’s management, these unaudited interim consolidated financial statements reflect all adjustments necessary to present fairly the Company’s consolidated financial position at September 30, 2015, the consolidated results of operations for the three and nine months ended September 30, 2015 and 2014, and the consolidated statements of cash flows for the nine months ended September 30, 2015 and 2014.  The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the entire fiscal year.

2.             Significant Accounting Policies.

These unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern and reflect the policies outlined below.

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(a)           Cash and Cash Equivalents.

The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents.  Cash and cash equivalents are maintained with several financial institutions.

(b)           Inventories and Cost of Sales.

The Company has three major classes of inventory:  finished goods, work in progress, and raw materials.  In all classes, inventory is valued at the lower of cost or market.  Cost is determined on a first-in, first-out basis.  Cost of sales includes all expenditures incurred in bringing the goods to the point of sale.  Inventory costs and cost of sales include direct costs of the raw material, inbound freight charges, warehousing costs, handling costs (receiving and purchasing) and utilities and overhead expenses related to the Company’s manufacturing and processing facilities.

 (c)           Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts when management estimates collectability to be uncertain.  Accounts receivable are continually reviewed to determine which, if any, accounts are doubtful of collection.  In making the determination of the appropriate allowance amount, the Company considers current economic and industry conditions, relationships with each significant customer, overall customer credit-worthiness and historical experience.

 (d)           Property, Equipment and Leaseholds.

The following assets are recorded at cost and depreciated using the methods and annual rates shown below:

Computer hardware	30% Declining balance
Furniture and fixtures	20% Declining balance
Manufacturing equipment	20% Declining balance
Office equipment	20% Declining balance
Boat	20% Declining balance
Building and improvements	10% Declining balance

Property and equipment are written down to net realizable value when management determines there has been a change in circumstances which indicates its carrying amount may not be recoverable.  No write-downs have been necessary to date.

(e)           Impairment of Long-Lived Assets.

In accordance with FASB Codification Topic 360, “Property, Plant and Equipment (ASC 360), the Company reviews long-lived assets, including, but not limited to, property and equipment, patents and other assets, for impairment annually or whenever events or changes in circumstances indicate the carrying amounts of assets may not be recoverable.  The carrying value of long-lived assets is assessed for impairment by evaluating operating performance and future undiscounted cash flows of the underlying assets.  If the sum of the expected future cash flows of an asset is less than its carrying value, an impairment measurement is indicated.  Impairment charges are recorded to the extent that an asset’s carrying value exceeds its fair value.  Accordingly, actual results could vary significantly from such estimates.  There were no impairment charges during the periods presented.

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(f)           Foreign Currency.

The functional currency of three of the Company’s subsidiaries is the Canadian Dollar.  The translation of the Canadian Dollar to the reporting currency of the Company, the U.S. Dollar, is performed for assets and liabilities using exchange rates in effect at the balance sheet date.  Revenue and expense transactions are translated using average exchange rates prevailing during the year.  Translation adjustments arising on conversion of the Company’s financial statements from the subsidiary’s functional currency, Canadian Dollars, into the reporting currency, U.S. Dollars, are excluded from the determination of income (loss) and are disclosed as other comprehensive income (loss) in the Statement of Operations and Comprehensive Income (Loss).

Foreign exchange gains and losses relating to transactions not denominated in the applicable local currency are included in operating income (loss) if realized during the year and in comprehensive income (loss) if they remain unrealized at the end of the year.

 (g)           Revenue Recognition.

Revenue from product sales is recognized at the time the product is shipped since title and risk of loss is transferred to the purchaser upon delivery to the carrier.  Shipments are made F.O.B. shipping point.  The Company recognizes revenue when there is persuasive evidence of an arrangement, delivery to the carrier has occurred, the fee is fixed or determinable, collectability is reasonably assured and there are no significant remaining performance obligations.  When significant post-delivery obligations exist, revenue is deferred until such obligations are fulfilled.  To date there have been no such significant post-delivery obligations.

Since the Company’s inception, product returns have been insignificant; therefore, no provision has been established for estimated product returns.

Deferred revenues consist of products sold to distributors with payment terms greater than the Company’s customary business terms due to lack of credit history or operating in a new market in which the Company has no prior experience. The Company defers the recognition of revenue until the criteria for revenue recognition have been met, and payments become due or cash is received from these distributors.

(h)           Stock Issued in Exchange for Services.

The Company’s common stock issued in exchange for services is valued at an estimated fair market value based upon trading prices of the Company’s common stock on the dates of the stock transactions.  The corresponding expense of the services rendered is recognized over the period that the services are performed.

(i)           Stock-based Compensation.

The Company recognizes compensation expense for all share-based payments in accordance with FASB Codification Topic 718, Compensation — Stock Compensation, (ASC 718). Under the fair value recognition provisions of ASC 718, the Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award.

The fair value at grant date of stock options is estimated using the Black-Scholes-Merton option-pricing model.  Compensation expense is recognized on a straight-line basis over the stock option vesting period based on the estimated number of stock options that are expected to vest.  Shares are issued from treasury upon exercise of stock options.

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(j)           Comprehensive Income.

Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income, but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity.  The Company’s other comprehensive income is primarily comprised of unrealized foreign exchange gains and losses.

(k)           Income (loss) Per Share.

Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding in the period.  Diluted earnings (loss) per share is calculated giving effect to the potential dilution of the exercise of options and warrants.  Common equivalent shares, composed of common shares issuable upon the exercise of stock options and warrants, are included in diluted net income per share to the extent that these shares are dilutive.  Common equivalent shares that have an anti-dilutive effect on net income per share have been excluded from the calculation of diluted weighted average shares outstanding for the three and nine months ended September 30, 2015 and 2014.

 (l)           Use of Estimates.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates and would impact the results of operations and cash flows.

Estimates and underlying assumptions are reviewed at each period end. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Significant areas requiring the use of management estimates include assumptions and estimates relating to the asset impairment analysis, share-based payments and warrants, valuation allowances for deferred income tax assets, determination of useful lives of property, plant and equipment, and the valuation of inventory.

 (m)           Financial Instruments.

The fair market value of the Company’s financial instruments, comprising cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, short term line of credit, and loan, were estimated to approximate their carrying values due to immediate or short-term maturity of these financial instruments.  The Company maintains cash balances at financial institutions which at times, exceed federally insured amounts. The Company has not experienced any material losses in such accounts.

The Company is exposed to foreign exchange and interest rate risk to the extent that market value rate fluctuations materially differ from financial assets and liabilities, subject to fixed long-term rates.

(n)           Fair Value of Financial Instruments.

In August 2009, an update was made to Fair Value Measurements and Disclosures — “Measuring Liabilities at Fair Value.” This update permits entities to measure the fair value of liabilities, in circumstances in which a quoted price in an active market for an identical liability is not available, using a valuation technique that uses a quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets, or the income or market approach that is consistent with the principles of Fair Value Measurements and Disclosures.

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Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.  The standard describes a fair value hierarchy based on three levels of inputs described below, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

● Level 1 – Quoted prices in active markets for identical assets or liabilities

● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and short term line of credit for all periods presented approximate their respective carrying amounts due to the short term nature of these financial instruments

 (o)           Contingencies.

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company's management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company's financial statements.  If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Legal fees associated with loss contingencies are expensed as incurred.

(p)            Income Taxes.

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance so that the assets are recognized only to the extent that when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.

Per FASB ASC 740 “Income taxes” under the liability method, it is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.  At

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September 30, 2015, the Company believes it has appropriately accounted for any unrecognized tax benefits.  To the extent the Company prevails in matters for which a liability for an unrecognized benefit is established or is required to pay amounts in excess of the liability, the Company’s effective tax rate in a given financial statement period may be affected. Interest and penalties associated with the Company’s tax positions are recorded as Interest Expense.

(q)               Risk Management.

The Company’s credit risk is primarily attributable to its account receivables.  The amounts presented in the accompanying consolidated balance sheets are net of allowances for doubtful accounts, estimated by the Company’s management based on prior experience and the current economic environment.  The Company is exposed to credit-related losses in the event of non-performance by counterparties to the financial instruments.  Credit exposure is minimized by dealing with only credit worthy counterparties. Accounts receivable for the Company’s three primary customers totaled $1,482,103 (72%) at September 30, 2015 (December 31, 2014 - $1,769,114 or 76%). 

The credit risk on cash and cash equivalents is limited because the Company limits its exposure to credit loss by placing its cash and cash equivalents with major financial institutions.

The Company is not exposed to significant interest rate risk to the extent that the long term debt maintained from the foreign government agencies is subject to a fixed rate of interest.

In order to manage its exposure to foreign exchange risks, the Company is closely monitoring the fluctuations in the foreign currency exchange rates and the impact on the value of cash and cash equivalents, accounts receivable, and accounts payable.

(r)               Recently Adopted Accounting Pronouncements.

In April 2014, the FASB issued new guidance on the definition of a discontinued operation that requires entities to provide additional disclosures about disposal transactions that do not meet the discontinued operations criteria.  The new guidance narrows the focus of discontinued operations to those components that are disposed of or classified as held-for-sale and that represent a strategic shift that has or will have a major impact on the entity’s operations or financial results.  The guidance is effective prospectively for all disposals or components initially classified as held-for-sale in periods beginning on or after December 15, 2014. Early adoption is permitted.  Upon adoption, this guidance did not have a material impact on the Company’s consolidated results of operations or financial position.

(s)               New Accounting Pronouncements Not Yet Adopted

On May 28, 2014, the Financial Accounting Standards Board (the “FASB”) and the International Accounting Standards Board (the “IASB”) issued substantially converged final standards on revenue recognition. The FASB's Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), was issued in three parts: (a) Section A, “Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40),” (b) Section B, “Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables” and (c) Section C, “Background Information and Basis for Conclusions.” The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.  The new revenue recognition guidance becomes effective for the Company on January 1, 2017, and early adoption is not permitted.  Entities have the option of using either a full retrospective or a modified approach to adopt the guidance in the ASU.  The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

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In August 2014, the FASB issued new guidance on determining when and how to disclose going -concern uncertainties in the financial statements.  The new guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about its ability to continue as a going concern.  The guidance is effective for annual periods ending after December 15, 2016 and interim periods thereafter.  Early adoption is permitted.  Upon adoption, the Company does not believe this guidance will have a material impact on its consolidated results of operations or financial position.

In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis" ("ASU 2015-02").  ASU 2015-02 makes several modifications to the consolidation guidance for variable interest entities ("VIEs") and general partners' investments in limited partnerships, as well as modifications to the evaluation of whether limited partnerships are VIEs or voting interest entities.  It is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted.  The Company is evaluating the impact of the amended guidance on its consolidated financial statements.

3.           Accounts Receivable.

	September 30, 2015			December 31, 2014
Accounts receivable	$	2,088,701		$	2,363,492
Allowances for doubtful accounts		(36,719	)		(41,119	)
	$	2,051,982		$	2,322,373

4.           Inventory.

	September 30, 2015		December 31, 2014
Completed goods	$	959,278	$	1,449,640
Work in progress		31,376		1,216
Raw materials		2,210,911		2,016,582
	$	3,111,565	$	3,467,438

5.Property, Plant & equipment.

	September 30, 2015		Accumulated		September 30, 2015
	Cost		Depreciation		Net
Buildings	$	4,823,756	$	2,738,152	$	2,085,604
Computer hardware		89,774		83,912		5,862
Furniture and fixtures		23,314		20,450		2,864
Office equipment		17,852		16,574		1,278
Manufacturing equipment		5,115,241		3,759,837		1,355,404
Trailer		12,937		11,968		969
Boat		34,400		2,580		31,820
Technology		102,363		76,772		25,591
Land		407,428		-		407,428
	$	10,627,065	$	6,710,245	$	3,916,820

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	December 31, 2014		Accumulated		December 31, 2014
	Cost		Depreciation		Net
Buildings	$	5,065,433	$	2,653,287	$	2,412,146
Computer hardware		97,124		89,083		8,041
Furniture and fixtures		25,548		21,906		3,642
Office equipment		20,537		18,807		1,730
Manufacturing equipment		5,710,354		3,864,204		1,846,150
Trailer		14,882		13,444		1,438
Technology		117,758		64,767		52,991
Land		438,762		-		438,762
	$	11,490,398	$	6,725,498	$	4,764,900

Amount of depreciation expense for 2015: $418,274 (2014: $412,760).

6.           Patents.

In fiscal 2005, the Company started the patent process for additional WATER$AVR® products.  Patents associated with these costs were granted in 2006 and they have been amortized over their legal life of 17 years.

	September 30, 2015 Cost		Accumulated Amortization		September 30, 2015 Net
Patents	$	198,787	$	90,658	$	108,129

	December 31, 2014 Cost	Accumulated Amortization	December 31, 2014 Net
Patents	$    228,597	$          91,193	$    137,404

Decrease in 2015 cost was due to currency conversion.  2015 cost in Canadian dollars - $265,102 (2014 - $265,102 in Canadian dollars).

Amount of amortization for 2015 - $12,073 (2014 - $13,889)

Estimated amortization expense over the next five years is as follows:

2015	$	16,097
2016		16,097
2017		16,097
2018		16,097
2019		16,097

7.           Long Term Deposits.

The Company has reclassified certain security deposits to better reflect their long term nature.  Long term deposits consist of damage deposits held by landlords and security deposits held by various vendors.

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	September 30, 2015		December 31, 2014
Long term deposits	$	10,326	$	4,425

8.           Short-Term Line of Credit.

In April 2015, the Company signed a new agreement with Harris Bank to renew the expiring credit line.  The revolving line of credit is for an aggregate amount of up to the lesser of (i) $3,000,000, or (ii) 75% of eligible domestic accounts receivable and certain foreign accounts receivable plus 40% of inventory.  The loan has an annual interest rate of 3.75%.

The Revolving Line of Credit contains customary affirmative and negative covenants, including the following: compliance with laws, provision of financial statements and periodic reports, payment of taxes, maintenance of inventory and insurance, maintenance of operating accounts at the Bank, the Bank’s access to collateral, formation or acquisition of subsidiaries, incurrence of indebtedness, dispositions of assets, granting liens, changes in business, ownership or business locations, engaging in mergers and acquisitions, making investments or distributions and affiliate transactions. The covenants also require that the Company maintain a minimum ratio of qualifying financial assets to the sum of qualifying financial obligations.  As of September 30, 2015, Company was in compliance with all loan covenants.

To secure the repayment of any amounts borrowed under the Revolving Line of Credit, the Company granted the Bank a security interest in substantially all of the assets of NanoChem Solutions Inc., exclusive of intellectual property assets.

Short-term borrowings outstanding under the Revolving Line as of September 30, 2015 were $250,000 (December 31, 2014 - $750,000).

9.           Long Term Debt.

(a)Flexible Solutions Ltd. has received a non-interest bearing, unsecured loan from the Department of Agriculture and Agri-Food Canada (“AAFC”).  Eligible for up to $1,000,000 in Canadian funds, the Company had borrowed $910,801in Canadian funds (US$682,463) as of September 30, 2015 on an unsecured basis (December 31, 2014 – CDN$910,801; US$785,106).  The balance owing at September 30, 2015 was $182,160 in Canadian funds (US$136,493); (December 31, 2014 – CDN$182,160; US$157,021).  The repayment schedule is as follows:

Amount Due (in CDN funds)		Payment Due Date
$	182,161	December  31, 2015

(b)           Flexible Solutions Ltd. has also received a 5% simple interest loan from Agriculture Financial Services Corp. (“AFSC”).  Eligible for up to $2,000,000 in Canadian funds, the Company had originally borrowed $1,491,000 in Canadian funds.  The Company was required to make interest payments until May 1, 2010 and then started to pay down the principal in equal payments until April 1, 2015.  The Company had pledged the assets of the Taber, AB building, including equipment, inventory and accounts receivable as collateral, as well as signed a promissory note guaranteeing the amount of the loan. The Company repaid this loan in full in September 2014.

(c)           In September 2014, NanoChem Solutions Inc. signed a US$1,005,967 promissory note with Harris Bank with a rate of prime plus 0.5% to be repaid over 5 years with equal monthly installments plus interest.  This money was used to retire the AFSC debt and make the December 2014 payment on the AAFC loan.  The balance owing at September 30, 2015 was $804,773 (December 31, 2014 – US$955,668).

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The Company has committed to the following repayments:

2015	$	50,298
2016	$	201,193
2017	$	201,193
2018	$	201,193
2019	$	150,896

As of September 30, 2015 the Company was in compliance with all loan covenants.

	September 30, 2015			December 31, 2014
Continuity
Balance, beginning of period	$	1,112,689			1,297,830
Plus:  Proceeds from loans		-			1,005,967
Less:  Payments on loan		(150,895	)		(982,973	)
Effect of exchange rate		(20,528	)		(208,135	)
Balance, end of period	$	941,266		$	1,112,689

Outstanding balance at:
a)Long term debt – AAFC	$	136,493		$	157,021
b)Long term debt – AFSC		-			-
c)Long term debt - Harris		804,773			955,668
Long term debt	$	941,266		$	1,112,689
Less: current portion		(337,686	)		(358,214	)
Balance	$	603,580		$	754,475

10.           Stock Options.

The Company adopted a stock option plan ("Plan").   The purpose of this Plan is to provide  additional  incentives  to  key  employees, officers, directors and consultants  of  the  Company  and its subsidiaries in order to help attract and retain  the  best  available  personnel  for  positions  of  responsibility  and otherwise promoting the success of its business.  It is intended that options issued under this Plan constitute non-qualified stock options. The general terms of awards under the option plan are that 100% of the options granted will vest the year following the date of grant.  The maximum term of options granted is 5 years.

The Company may issue stock options and stock bonuses for shares of its common stock to provide incentives to directors, key employees and other persons who contribute to the success of the Company.  The exercise price of all options is not less than fair market value at the date of grant.

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The following table summarizes the Company’s stock option activity for the year ended December 31, 2014 and the nine-month period ended September 30, 2015:

	Number of shares			Exercise price per share		Weighted average exercise price
Balance, December 31, 2013		1,164,000		$	1.21 – 2.45	$	1.73
Granted		227,000		$	1.00 – 1.21	$	1.01
Cancelled or expired		(265,000	)	$	1.00 – 2.25	$	1.91
Balance, December 31, 2014		1,126,000		$	1.00 – 2.45	$	1.54
Granted		159,000		$	1.05	$	1.05
Exercised		8,000		$	1.00	$	1.00
Cancelled or expired		(236,000	)	$	1.00 - 2.22	$	1.73
Balance, September 30, 2015		1,041,000		$	1.00 – 2.45	$	1.43
Exercisable, September 30, 2015		829,000		$	1.00 – 2.45	$	1.50

The fair value of each option grant is calculated using the following weighted average assumptions:

	2015			2014
Expected life – years		3.0			3.0
Interest rate		1.07	%		0.78	%
Volatility		61	%		58	%
Dividend yield		—	%		—	%
Weighted average fair value of options granted	$	0.49		$	0.36

During the nine months ended September 30, 2015 the Company granted 60,000 options to consultants that resulted in $5,891 in expenses this quarter.  During the same period, 99,000 options were granted to employees, resulting in $9,720 in expenses this quarter.  Options granted in previous quarters resulted in additional expenses in the amount of $837 for consultants and $1,148 for employees during the quarter ended September 30, 2015.

During the nine months ended September 30, 2014 the Company granted 100,000 options to consultants that resulted in $12,356 in expenses this quarter. During the same period, 127,000 options were granted to employees, resulting in $9,205 in expenses this quarter. Options granted in previous quarters resulted in additional expenses in the amount of $1,871 for consultants and $3,456 for employees during the quarter ended September 30, 2014. No stock options were exercised during the period.

As of September 30, 2015, there was approximately $17,596 of compensation expense related to non-vested awards. This expense is expected to be recognized over a weighted average period of .25 years.

The aggregate intrinsic value of vested options outstanding at September 30, 2015 is $487,600.

11.           Capital Stock.

The Company issued 8,000 shares upon the exercise of employee stock options in July 2015.

12.           Segmented, Significant Customer Information and Economic Dependency.

The Company operates in two segments:

(a)   Development and marketing of two lines of energy and water conservation products (as shown under the column heading “EWCP” below), which consists of a (i) liquid swimming pool blanket which

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saves energy and water by inhibiting evaporation from the pool surface, and (ii) food-safe powdered form of the active ingredient within the liquid blanket and which is designed to be used in still or slow moving drinking water sources.

(b)    Manufacture of biodegradable polymers (“BCPA’s”), used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. This product can also be used in detergents to increase biodegradability and in agriculture to increase crop yields by enhancing fertilizer uptake.

The accounting policies of the segments are the same as those described in Note 2, Significant Accounting Policies.  The Company evaluates performance based on profit or loss from operations before income taxes, not including nonrecurring gains and losses and foreign exchange gains and losses.

The Company’s reportable segments are strategic business units that offer different, but synergistic products and services.  They are managed separately because each business requires different technology and marketing strategies.

Nine months ended September 30, 2015:

	EWCP			BPCA			Total
Revenue	$	639,166		$	11,528,859		$	12,168,025
Interest revenue		1			2,962			2,963
Interest expense		2			44,042			44,044
Depreciation an amortization		292,898			137,449			430,347
Segment profit (loss)		(815,193	)		1,875,332			1,060,139
Segment assets		2,386,007			1,638,942			4,024,949
Expenditures for segment assets		247,982			(206,550	)		41,432

Nine months ended September 30, 2014:

	EWCP			BPCA		Total
Revenue	$	792,235		$	11,157,991	$	11,950,226
Interest revenue		-			-		-
Interest expense		30,162			42,296		72,458
Depreciation and amortization		283,808			142,841		426,649
Segment profit (loss)		(1,088,679	)		1,518,892		430,213
Segment assets		3,771,914			1,617,455		5,389,369
Expenditures for segment assets		6,215			18,379		24,594

The sales generated in the United States and Canada are as follows:

	Nine Months Ended September 30, 2015		Nine Months Ended September 30, 2014
Canada	$	261,057	$	382,307
United States and abroad		11,906,968		11,567,919
Total	$	12,168,025	$	11,950,226

The Company’s property, equipment, leasehold and patents are located in Canada and the United States as follows:

	September 30, 2015		December 31, 2014
Canada	$	2,388,587	$	3,331,879
United States		1,636,362		1,570,424
Total	$	4,024,949	$	4,902,304

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Three customers accounted for $7,586,641 (62%) of sales during the nine months ended September 30, 2015 (2014 - $7,278,612 or 61%).  Three customers accounted for $1,482,103 of accounts receivable (72%) at September 30, 2015 (December 31, 2014 – $1,769,114 or 76%).

13.           Commitments.

The Company is committed to minimum rental payments for property and premises aggregating approximately $101,983 over the term of three leases, the last expiring on December 31, 2016.

Commitments in each of the next three years are approximately as follows:

2015	$	27,936
2016	$	74,047

14.           Comparative Figures.

Certain of the comparative figures have been reclassified to conform with the current period’s presentation.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The Company develops, manufactures and markets specialty chemicals that slow the evaporation of water.  The Company also manufactures and markets biodegradable polymers which are used in the oil, gas and agriculture industries.

Results of Operations

The Company has two product lines:

Energy and Water Conservation products - The Company’s HEAT$AVR® product is used in swimming pools and spas.  The product forms a thin, transparent layer on the water’s surface.  The transparent layer slows the evaporation of water, allowing the water to retain a higher temperature for a longer period of time and thereby reducing the energy required to maintain the desired temperature of the water.  WATER$AVR®, a modified version of HEAT$AVR®, can be used in reservoirs, potable water storage tanks, livestock watering ponds, canals, and irrigation ditches.

BCPA products - The Company’s second class of products, TPA’s (i.e. thermal polyaspartate biopolymers), are biodegradable polymers used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. TPA’s can also be used in detergents to increase biodegradability and in agriculture to increase crop yields by enhancing fertilizer uptake.

Material changes in the Company’s Statement of Operations for the three and nine months ended September 30, 2015 are discussed below:

Nine Months ended September 30, 2015

Item	Increase (I) or Decrease (D)	Reason
Sales     EWCP products	D	Flood waters in Texas reduced need for Watersavr.
BPCA products	I	Increased uptake from new and existing customers and new agriculture products.
Gross Profit, as a % of sales	I	Lower oil prices reduced aspartic acid costs.
Office and miscellaneous	D	Reduced since the Taber plant is no longer operational.
Rent	D	Head office moved to a smaller place, resulting in reduced rent.
Consulting	D	Reduced since the Taber plant is no longer operational.
Professional fess	D	Termination of litigation resulted in reduced professional fees.
Research	D	Costs for the prior period were associated with research into and regulatory compliance for new nitrogen conservation product.
Commissions	D	Uncommissionable sales increased against commissionable sales.
Utilities	D	Reduced since Taber plant is no longer in operation.

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Three months ended September 30, 2015

Item	Increase (I) or Decrease (D)	Reason
Sales     EWCP products	D	Flood waters in Texas reduced need for Watersavr.
BPCA products	D	Low oil prices reduced customer orders.
Gross Profit, as a % of sales	I	Lower oil prices reduced aspartic acid costs.
Office and miscellaneous	D	Reduced since the Taber plant is no longer operational.
Consulting	D	Reduced since the Taber plant is no longer operational.
Professional fess	D	Termination of litigation resulted in reduced professional fees.
Commissions	D	Uncommissionable sales increased against commissionable sales.
Utilities	D	Reduced since Taber plant is no longer in operation.

           Three customers accounting for 73% of our sales during the three months ended September 30, 2015 (2014 – 65%) and 63% of our sales during the nine months ended September 30, 2015 (2014 - $61%).  The amount of revenue attributable to each customer is shown below.

	Three months ended September 30,				Nine months ended September 30,
Customer	2015		2014		2015		2014
A	$	1,232,136	$	1,335,736	$	3,543,032	$	3,459,694
B	$	968,015	$	862,543	$	3,135,836	$	2,976,584
C		-		-	$	907,773	$	842,337
D	$	201,348		-		-		-
E		-	$	295,250		-		-

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Customers with balances greater than 10% of our receivables as of September 30, 2015 and 2014 are shown below:

	September 30,
	2015		2014
Company A		961,206		1,073,763
Company B		420,223		594,483

In 2007, we began construction of a plant in Taber, AB, Canada.  The plant came online during 2012 and we began depreciating the plant and related equipment effective January 2012.

The plant was designed to manufacture aspartic acid which is the major component of TPAS.  Previously, we bought aspartic acid from China where the base raw material is oil.  The plant uses sugar as the base raw material.  We believed that using aspartic acid manufactured from sugar would reduce our raw material costs, reduce price fluctuations generated by oil prices and reduce shipping costs.

In February 2014, we suspended production of aspartic acid at our Taber plant.  The suspension was due to the fact that since construction of the plant began in 2008, economic conditions in Alberta and worldwide have changed significantly.  In particular, plant operating costs increased and the price of aspartic acid derived from oil is less than forecast.

Although we continue to believe in the technical and economic viability of using sugar in the aspartic acid process that we have pioneered, we are unable to fund the equipment and personnel increases needed to reach break-even levels on our own. Accordingly, a partner is required to build on the technical successes achieved to date and reach profitable production levels.

While we are actively seeking a partner to complete process development, staffing at the Taber plant has been reduced to levels needed to maintain the intellectual property and the process equipment we have developed.

We expect that the suspension of the operations at the Taber plant will save us approximately $800,000 per year in plant operating costs and general and administrative expenses.

Other factors that will most significantly affect future operating results will be:

● the sale price of crude oil which is used in the manufacture of aspartic acid we import from China. Aspartic acid is a key ingredient in our BCPA product;

● activity in the oil and gas industry, as we sell our BCPA product to oil and gas companies; and

● drought conditions, since we also sell our BCPA product to farmers.

Other than the foregoing we do not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on our revenues or expenses.

Capital Resources and Liquidity

The Company’s sources and (uses) of cash for the nine months ended September 30, 2015 and 2014 are shown below:

	2015			2014
Cash provided by (used by) operations		1,574,959			(93,334	)
Sales (purchases) of equipment		41,432			(24,594	)
Long term deposits		(5,440	)		-
Advances from (repayments of) short term line of credit		(500,000	)		(50,000	)
Repayment of loans		(150,895	)		(1,095,050	)
Advances from loans		-			1,005,967
Proceeds from issuance of common stock		8,000
Changes in exchange rates		(31,602	)		(12,066	)

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             The Company has sufficient cash resources to meets its future commitments and cash flow requirements for the coming year.  As of September 30, 2015 working capital was $5,927,694 (December 31, 2014 - $4,552,049) and the Company has no substantial commitments that require significant outlays of cash over the coming fiscal year.

The Company is committed to minimum rental payments for property and premises aggregating approximately $101,983 over the term of three leases, the last expiring on December 31, 2016.

Commitments in each of the next three years are approximately as follows:

2015	$	27,936
2016	$	74,047

Other than as disclosed above, the Company does not anticipate any capital requirements during the remainder of 2015.

Other than as disclosed above, the Company does not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonable likely to result in, its liquidity increasing or decreasing in any material way.

Other than as disclosed above, the Company does not know of any significant changes in its expected sources and uses of cash.

The Company does not have any commitments or arrangements from any person to provide it with any equity capital.

See Note 2 to the financial statements included as part of this report for a description of the Company’s significant accounting policies.

Item 4.                 CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the direction and with the participation of our management, including our Principal Executive and Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2015.  We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to our management, including our principal executive and financial officer, as appropriate, to allow timely decisions regarding required disclosure.  Our disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching desired disclosure control objectives. Based on the

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evaluation, our Principal Executive and Financial Officer concluded that these disclosure controls and procedures are effective as of September 30, 2015.

Changes in Internal Control over Financial Reporting

Our management, with the participation of our Principal Executive and Financial Officer, evaluated whether any change in our internal control over financial reporting occurred during the three months ended September 30, 2015.  Based on that evaluation, it was concluded that there has been no change in our internal control over financial reporting during the three months ended September 30, 2015 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 6.                      Exhibits.

Number	Description
3.1	Amended and Restated Certificate of Incorporation of the registrant. (1)
3.2	Bylaws of the registrant. (1)
31.1	Certification of Principal Executive Officer Pursuant to §302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Principal Financial Officer Pursuant to §302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Principal Executive and Financial Officer Pursuant to 18 U.S.C. §1350 and §906 of the Sarbanes-Oxley Act of 2002.*

______________

*           Filed with this report.

(1)           Incorporated by reference to the registrant’s Registration Statement on Form 10-SB (SEC File. No. 000-29649) filed February 22, 2000.

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SIGNATURES

In accordance with the requirements of Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

November 13, 2015

Flexible Solutions International, Inc.
By:	/s/  Daniel B. O’Brien
Name:	Daniel B. O’Brien
Title:	President and Principal Executive Officer
By:	/s/ Daniel B. O’Brien
Name:	Daniel B. O’Brien
Title:	Title: Principal Financial and Accounting Officer

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EX-3.1

Exhibit 31.1

CERTIFICATIONS

I, Daniel O’Brien, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Flexible Solutions International, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)           designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)           disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)           all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)           any fraud, whether or not material, that involves management or other employees who have significant role in the registrant’s internal control over financial reporting.

November 13, 2015	/s/ Daniel B. O’Brien
	Daniel B. O’Brien
	Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Daniel O’Brien, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Flexible Solutions International, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)           designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;  and

d)           disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)           all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)           any fraud, whether or not material, that involves management or other employees who have significant role in the registrant’s internal control over financial reporting.

November 13, 2015	/s/ Daniel B. O’Brien
	Daniel B. O’Brien
	Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned Principal Executive and Financial Officer of Flexible Solutions International, Inc. (the “Company”), hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 13, 2015	/s/ Daniel B. O’Brien
	Daniel B. O’Brien
	Principal Executive and Financial Officer

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6. PATENTS (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Legal life of patents	17 years
Amortization	$ 12,073	$ 13,889
Canadian Dollars
Currency conversion in canadian dollars	$ 265,102	$ 265,102

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13. COMMITMENTS (Details)	Sep. 30, 2015 USD ($)
Commitments Details
2015	$ 27,936
2016	$ 74,047

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10. STOCK OPTIONS (Details 1) - $ / shares	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Stock Options Details 1
Expected life - years	3 years	3 years
Interest rate	1.07%	0.78%
Volatility	61.00%	58.00%
Dividend yield	0.00%	0.00%
Weighted average fair value of options granted	$ 0.49	$ 0.36

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13. COMMITMENTS (Details Narrative)	9 Months Ended
	Sep. 30, 2015 USD ($)
Commitments Details Narrative
Total Due	$ 101,983
Lease expiry date	December 31, 2016

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9. LONG TERM DEBT (Details Narrative) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
AAFC [Member]
Debt Instrument [Line Items]
Amount borrowed	$ 682,463	$ 785,106
Balance owing	136,493	157,021
AAFC [Member] | Canadian Dollars
Debt Instrument [Line Items]
Eligible loan amount	1,000,000
Amount borrowed	910,801	910,801
Balance owing	182,160	182,160
Harris [Member]
Debt Instrument [Line Items]
Balance owing	$ 804,773	$ 955,668

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3. ACCOUNTS RECEIVABLE (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Accounts Receivable Details
Accounts receivable	$ 2,088,701	$ 2,363,492
Allowances for doubtful accounts	(36,719)	(41,119)
Accounts Receivable Net Current	$ 2,051,982	$ 2,322,373

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6. PATENTS (Tables)

9 Months Ended

Sep. 30, 2015

Patents Tables

Patents

	September 30, 2015 Cost		Accumulated Amortization		September 30, 2015 Net
Patents	$	198,787	$	90,658	$	108,129

	December 31, 2014 Cost	Accumulated Amortization	December 31, 2014 Net
Patents	$    228,597	$          91,193	$    137,404

Estimated depreciation expense

2015	$	16,097
2016		16,097
2017		16,097
2018		16,097
2019		16,097

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12. SEGMENTED, SIGNIFICANT CUSTOMER INFORMATION AND ECONOMIC DEPENDENCY (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue			$ 12,168,025	$ 11,950,226
Interest revenue			2,963
Interest expense	$ 11,867	$ 19,686	44,044	$ 72,458
Depreciation and amortization			430,347	426,649
Segment profit (loss)			1,060,139	421,403
Segment assets			4,024,949	5,389,369
Expenditures for segment assets			41,432	24,594
BPCA [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue			11,528,859	$ 11,157,991
Interest revenue			2,962
Interest expense			44,042	$ 42,296
Depreciation and amortization			137,449	142,841
Segment profit (loss)			1,875,332	1,518,892
Segment assets			1,638,942	1,617,455
Expenditures for segment assets			(206,550)	18,379
EWCP [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue			639,166	$ 792,235
Interest revenue			1
Interest expense			2	$ 30,162
Depreciation and amortization			292,898	283,808
Segment profit (loss)			(815,193)	(1,088,679)
Segment assets			2,386,007	3,771,914
Expenditures for segment assets			$ 247,982	$ 6,215

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9. LONG TERM DEBT (Details) - AAFC [Member]	9 Months Ended
	Sep. 30, 2015 USD ($)
Debt Instrument [Line Items]
December 31, 2015	$ 182,161
Debt instrument maturity date	Dec. 31, 2015

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6. PATENTS (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Patents Details
Patents, Gross	$ 198,787	$ 228,597
Accumulated Amortization	90,658	91,193
Patents, net	$ 108,129	$ 137,404

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12. SEGMENTED, SIGNIFICANT CUSTOMER INFORMATION AND ECONOMIC DEPENDENCY (Details 2) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Property, equipment, leasehold and patents	$ 4,024,949	$ 4,902,304
Canada [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property, equipment, leasehold and patents	2,388,587	3,331,879
United States and abroad [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property, equipment, leasehold and patents	$ 1,636,362	$ 1,570,424

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10. STOCK OPTIONS (Details) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Number of shares
Beginning Balance, Shares	1,126,000	1,164,000
Granted, Shares	159,000	227,000
Exercised	8,000
Cancelled or expired, Shares	(236,000)	(265,000)
Ending Balance, Shares	1,041,000	1,126,000
Exercisable, September 30, 2015	829,000
Exercise price per share
Granted, Exercise price per share	$ 1.05
Exercised, Exercise price per share	1.00
Weighted average exercise price
Beginning Balance, Weighted average exercise price	1.54	$ 1.73
Granted, Weighted average exercise price	1.05	1.01
Exercised, Weighted average exercise price	1.00
Cancelled or expired, Weighted average exercise price	1.73	1.91
Ending Balance, Weighted average exercise price	1.43	1.54
Exercisable Weighted average exercise price, September 30, 2015	1.50
Minimum [Member]
Exercise price per share
Balance, Exercise price per share	1.00	1.21
Granted, Exercise price per share		1.00
Cancelled or expired, Exercise price per share	1.00	1.00
Balance, Exercise price per share	1.00	1.00
Exercisable, September 30, 2015	1.00
Maximum [Member]
Exercise price per share
Balance, Exercise price per share	2.45	2.45
Granted, Exercise price per share		1.21
Cancelled or expired, Exercise price per share	2.22	2.25
Balance, Exercise price per share	2.45	$ 2.45
Exercisable, September 30, 2015	$ 2.45

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4. INVENTORY

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

4. INVENTORY

4.           Inventory.

	September 30, 2015		December 31, 2014
Completed goods	$	959,278	$	1,449,640
Work in progress		31,376		1,216
Raw materials		2,210,911		2,016,582
	$	3,111,565	$	3,467,438

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9. LONG TERM DEBT (Details 1)	Sep. 30, 2015 USD ($)
Long Term Debt Details 1
2015	$ 50,298
2016	201,193
2017	201,193
2018	201,193
2019	$ 150,896

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12. SEGMENTED, SIGNIFICANT CUSTOMER INFORMATION AND ECONOMIC DEPENDENCY (Tables)

9 Months Ended

Sep. 30, 2015

Segmented Significant Customer Information And Economic Dependency Tables

Reportable segments

Nine months ended September 30, 2015:

	EWCP			BPCA			Total
Revenue	$	639,166		$	11,528,859		$	12,168,025
Interest revenue		1			2,962			2,963
Interest expense		2			44,042			44,044
Depreciation an amortization		292,898			137,449			430,347
Segment profit (loss)		(815,193	)		1,875,332			1,060,139
Segment assets		2,386,007			1,638,942			4,024,949
Expenditures for segment assets		247,982			(206,550	)		41,432

Nine months ended September 30, 2014:

	EWCP			BPCA		Total
Revenue	$	792,235		$	11,157,991	$	11,950,226
Interest revenue		-			-		-
Interest expense		30,162			42,296		72,458
Depreciation and amortization		283,808			142,841		426,649
Segment profit (loss)		(1,088,679	)		1,518,892		430,213
Segment assets		3,771,914			1,617,455		5,389,369
Expenditures for segment assets		6,215			18,379		24,594

Sales generated in the United States and Canada

The sales generated in the United States and Canada are as follows:

	Nine Months Ended September 30, 2015		Nine Months Ended September 30, 2014
Canada	$	261,057	$	382,307
United States and abroad		11,906,968		11,567,919
Total	$	12,168,025	$	11,950,226

Property and equipment, and patents are located in Canada and the United States

The Company’s property, equipment, leasehold and patents are located in Canada and the United States as follows:

	September 30, 2015		December 31, 2014
Canada	$	2,388,587	$	3,331,879
United States		1,636,362		1,570,424
Total	$	4,024,949	$	4,902,304

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10. STOCK OPTIONS (Tables)

9 Months Ended

Sep. 30, 2015

Stock Options Tables

Stock option activity

	Number of shares			Exercise price per share		Weighted average exercise price
Balance, December 31, 2013		1,164,000		$	1.21 – 2.45	$	1.73
Granted		227,000		$	1.00 – 1.21	$	1.01
Cancelled or expired		(265,000	)	$	1.00 – 2.25	$	1.91
Balance, December 31, 2014		1,126,000		$	1.00 – 2.45	$	1.54
Granted		159,000		$	1.05	$	1.05
Exercised		8,000		$	1.00	$	1.00
Cancelled or expired		(236,000	)	$	1.00 - 2.22	$	1.73
Balance, September 30, 2015		1,041,000		$	1.00 – 2.45	$	1.43
Exercisable, September 30, 2015		829,000		$	1.00 – 2.45	$	1.50

Fair value of each option grant

	2015			2014
Expected life – years		3.0			3.0
Interest rate		1.07	%		0.78	%
Volatility		61	%		58	%
Dividend yield		—	%		—	%
Weighted average fair value of options granted	$	0.49		$	0.36

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9. LONG TERM DEBT (Details 2) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Long Term Debt Details 2
Balance, beginning of period	$ 1,112,689	$ 1,297,830
Plus: Proceeds from loans		1,005,967
Less: Payments on loan	$ (150,895)	(982,973)
Effect of exchange rate	(20,528)	(208,135)
Balance, end of period	$ 941,266	$ 1,112,689

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13. COMMITMENTS (Tables)

9 Months Ended

Sep. 30, 2015

Commitments Tables

Commitments

Commitments in each of the next three years are approximately as follows:

2015	$	27,936
2016	$	74,047

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2. SIGNIFICANT ACCOUNTING POLICIES (Details)	9 Months Ended
	Sep. 30, 2015
Computer hardware [Member]
Property, Plant and Equipment [Line Items]
Depreciation method used and annual rate	30% Declining balance
Furniture and fixtures [Member]
Property, Plant and Equipment [Line Items]
Depreciation method used and annual rate	20% Declining balance
Manufacturing equipment [Member]
Property, Plant and Equipment [Line Items]
Depreciation method used and annual rate	20% Declining balance
Office equipment [Member]
Property, Plant and Equipment [Line Items]
Depreciation method used and annual rate	20% Declining balance
Boat [Member]
Property, Plant and Equipment [Line Items]
Depreciation method used and annual rate	20% Declining balance
Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Depreciation method used and annual rate	10% Declining balance

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3. ACCOUNTS RECEIVABLE

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

3. ACCOUNTS RECEIVABLE

3.           Accounts Receivable.

	September 30, 2015			December 31, 2014
Accounts receivable	$	2,088,701		$	2,363,492
Allowances for doubtful accounts		(36,719	)		(41,119	)
	$	2,051,982		$	2,322,373

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2. SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Significant Accounting Policies Details Narrative
Representation in Accounts receivable by primary customers	$ 1,482,103	$ 1,769,114
Percentage Representation in Accounts receivable by primary customers	72.00%	76.00%

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7. LONG TERM DEPOSITS (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Long Term Deposits Details
Long term deposits	$ 10,326	$ 4,425

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12. SEGMENTED, SIGNIFICANT CUSTOMER INFORMATION AND ECONOMIC DEPENDENCY (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Segmented Significant Customer Information And Economic Dependency Details Narrative
Customers accounted sales	$ 7,586,641	$ 7,278,612
Percentage representation in sales	62.00%	61.00%
Customers accounts receivable	$ 1,482,103		$ 1,769,114
Percentage Customers accounts receivable	72.00%		76.00%

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CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Current
Cash and cash equivalents	$ 1,683,971	$ 747,517
Accounts receivable (Note 3)	2,051,982	2,322,373
Inventory (Note 4)	3,111,565	3,467,438
Prepaid expenses	324,927	123,511
Total	7,172,445	6,660,839
Property, equipment and leaseholds (Note 5)	3,916,820	4,764,900
Patents (Note 6)	108,129	137,404
Long term deposits (Note 7)	10,326	4,425
Deferred tax asset	2,356,266	2,667,286
Total Assets	13,563,986	14,234,854
Current
Accounts payable and accrued liabilities	336,846	815,141
Deferred revenue	41,952	44,593
Taxes payable	278,267	140,842
Short term line of credit (Note 8)	250,000	750,000
Current portion of long term debt (Note 9)	337,686	358,214
Total	1,244,751	2,108,790
Long Term
Loans (Note 9)	603,580	754,475
Total Liabilities	1,848,331	2,863,265
Stockholders' Equity
Authorized 50,000,000 Common shares with a par value of $0.001 each 1,000,000 Preferred shares with a par value of $0.01 each Issued and outstanding 13,177,991 common shares at September 30, 2015 (13,169,991 at December 31, 2014)	13,178	13,170
Capital in excess of par value	16,287,899	16,227,121
Other comprehensive income	(1,044,411)	(267,552)
Deficit	(3,541,011)	(4,601,150)
Total Stockholders' Equity	11,715,655	11,371,589
Total Liabilities and Stockholders' Equity	$ 13,563,986	$ 14,234,854
Commitments and contingencies (Note 13)

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9. LONG TERM DEBT (Details 3) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Long term debt	$ 941,266	$ 1,112,689
Less: current portion	(337,686)	(358,214)
Long term debt outstanding Balance	603,580	754,475
AAFC [Member]
Debt Instrument [Line Items]
Long term debt	$ 136,493	$ 157,021
AFSC [Member]
Debt Instrument [Line Items]
Long term debt
Harris [Member]
Debt Instrument [Line Items]
Long term debt	$ 804,773	$ 955,668

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1. BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

1. BASIS OF PRESENTATION

1.            Basis of Presentation.

These unaudited interim condensed consolidated interim financial statements include the accounts of Flexible Solutions International, Inc. (the “Company”, “we”, or “our”), and its wholly-owned subsidiaries Flexible Fermentation Ltd. (“Flexible Ltd.”), NanoChem Solutions Inc. (“NanoChem”), Flexible Solutions Ltd., Flexible Biomass LP, and FS Biomass Inc.  All inter-company balances and transactions have been eliminated.  The company was incorporated May 12, 1998 in the State of Nevada and had no operations until June 30, 1998.

The Company and its subsidiaries develop, manufacture and market specialty chemicals which slow the evaporation of water.  One of the Company’s products, HEATSAVR®, is marketed for use in swimming pools and spas where its use, by slowing the evaporation of water, allows the water to retain a higher temperature for a longer period of time and thereby reduces the energy required to maintain the desired temperature of the water in the pool.  Another product, WATERSAVR®, is marketed for water conservation in irrigation canals, aquaculture, and reservoirs where its use slows water loss due to evaporation.  In addition to the water conservation products, the Company also manufactures and markets water-soluble chemicals utilizing thermal polyaspartate biopolymers (hereinafter referred to as “TPAs”), which are beta-proteins manufactured from the common biological amino acid, L-aspartic.  TPAs can be formulated to prevent corrosion and scaling in water piping within the petroleum, chemical, utility and mining industries.  TPAs are also used as proteins to enhance fertilizers in improving crop yields and as additives for household laundry detergents, consumer care products and pesticides.

These unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements.  These financial statements are condensed and do not include all disclosures required for annual financial statements.  The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Company’s audited consolidated financial statements filed as part of the Company’s December 31, 2014 Annual Report on Form 10-K.  This quarterly report should be read in conjunction with such annual report.

In the opinion of the Company’s management, these unaudited interim consolidated financial statements reflect all adjustments necessary to present fairly the Company’s consolidated financial position at September 30, 2015, the consolidated results of operations for the three and nine months ended September 30, 2015 and 2014, and the consolidated statements of cash flows for the nine months ended September 30, 2015 and 2014.  The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the entire fiscal year.

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5. PROPERTY, PLANT & EQUIPMENT (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Cost	$ 10,627,065	$ 11,490,398
Accumulated Depreciation	6,710,245	6,725,498
Net	3,916,820	4,764,900
Buildings [Member]
Property, Plant and Equipment [Line Items]
Cost	4,823,756	5,065,433
Accumulated Depreciation	2,738,152	2,653,287
Net	2,085,604	2,412,146
Computer hardware [Member]
Property, Plant and Equipment [Line Items]
Cost	89,774	97,124
Accumulated Depreciation	83,912	89,083
Net	5,862	8,041
Furniture and fixtures [Member]
Property, Plant and Equipment [Line Items]
Cost	23,314	25,548
Accumulated Depreciation	20,450	21,906
Net	2,864	3,642
Office equipment [Member]
Property, Plant and Equipment [Line Items]
Cost	17,852	20,537
Accumulated Depreciation	16,574	18,807
Net	1,278	1,730
Manufacturing equipment [Member]
Property, Plant and Equipment [Line Items]
Cost	5,115,241	5,710,354
Accumulated Depreciation	3,759,837	3,864,204
Net	1,355,404	1,846,150
Trailer [Member]
Property, Plant and Equipment [Line Items]
Cost	12,937	14,882
Accumulated Depreciation	11,968	13,444
Net	969	1,438
Boat [Member]
Property, Plant and Equipment [Line Items]
Cost	34,400
Accumulated Depreciation	2,580
Net	31,820
Technology [Member]
Property, Plant and Equipment [Line Items]
Cost	102,363	117,758
Accumulated Depreciation	76,772	64,767
Net	25,591	52,991
Land [Member]
Property, Plant and Equipment [Line Items]
Cost	$ 407,428	$ 438,762
Accumulated Depreciation
Net	$ 407,428	$ 438,762

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3. ACCOUNTS RECEIVABLE (Tables)

9 Months Ended

Sep. 30, 2015

Accounts Receivable Tables

Accounts Receivable

	September 30, 2015			December 31, 2014
Accounts receivable	$	2,088,701		$	2,363,492
Allowances for doubtful accounts		(36,719	)		(41,119	)
	$	2,051,982		$	2,322,373

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5. PROPERTY, PLANT & EQUIPMENT (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Property Plant Equipment Details Narrative
Depreciation expense	$ 418,274	$ 412,760

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5. PROPERTY, PLANT & EQUIPMENT (Tables)

9 Months Ended

Sep. 30, 2015

Property Plant Equipment Tables

Property, Plant & equipment

	September 30, 2015		Accumulated		September 30, 2015
	Cost		Depreciation		Net
Buildings	$	4,823,756	$	2,738,152	$	2,085,604
Computer hardware		89,774		83,912		5,862
Furniture and fixtures		23,314		20,450		2,864
Office equipment		17,852		16,574		1,278
Manufacturing equipment		5,115,241		3,759,837		1,355,404
Trailer		12,937		11,968		969
Boat		34,400		2,580		31,820
Technology		102,363		76,772		25,591
Land		407,428		-		407,428
	$	10,627,065	$	6,710,245	$	3,916,820

	December 31, 2014		Accumulated		December 31, 2014
	Cost		Depreciation		Net
Buildings	$	5,065,433	$	2,653,287	$	2,412,146
Computer hardware		97,124		89,083		8,041
Furniture and fixtures		25,548		21,906		3,642
Office equipment		20,537		18,807		1,730
Manufacturing equipment		5,710,354		3,864,204		1,846,150
Trailer		14,882		13,444		1,438
Technology		117,758		64,767		52,991
Land		438,762		-		438,762
	$	11,490,398	$	6,725,498	$	4,764,900

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2. SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES

2.             Significant Accounting Policies.

These unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern and reflect the policies outlined below.

 (a)           Cash and Cash Equivalents.

The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents.  Cash and cash equivalents are maintained with several financial institutions.

 (b)           Inventories and Cost of Sales.

The Company has three major classes of inventory:  finished goods, work in progress, and raw materials.  In all classes, inventory is valued at the lower of cost or market.  Cost is determined on a first-in, first-out basis.  Cost of sales includes all expenditures incurred in bringing the goods to the point of sale.  Inventory costs and cost of sales include direct costs of the raw material, inbound freight charges, warehousing costs, handling costs (receiving and purchasing) and utilities and overhead expenses related to the Company’s manufacturing and processing facilities.

 (c)           Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts when management estimates collectability to be uncertain.  Accounts receivable are continually reviewed to determine which, if any, accounts are doubtful of collection.  In making the determination of the appropriate allowance amount, the Company considers current economic and industry conditions, relationships with each significant customer, overall customer credit-worthiness and historical experience.

 (d)           Property, Equipment and Leaseholds.

The following assets are recorded at cost and depreciated using the methods and annual rates shown below:

Computer hardware	30% Declining balance
Furniture and fixtures	20% Declining balance
Manufacturing equipment	20% Declining balance
Office equipment	20% Declining balance
Boat	20% Declining balance
Building and improvements	10% Declining balance

Property and equipment are written down to net realizable value when management determines there has been a change in circumstances which indicates its carrying amount may not be recoverable.  No write-downs have been necessary to date.

 (e)           Impairment of Long-Lived Assets.

In accordance with FASB Codification Topic 360, “Property, Plant and Equipment (ASC 360), the Company reviews long-lived assets, including, but not limited to, property and equipment, patents and other assets, for impairment annually or whenever events or changes in circumstances indicate the carrying amounts of assets may not be recoverable.  The carrying value of long-lived assets is assessed for impairment by evaluating operating performance and future undiscounted cash flows of the underlying assets.  If the sum of the expected future cash flows of an asset is less than its carrying value, an impairment measurement is indicated.  Impairment charges are recorded to the extent that an asset’s carrying value exceeds its fair value.  Accordingly, actual results could vary significantly from such estimates.  There were no impairment charges during the periods presented.

 (f)           Foreign Currency.

The functional currency of three of the Company’s subsidiaries is the Canadian Dollar.  The translation of the Canadian Dollar to the reporting currency of the Company, the U.S. Dollar, is performed for assets and liabilities using exchange rates in effect at the balance sheet date.  Revenue and expense transactions are translated using average exchange rates prevailing during the year.  Translation adjustments arising on conversion of the Company’s financial statements from the subsidiary’s functional currency, Canadian Dollars, into the reporting currency, U.S. Dollars, are excluded from the determination of income (loss) and are disclosed as other comprehensive income (loss) in the Statement of Operations and Comprehensive Income (Loss).

Foreign exchange gains and losses relating to transactions not denominated in the applicable local currency are included in operating income (loss) if realized during the year and in comprehensive income (loss) if they remain unrealized at the end of the year.

 (g)           Revenue Recognition.

Revenue from product sales is recognized at the time the product is shipped since title and risk of loss is transferred to the purchaser upon delivery to the carrier.  Shipments are made F.O.B. shipping point.  The Company recognizes revenue when there is persuasive evidence of an arrangement, delivery to the carrier has occurred, the fee is fixed or determinable, collectability is reasonably assured and there are no significant remaining performance obligations.  When significant post-delivery obligations exist, revenue is deferred until such obligations are fulfilled.  To date there have been no such significant post-delivery obligations.

Since the Company’s inception, product returns have been insignificant; therefore, no provision has been established for estimated product returns.

Deferred revenues consist of products sold to distributors with payment terms greater than the Company’s customary business terms due to lack of credit history or operating in a new market in which the Company has no prior experience. The Company defers the recognition of revenue until the criteria for revenue recognition have been met, and payments become due or cash is received from these distributors.

 (h)           Stock Issued in Exchange for Services.

The Company’s common stock issued in exchange for services is valued at an estimated fair market value based upon trading prices of the Company’s common stock on the dates of the stock transactions.  The corresponding expense of the services rendered is recognized over the period that the services are performed.

 (i)           Stock-based Compensation.

The Company recognizes compensation expense for all share-based payments in accordance with FASB Codification Topic 718, Compensation — Stock Compensation, (ASC 718). Under the fair value recognition provisions of ASC 718, the Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award.

The fair value at grant date of stock options is estimated using the Black-Scholes-Merton option-pricing model.  Compensation expense is recognized on a straight-line basis over the stock option vesting period based on the estimated number of stock options that are expected to vest.  Shares are issued from treasury upon exercise of stock options.

 (j)           Comprehensive Income.

Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income, but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity.  The Company’s other comprehensive income is primarily comprised of unrealized foreign exchange gains and losses.

 (k)           Income (loss) Per Share.

Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding in the period.  Diluted earnings (loss) per share is calculated giving effect to the potential dilution of the exercise of options and warrants.  Common equivalent shares, composed of common shares issuable upon the exercise of stock options and warrants, are included in diluted net income per share to the extent that these shares are dilutive.  Common equivalent shares that have an anti-dilutive effect on net income per share have been excluded from the calculation of diluted weighted average shares outstanding for the three and nine months ended September 30, 2015 and 2014.

 (l)           Use of Estimates.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates and would impact the results of operations and cash flows.

Estimates and underlying assumptions are reviewed at each period end. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Significant areas requiring the use of management estimates include assumptions and estimates relating to the asset impairment analysis, share-based payments and warrants, valuation allowances for deferred income tax assets, determination of useful lives of property, plant and equipment, and the valuation of inventory.

 (m)           Financial Instruments.

The fair market value of the Company’s financial instruments, comprising cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, short term line of credit, and loan, were estimated to approximate their carrying values due to immediate or short-term maturity of these financial instruments.  The Company maintains cash balances at financial institutions which at times, exceed federally insured amounts. The Company has not experienced any material losses in such accounts.

The Company is exposed to foreign exchange and interest rate risk to the extent that market value rate fluctuations materially differ from financial assets and liabilities, subject to fixed long-term rates.

 (n)           Fair Value of Financial Instruments.

In August 2009, an update was made to Fair Value Measurements and Disclosures — “Measuring Liabilities at Fair Value.” This update permits entities to measure the fair value of liabilities, in circumstances in which a quoted price in an active market for an identical liability is not available, using a valuation technique that uses a quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets, or the income or market approach that is consistent with the principles of Fair Value Measurements and Disclosures.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.  The standard describes a fair value hierarchy based on three levels of inputs described below, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

● Level 1 – Quoted prices in active markets for identical assets or liabilities

● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and short term line of credit for all periods presented approximate their respective carrying amounts due to the short term nature of these financial instruments

 (o)           Contingencies.

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company's management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company's financial statements.  If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Legal fees associated with loss contingencies are expensed as incurred.

 (p)            Income Taxes.

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance so that the assets are recognized only to the extent that when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.

Per FASB ASC 740 “Income taxes” under the liability method, it is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.  At September 30, 2015, the Company believes it has appropriately accounted for any unrecognized tax benefits.  To the extent the Company prevails in matters for which a liability for an unrecognized benefit is established or is required to pay amounts in excess of the liability, the Company’s effective tax rate in a given financial statement period may be affected. Interest and penalties associated with the Company’s tax positions are recorded as Interest Expense.

 (q)               Risk Management.

The Company’s credit risk is primarily attributable to its account receivables.  The amounts presented in the accompanying consolidated balance sheets are net of allowances for doubtful accounts, estimated by the Company’s management based on prior experience and the current economic environment.  The Company is exposed to credit-related losses in the event of non-performance by counterparties to the financial instruments.  Credit exposure is minimized by dealing with only credit worthy counterparties. Accounts receivable for the Company’s three primary customers totaled $1,482,103 (72%) at September 30, 2015 (December 31, 2014 - $1,769,114 or 76%). 

The credit risk on cash and cash equivalents is limited because the Company limits its exposure to credit loss by placing its cash and cash equivalents with major financial institutions.

The Company is not exposed to significant interest rate risk to the extent that the long term debt maintained from the foreign government agencies is subject to a fixed rate of interest.

In order to manage its exposure to foreign exchange risks, the Company is closely monitoring the fluctuations in the foreign currency exchange rates and the impact on the value of cash and cash equivalents, accounts receivable, and accounts payable.

 (r)               Recently Adopted Accounting Pronouncements.

In April 2014, the FASB issued new guidance on the definition of a discontinued operation that requires entities to provide additional disclosures about disposal transactions that do not meet the discontinued operations criteria.  The new guidance narrows the focus of discontinued operations to those components that are disposed of or classified as held-for-sale and that represent a strategic shift that has or will have a major impact on the entity’s operations or financial results.  The guidance is effective prospectively for all disposals or components initially classified as held-for-sale in periods beginning on or after December 15, 2014. Early adoption is permitted.  Upon adoption, this guidance did not have a material impact on the Company’s consolidated results of operations or financial position.

 (s)               New Accounting Pronouncements Not Yet Adopted

On May 28, 2014, the Financial Accounting Standards Board (the “FASB”) and the International Accounting Standards Board (the “IASB”) issued substantially converged final standards on revenue recognition. The FASB's Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), was issued in three parts: (a) Section A, “Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40),” (b) Section B, “Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables” and (c) Section C, “Background Information and Basis for Conclusions.” The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.  The new revenue recognition guidance becomes effective for the Company on January 1, 2017, and early adoption is not permitted.  Entities have the option of using either a full retrospective or a modified approach to adopt the guidance in the ASU.  The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

In August 2014, the FASB issued new guidance on determining when and how to disclose going -concern uncertainties in the financial statements.  The new guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about its ability to continue as a going concern.  The guidance is effective for annual periods ending after December 15, 2016 and interim periods thereafter.  Early adoption is permitted.  Upon adoption, the Company does not believe this guidance will have a material impact on its consolidated results of operations or financial position.

In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis" ("ASU 2015-02").  ASU 2015-02 makes several modifications to the consolidation guidance for variable interest entities ("VIEs") and general partners' investments in limited partnerships, as well as modifications to the evaluation of whether limited partnerships are VIEs or voting interest entities.  It is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted.  The Company is evaluating the impact of the amended guidance on its consolidated financial statements.

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CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2015	Dec. 31, 2014
Stockholders' Equity
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, authorized shares	1,000,000	1,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, Authorized	50,000,000	50,000,000
Common stock, Issued	13,177,991	1,316,999
Common stock, Outstanding	13,177,991	1,316,999

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12. SEGMENTED, SIGNIFICANT CUSTOMER INFORMATION AND ECONOMIC DEPENDENCY

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

12. SEGMENTED, SIGNIFICANT CUSTOMER INFORMATION AND ECONOMIC DEPENDENCY

12.           Segmented, Significant Customer Information and Economic Dependency.

The Company operates in two segments:

(a)   Development and marketing of two lines of energy and water conservation products (as shown under the column heading “EWCP” below), which consists of a (i) liquid swimming pool blanket which saves energy and water by inhibiting evaporation from the pool surface, and (ii) food-safe powdered form of the active ingredient within the liquid blanket and which is designed to be used in still or slow moving drinking water sources.

(b)    Manufacture of biodegradable polymers (“BCPA’s”), used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. This product can also be used in detergents to increase biodegradability and in agriculture to increase crop yields by enhancing fertilizer uptake.

The accounting policies of the segments are the same as those described in Note 2, Significant Accounting Policies.  The Company evaluates performance based on profit or loss from operations before income taxes, not including nonrecurring gains and losses and foreign exchange gains and losses.

The Company’s reportable segments are strategic business units that offer different, but synergistic products and services.  They are managed separately because each business requires different technology and marketing strategies.

Nine months ended September 30, 2015:

	EWCP			BPCA			Total
Revenue	$	639,166		$	11,528,859		$	12,168,025
Interest revenue		1			2,962			2,963
Interest expense		2			44,042			44,044
Depreciation an amortization		292,898			137,449			430,347
Segment profit (loss)		(815,193	)		1,875,332			1,060,139
Segment assets		2,386,007			1,638,942			4,024,949
Expenditures for segment assets		247,982			(206,550	)		41,432

Nine months ended September 30, 2014:

	EWCP			BPCA		Total
Revenue	$	792,235		$	11,157,991	$	11,950,226
Interest revenue		-			-		-
Interest expense		30,162			42,296		72,458
Depreciation and amortization		283,808			142,841		426,649
Segment profit (loss)		(1,088,679	)		1,518,892		430,213
Segment assets		3,771,914			1,617,455		5,389,369
Expenditures for segment assets		6,215			18,379		24,594

The sales generated in the United States and Canada are as follows:

	Nine Months Ended September 30, 2015		Nine Months Ended September 30, 2014
Canada	$	261,057	$	382,307
United States and abroad		11,906,968		11,567,919
Total	$	12,168,025	$	11,950,226

The Company’s property, equipment, leasehold and patents are located in Canada and the United States as follows:

	September 30, 2015		December 31, 2014
Canada	$	2,388,587	$	3,331,879
United States		1,636,362		1,570,424
Total	$	4,024,949	$	4,902,304

Three customers accounted for $7,586,641 (62%) of sales during the nine months ended September 30, 2015 (2014 - $7,278,612 or 61%).  Three customers accounted for $1,482,103 of accounts receivable (72%) at September 30, 2015 (December 31, 2014 – $1,769,114 or 76%).

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 01, 2015
Document And Entity Information
Entity Registrant Name	FLEXIBLE SOLUTIONS INTERNATIONAL INC
Entity Central Index Key	0001069394
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer	No
Is Entity a Voluntary Filer	No
Is Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		13,177,991
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2015

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13. COMMITMENTS

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

13. COMMITMENTS

13.           Commitments.

The Company is committed to minimum rental payments for property and premises aggregating approximately $101,983 over the term of three leases, the last expiring on December 31, 2016.

Commitments in each of the next three years are approximately as follows:

2015	$	27,936
2016	$	74,047

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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income Statement [Abstract]
Sales	$ 3,303,216	$ 3,850,514	$ 12,168,025	$ 11,950,226
Cost of sales	2,094,258	2,524,026	7,432,944	7,914,874
Gross profit	1,208,958	1,326,488	4,735,081	4,035,352
Operating expenses
Wages	368,861	356,021	1,165,021	1,158,137
Administrative salaries and benefits	172,607	199,281	546,985	597,890
Advertising and promotion	4,082	4,293	30,033	32,243
Investor relations and transfer agent fee	21,879	63,886	99,978	167,083
Office and miscellaneous	94,211	131,032	207,803	303,326
Insurance	73,695	76,840	218,350	223,757
Interest expense	11,867	19,686	44,044	72,458
Rent	31,748	37,529	96,114	138,054
Consulting	38,689	75,651	105,882	214,554
Professional fees	35,459	53,020	129,925	201,675
Travel	29,497	52,225	86,924	106,887
Telecommunications	7,442	7,885	23,971	23,070
Shipping	4,938	5,210	14,707	23,077
Research	28,572	23,309	66,982	99,851
Commissions	2,585	42,790	73,530	113,468
Currency exchange	(36,807)	(16,839)	(47,724)	(20,988)
Utilities	4,777	8,631	19,774	51,888
Total operating expenses	894,102	1,140,450	2,882,299	3,506,430
Income (loss) before other items and income tax	$ 314,856	$ 186,038	1,852,782	$ 528,922
Gain (loss) on sale of equipment			(45,249)
Interest income			2,963
Income (loss) before income tax	$ 314,856	$ 186,038	1,810,496	$ 528,922
Provision for income taxes	77,654	8,810	750,357	107,519
Net income (loss)	237,202	177,228	1,060,139	421,403
Other comprehensive income (loss)	(350,433)	(290,156)	(776,859)	(361,524)
Comprehensive income (loss)	$ (113,231)	$ (112,928)	$ 283,280	$ 59,879
Net income (loss) per share (basic and diluted)	$ 0.02	$ 0.01	$ 0.08	$ 0.03
Weighted average number of common shares - basic	13,177,208	13,169,991	13,172,423	13,169,991
Weighted average number of common shares - diluted	13,220,047	13,220,797	13,284,267	13,169,991

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7. LONG TERM DEPOSITS

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

7. LONG TERM DEPOSITS

7.           Long Term Deposits.

The Company has reclassified certain security deposits to better reflect their long term nature.  Long term deposits consist of damage deposits held by landlords and security deposits held by various vendors.

	September 30, 2015		December 31, 2014
Long term deposits	$	10,326	$	4,425

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6. PATENTS

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

6. PATENTS

6.           Patents.

In fiscal 2005, the Company started the patent process for additional WATER$AVR® products.  Patents associated with these costs were granted in 2006 and they have been amortized over their legal life of 17 years.

	September 30, 2015 Cost		Accumulated Amortization		September 30, 2015 Net
Patents	$	198,787	$	90,658	$	108,129

	December 31, 2014 Cost	Accumulated Amortization	December 31, 2014 Net
Patents	$    228,597	$          91,193	$    137,404

Decrease in 2015 cost was due to currency conversion.  2015 cost in Canadian dollars - $265,102 (2014 - $265,102 in Canadian dollars).

Amount of amortization for 2015 - $12,073 (2014 - $13,889)

Estimated amortization expense over the next five years is as follows:

2015	$	16,097
2016		16,097
2017		16,097
2018		16,097
2019		16,097

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4. INVENTORY (Tables)

9 Months Ended

Sep. 30, 2015

Inventory Tables

Inventories

	September 30, 2015		December 31, 2014
Completed goods	$	959,278	$	1,449,640
Work in progress		31,376		1,216
Raw materials		2,210,911		2,016,582
	$	3,111,565	$	3,467,438

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14. COMPARATIVE FIGURES

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

14. COMPARATIVE FIGURES

14.           Comparative Figures.

Certain of the comparative figures have been reclassified to conform with the current period’s presentation.

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10. STOCK OPTIONS

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

10. STOCK OPTIONS

10.           Stock Options.

The Company adopted a stock option plan ("Plan").   The purpose of this Plan is to provide  additional  incentives  to  key  employees, officers, directors and consultants  of  the  Company  and its subsidiaries in order to help attract and retain  the  best  available  personnel  for  positions  of  responsibility  and otherwise promoting the success of its business.  It is intended that options issued under this Plan constitute non-qualified stock options. The general terms of awards under the option plan are that 100% of the options granted will vest the year following the date of grant.  The maximum term of options granted is 5 years.

The Company may issue stock options and stock bonuses for shares of its common stock to provide incentives to directors, key employees and other persons who contribute to the success of the Company.  The exercise price of all options is not less than fair market value at the date of grant.

The following table summarizes the Company’s stock option activity for the year ended December 31, 2014 and the nine-month period ended September 30, 2015:

	Number of shares			Exercise price per share		Weighted average exercise price
Balance, December 31, 2013		1,164,000		$	1.21 – 2.45	$	1.73
Granted		227,000		$	1.00 – 1.21	$	1.01
Cancelled or expired		(265,000	)	$	1.00 – 2.25	$	1.91
Balance, December 31, 2014		1,126,000		$	1.00 – 2.45	$	1.54
Granted		159,000		$	1.05	$	1.05
Exercised		8,000		$	1.00	$	1.00
Cancelled or expired		(236,000	)	$	1.00 - 2.22	$	1.73
Balance, September 30, 2015		1,041,000		$	1.00 – 2.45	$	1.43
Exercisable, September 30, 2015		829,000		$	1.00 – 2.45	$	1.50

The fair value of each option grant is calculated using the following weighted average assumptions:

	2015			2014
Expected life – years		3.0			3.0
Interest rate		1.07	%		0.78	%
Volatility		61	%		58	%
Dividend yield		—	%		—	%
Weighted average fair value of options granted	$	0.49		$	0.36

During the nine months ended September 30, 2015 the Company granted 60,000 options to consultants that resulted in $5,891 in expenses this quarter.  During the same period, 99,000 options were granted to employees, resulting in $9,720 in expenses this quarter.  Options granted in previous quarters resulted in additional expenses in the amount of $837 for consultants and $1,148 for employees during the quarter ended September 30, 2015.

During the nine months ended September 30, 2014 the Company granted 100,000 options to consultants that resulted in $12,356 in expenses this quarter. During the same period, 127,000 options were granted to employees, resulting in $9,205 in expenses this quarter. Options granted in previous quarters resulted in additional expenses in the amount of $1,871 for consultants and $3,456 for employees during the quarter ended September 30, 2014. No stock options were exercised during the period.

As of September 30, 2015, there was approximately $17,596 of compensation expense related to non-vested awards. This expense is expected to be recognized over a weighted average period of .25 years.

The aggregate intrinsic value of vested options outstanding at September 30, 2015 is $487,600.

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8. SHORT-TERM LINE OF CREDIT

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

8. SHORT-TERM LINE OF CREDIT

8.           Short-Term Line of Credit.

In April 2015, the Company signed a new agreement with Harris Bank to renew the expiring credit line.  The revolving line of credit is for an aggregate amount of up to the lesser of (i) $3,000,000, or (ii) 75% of eligible domestic accounts receivable and certain foreign accounts receivable plus 40% of inventory.  The loan has an annual interest rate of 3.75%.

The Revolving Line of Credit contains customary affirmative and negative covenants, including the following: compliance with laws, provision of financial statements and periodic reports, payment of taxes, maintenance of inventory and insurance, maintenance of operating accounts at the Bank, the Bank’s access to collateral, formation or acquisition of subsidiaries, incurrence of indebtedness, dispositions of assets, granting liens, changes in business, ownership or business locations, engaging in mergers and acquisitions, making investments or distributions and affiliate transactions. The covenants also require that the Company maintain a minimum ratio of qualifying financial assets to the sum of qualifying financial obligations.  As of September 30, 2015, Company was in compliance with all loan covenants.

To secure the repayment of any amounts borrowed under the Revolving Line of Credit, the Company granted the Bank a security interest in substantially all of the assets of NanoChem Solutions Inc., exclusive of intellectual property assets.

Short-term borrowings outstanding under the Revolving Line as of September 30, 2015 were $250,000 (December 31, 2014 - $750,000).

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9. LONG TERM DEBT

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

9. LONG TERM DEBT

9.           Long Term Debt.

(a)Flexible Solutions Ltd. has received a non-interest bearing, unsecured loan from the Department of Agriculture and Agri-Food Canada (“AAFC”).  Eligible for up to $1,000,000 in Canadian funds, the Company had borrowed $910,801 in Canadian funds (US$682,463) as of September 30, 2015 on an unsecured basis (December 31, 2014 – CDN$910,801; US$785,106).  The balance owing at September 30, 2015 was $182,160 in Canadian funds (US$136,493); (December 31, 2014 – CDN$182,160; US$157,021).  The repayment schedule is as follows:

Amount Due (in CDN funds)		Payment Due Date
$	182,161	December  31, 2015

(b)           Flexible Solutions Ltd. has also received a 5% simple interest loan from Agriculture Financial Services Corp. (“AFSC”).  Eligible for up to $2,000,000 in Canadian funds, the Company had originally borrowed $1,491,000 in Canadian funds.  The Company was required to make interest payments until May 1, 2010 and then started to pay down the principal in equal payments until April 1, 2015.  The Company had pledged the assets of the Taber, AB building, including equipment, inventory and accounts receivable as collateral, as well as signed a promissory note guaranteeing the amount of the loan. The Company repaid this loan in full in September 2014.

(c)           In September 2014, NanoChem Solutions Inc. signed a US$1,005,967 promissory note with

Harris Bank with a rate of prime plus 0.5% to be repaid over 5 years with equal monthly installments plus interest.  This money was used to retire the AFSC debt and make the December 2014 payment on the AAFC loan.  The balance owing at September 30, 2015 was $804,773 (December 31, 2014 – US$955,668).

The Company has committed to the following repayments:

2015	$	50,298
2016	$	201,193
2017	$	201,193
2018	$	201,193
2019	$	150,896

As of September 30, 2015 the Company was in compliance with all loan covenants.

	September 30, 2015			December 31, 2014
Continuity
Balance, beginning of period	$	1,112,689			1,297,830
Plus:  Proceeds from loans		-			1,005,967
Less:  Payments on loan		(150,895	)		(982,973	)
Effect of exchange rate		(20,528	)		(208,135	)
Balance, end of period	$	941,266		$	1,112,689

Outstanding balance at:
a)Long term debt – AAFC	$	136,493		$	157,021
b)Long term debt – AFSC		-			-
c)Long term debt - Harris		804,773			955,668
Long term debt	$	941,266		$	1,112,689
Less: current portion		(337,686	)		(358,214	)
Balance	$	603,580		$	754,475

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11. CAPITAL STOCK

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

11. CAPITAL STOCK

11.           Capital Stock.

The Company issued 8,000 shares upon the exercise of employee stock options in July 2015.

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4. INVENTORY (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Inventory Details
Completed goods	$ 959,278	$ 1,449,640
Work in progress	31,376	1,216
Raw materials	2,210,911	2,016,582
Total Inventory	$ 3,111,565	$ 3,467,438

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12. SEGMENTED, SIGNIFICANT CUSTOMER INFORMATION AND ECONOMIC DEPENDENCY (Details 1) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales generated	$ 12,168,025	$ 11,950,226
Canada [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales generated	261,057	382,307
United States and abroad [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales generated	$ 11,906,968	$ 11,567,919

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2. SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2015

Significant Accounting Policies Tables

Method of Depreciation

The following assets are recorded at cost and depreciated using the methods and annual rates shown below:

Computer hardware	30% Declining balance
Furniture and fixtures	20% Declining balance
Manufacturing equipment	20% Declining balance
Office equipment	20% Declining balance
Boat	20% Declining balance
Building and improvements	10% Declining balance

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7. LONG TERM DEPOSITS (Tables)

9 Months Ended

Sep. 30, 2015

Long Term Deposits Tables

Long Term Deposits

	September 30, 2015		December 31, 2014
Long term deposits	$	10,326	$	4,425

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10. STOCK OPTIONS (Details Narrative) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Options granted	159,000		227,000
Compensation expense related to non-vested awards	$ 17,596
Compensation expense related to non-vested awards, weighted average period	3 months
Aggregate intrinsic value of vested stock options outstanding	$ 487,600
Consultants
Options granted	60,000	100,000
Stock granted expenses	$ 5,891	$ 12,356
Additional Expenses due to Options granted	$ 837	$ 1,871
Employees
Options granted	99,000	127,000
Stock granted expenses	$ 9,720	$ 9,205
Additional Expenses due to Options granted	$ 1,148	$ 3,456

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8. SHORT-TERM LINE OF CREDIT (Details Narrative) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Short-term Line Of Credit Details Narrative
Short-term borrowings outstanding	$ 250,000	$ 750,000

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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Operating activities
Net income (loss)	$ 1,060,139	$ 421,403
Stock compensation expense	52,787	68,273
Depreciation	430,347	426,649
Changes in non-cash working capital items:
(Increase) Decrease in accounts receivable	249,171	(820,375)
(Increase) Decrease in inventory	311,450	(232,604)
(Increase) Decrease in prepaid expenses	$ (208,917)	(25,981)
(Increase) Decrease in deferred tax assets		107,519
Increase (Decrease) in accounts payable	$ (454,802)	$ (31,353)
Increase (Decrease) in taxes payable	137,425
Increase (Decrease) in deferred revenue	(2,641)	$ (6,865)
Cash provided by (used in) operating activities	1,574,959	$ (93,334)
Investing activities
Long term deposits	(5,440)
Sale (purchase) of property and equipment	41,432	$ (24,594)
Cash provided by (used in) investing activities	35,992	(24,594)
Financing activities
Short term line of credit	(500,000)	(50,000)
Loan repayment	$ (150,895)	(1,095,050)
Proceeds received from loan		$ 1,005,967
Proceeds from issuance of common stock	$ 8,000
Cash provided (used) by financing activities	(642,895)	$ (139,083)
Effect of exchange rate changes on cash	(31,602)	(11,066)
Inflow (outflow) of cash	936,454	(268,077)
Cash and cash equivalents, beginning	747,517	568,087
Cash and cash equivalents, ending	1,683,971	$ 300,010
Supplemental disclosure of cash flow information:
Income taxes paid	785,000
Interest paid	$ 44,044	$ 72,638

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5. PROPERTY, PLANT & EQUIPMENT

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

5. PROPERTY, PLANT & EQUIPMENT

5.           Property, Plant & equipment.

	September 30, 2015		Accumulated		September 30, 2015
	Cost		Depreciation		Net
Buildings	$	4,823,756	$	2,738,152	$	2,085,604
Computer hardware		89,774		83,912		5,862
Furniture and fixtures		23,314		20,450		2,864
Office equipment		17,852		16,574		1,278
Manufacturing equipment		5,115,241		3,759,837		1,355,404
Trailer		12,937		11,968		969
Boat		34,400		2,580		31,820
Technology		102,363		76,772		25,591
Land		407,428		-		407,428
	$	10,627,065	$	6,710,245	$	3,916,820

	December 31, 2014		Accumulated		December 31, 2014
	Cost		Depreciation		Net
Buildings	$	5,065,433	$	2,653,287	$	2,412,146
Computer hardware		97,124		89,083		8,041
Furniture and fixtures		25,548		21,906		3,642
Office equipment		20,537		18,807		1,730
Manufacturing equipment		5,710,354		3,864,204		1,846,150
Trailer		14,882		13,444		1,438
Technology		117,758		64,767		52,991
Land		438,762		-		438,762
	$	11,490,398	$	6,725,498	$	4,764,900

Amount of depreciation expense for 2015: $418,274 (2014: $412,760).

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9. LONG TERM DEBT (Tables)

9 Months Ended

Sep. 30, 2015

Long Term Debt Tables

Non-interest bearing loan repayment

Amount Due (in CDN funds)		Payment Due Date
$	182,161	December  31, 2015

Interest loan Repayment

2015	$	50,298
2016	$	201,193
2017	$	201,193
2018	$	201,193
2019	$	150,896

Outstanding balance loan

	September 30, 2015			December 31, 2014
Continuity
Balance, beginning of period	$	1,112,689			1,297,830
Plus:  Proceeds from loans		-			1,005,967
Less:  Payments on loan		(150,895	)		(982,973	)
Effect of exchange rate		(20,528	)		(208,135	)
Balance, end of period	$	941,266		$	1,112,689

Outstanding balance at:
a)Long term debt – AAFC	$	136,493		$	157,021
b)Long term debt – AFSC		-			-
c)Long term debt - Harris		804,773			955,668
Long term debt	$	941,266		$	1,112,689
Less: current portion		(337,686	)		(358,214	)
Balance	$	603,580		$	754,475

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6. PATENTS (Details 1)	Sep. 30, 2015 USD ($)
Patents Details 1
2015	$ 16,097
2016	16,097
2017	16,097
2018	16,097
2019	$ 16,097

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2. SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2015

Significant Accounting Policies Policies

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents.  Cash and cash equivalents are maintained with several financial institutions.

Inventories and Cost of Sales

The Company has three major classes of inventory:  finished goods, work in progress, and raw materials.  In all classes, inventory is valued at the lower of cost or market.  Cost is determined on a first-in, first-out basis.  Cost of sales includes all expenditures incurred in bringing the goods to the point of sale.  Inventory costs and cost of sales include direct costs of the raw material, inbound freight charges, warehousing costs, handling costs (receiving and purchasing) and utilities and overhead expenses related to the Company’s manufacturing and processing facilities.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts when management estimates collectability to be uncertain.  Accounts receivable are continually reviewed to determine which, if any, accounts are doubtful of collection.  In making the determination of the appropriate allowance amount, the Company considers current economic and industry conditions, relationships with each significant customer, overall customer credit-worthiness and historical experience.

Property, Equipment and Leaseholds

The following assets are recorded at cost and depreciated using the methods and annual rates shown below:

Computer hardware	30% Declining balance
Furniture and fixtures	20% Declining balance
Manufacturing equipment	20% Declining balance
Office equipment	20% Declining balance
Boat	20% Declining balance
Building and improvements	10% Declining balance

Property and equipment are written down to net realizable value when management determines there has been a change in circumstances which indicates its carrying amount may not be recoverable.  No write-downs have been necessary to date.

Impairment of Long-Lived Assets

In accordance with FASB Codification Topic 360, “Property, Plant and Equipment (ASC 360), the Company reviews long-lived assets, including, but not limited to, property and equipment, patents and other assets, for impairment annually or whenever events or changes in circumstances indicate the carrying amounts of assets may not be recoverable.  The carrying value of long-lived assets is assessed for impairment by evaluating operating performance and future undiscounted cash flows of the underlying assets.  If the sum of the expected future cash flows of an asset is less than its carrying value, an impairment measurement is indicated.  Impairment charges are recorded to the extent that an asset’s carrying value exceeds its fair value.  Accordingly, actual results could vary significantly from such estimates.  There were no impairment charges during the periods presented.

Foreign Currency

The functional currency of three of the Company’s subsidiaries is the Canadian Dollar.  The translation of the Canadian Dollar to the reporting currency of the Company, the U.S. Dollar, is performed for assets and liabilities using exchange rates in effect at the balance sheet date.  Revenue and expense transactions are translated using average exchange rates prevailing during the year.  Translation adjustments arising on conversion of the Company’s financial statements from the subsidiary’s functional currency, Canadian Dollars, into the reporting currency, U.S. Dollars, are excluded from the determination of income (loss) and are disclosed as other comprehensive income (loss) in the Statement of Operations and Comprehensive Income (Loss).

Foreign exchange gains and losses relating to transactions not denominated in the applicable local currency are included in operating income (loss) if realized during the year and in comprehensive income (loss) if they remain unrealized at the end of the year.

Revenue Recognition

Revenue from product sales is recognized at the time the product is shipped since title and risk of loss is transferred to the purchaser upon delivery to the carrier.  Shipments are made F.O.B. shipping point.  The Company recognizes revenue when there is persuasive evidence of an arrangement, delivery to the carrier has occurred, the fee is fixed or determinable, collectability is reasonably assured and there are no significant remaining performance obligations.  When significant post-delivery obligations exist, revenue is deferred until such obligations are fulfilled.  To date there have been no such significant post-delivery obligations.

Since the Company’s inception, product returns have been insignificant; therefore, no provision has been established for estimated product returns.

Deferred revenues consist of products sold to distributors with payment terms greater than the Company’s customary business terms due to lack of credit history or operating in a new market in which the Company has no prior experience. The Company defers the recognition of revenue until the criteria for revenue recognition have been met, and payments become due or cash is received from these distributors.

Stock Issued in Exchange for Services

The Company’s common stock issued in exchange for services is valued at an estimated fair market value based upon trading prices of the Company’s common stock on the dates of the stock transactions.  The corresponding expense of the services rendered is recognized over the period that the services are performed.

Stock-based Compensation

The Company recognizes compensation expense for all share-based payments in accordance with FASB Codification Topic 718, Compensation — Stock Compensation, (ASC 718). Under the fair value recognition provisions of ASC 718, the Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award.

The fair value at grant date of stock options is estimated using the Black-Scholes-Merton option-pricing model.  Compensation expense is recognized on a straight-line basis over the stock option vesting period based on the estimated number of stock options that are expected to vest.  Shares are issued from treasury upon exercise of stock options.

Comprehensive Income

Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income, but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity.  The Company’s other comprehensive income is primarily comprised of unrealized foreign exchange gains and losses.

Income (loss) Per Share

Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding in the period.  Diluted earnings (loss) per share is calculated giving effect to the potential dilution of the exercise of options and warrants.  Common equivalent shares, composed of common shares issuable upon the exercise of stock options and warrants, are included in diluted net income per share to the extent that these shares are dilutive.  Common equivalent shares that have an anti-dilutive effect on net income per share have been excluded from the calculation of diluted weighted average shares outstanding for the three and nine months ended September 30, 2015 and 2014.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates and would impact the results of operations and cash flows.

Estimates and underlying assumptions are reviewed at each period end. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Significant areas requiring the use of management estimates include assumptions and estimates relating to the asset impairment analysis, share-based payments and warrants, valuation allowances for deferred income tax assets, determination of useful lives of property, plant and equipment, and the valuation of inventory.

Financial Instruments

The fair market value of the Company’s financial instruments, comprising cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, short term line of credit, and loan, were estimated to approximate their carrying values due to immediate or short-term maturity of these financial instruments.  The Company maintains cash balances at financial institutions which at times, exceed federally insured amounts. The Company has not experienced any material losses in such accounts.

The Company is exposed to foreign exchange and interest rate risk to the extent that market value rate fluctuations materially differ from financial assets and liabilities, subject to fixed long-term rates.

Fair Value of Financial Instruments

In August 2009, an update was made to Fair Value Measurements and Disclosures — “Measuring Liabilities at Fair Value.” This update permits entities to measure the fair value of liabilities, in circumstances in which a quoted price in an active market for an identical liability is not available, using a valuation technique that uses a quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets, or the income or market approach that is consistent with the principles of Fair Value Measurements and Disclosures.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.  The standard describes a fair value hierarchy based on three levels of inputs described below, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

● Level 1 – Quoted prices in active markets for identical assets or liabilities

● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and short term line of credit for all periods presented approximate their respective carrying amounts due to the short term nature of these financial instruments

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company's management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company's financial statements.  If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Legal fees associated with loss contingencies are expensed as incurred.

Income Taxes

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance so that the assets are recognized only to the extent that when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.

Per FASB ASC 740 “Income taxes” under the liability method, it is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.  At September 30, 2015, the Company believes it has appropriately accounted for any unrecognized tax benefits.  To the extent the Company prevails in matters for which a liability for an unrecognized benefit is established or is required to pay amounts in excess of the liability, the Company’s effective tax rate in a given financial statement period may be affected. Interest and penalties associated with the Company’s tax positions are recorded as Interest Expense.

Risk Management

The Company’s credit risk is primarily attributable to its account receivables.  The amounts presented in the accompanying consolidated balance sheets are net of allowances for doubtful accounts, estimated by the Company’s management based on prior experience and the current economic environment.  The Company is exposed to credit-related losses in the event of non-performance by counterparties to the financial instruments.  Credit exposure is minimized by dealing with only credit worthy counterparties. Accounts receivable for the Company’s three primary customers totaled $1,482,103 (72%) at September 30, 2015 (December 31, 2014 - $1,769,114 or 76%). 

The credit risk on cash and cash equivalents is limited because the Company limits its exposure to credit loss by placing its cash and cash equivalents with major financial institutions.

The Company is not exposed to significant interest rate risk to the extent that the long term debt maintained from the foreign government agencies is subject to a fixed rate of interest.

In order to manage its exposure to foreign exchange risks, the Company is closely monitoring the fluctuations in the foreign currency exchange rates and the impact on the value of cash and cash equivalents, accounts receivable, and accounts payable.

Recently Adopted Accounting Pronouncements

In April 2014, the FASB issued new guidance on the definition of a discontinued operation that requires entities to provide additional disclosures about disposal transactions that do not meet the discontinued operations criteria.  The new guidance narrows the focus of discontinued operations to those components that are disposed of or classified as held-for-sale and that represent a strategic shift that has or will have a major impact on the entity’s operations or financial results.  The guidance is effective prospectively for all disposals or components initially classified as held-for-sale in periods beginning on or after December 15, 2014. Early adoption is permitted.  Upon adoption, this guidance did not have a material impact on the Company’s consolidated results of operations or financial position.

New Accounting Pronouncements Not Yet Adopted

On May 28, 2014, the Financial Accounting Standards Board (the “FASB”) and the International Accounting Standards Board (the “IASB”) issued substantially converged final standards on revenue recognition. The FASB's Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), was issued in three parts: (a) Section A, “Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40),” (b) Section B, “Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables” and (c) Section C, “Background Information and Basis for Conclusions.” The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.  The new revenue recognition guidance becomes effective for the Company on January 1, 2017, and early adoption is not permitted.  Entities have the option of using either a full retrospective or a modified approach to adopt the guidance in the ASU.  The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

In August 2014, the FASB issued new guidance on determining when and how to disclose going -concern uncertainties in the financial statements.  The new guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about its ability to continue as a going concern.  The guidance is effective for annual periods ending after December 15, 2016 and interim periods thereafter.  Early adoption is permitted.  Upon adoption, the Company does not believe this guidance will have a material impact on its consolidated results of operations or financial position.

In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis" ("ASU 2015-02").  ASU 2015-02 makes several modifications to the consolidation guidance for variable interest entities ("VIEs") and general partners' investments in limited partnerships, as well as modifications to the evaluation of whether limited partnerships are VIEs or voting interest entities.  It is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted.  The Company is evaluating the impact of the amended guidance on its consolidated financial statements.