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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
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:
(Exact Name of registrant as Specified in Its Charter)
| Alberta |
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| (State or other jurisdiction of | (Employer | |
| incorporation or organization) | Identification No.) |
|
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||
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| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s
telephone number:
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
|
|
|
|
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports 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) has been subject
to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
|
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Smaller
reporting company
|
|
Emerging
growth company
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ☐ Yes
| Class of Stock | No. Shares Outstanding | Date | ||
| Common | May 15, 2025 |
FORM 10-Q
Index
| 1 |
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 financial 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 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; | |
| ● | Operational inefficiencies in distribution or other systems; and | |
| ● | New tariffs relating to raw materials imported from China. |
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, 2024.
| 2 |
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(U.S. Dollars - Unaudited)
| March 31, 2025 | December 31, 2024 | |||||||
| Assets | ||||||||
| Current | ||||||||
| Cash | $ |
|
$ |
|
||||
| Term deposits (Note 2) |
|
|
||||||
| Accounts receivable, net (Note 3) |
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| Inventories (Note 4) |
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| Prepaid expenses and deposits |
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| Total current assets |
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||||||
| Property and equipment, net (Note 5) |
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| Intangible assets |
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| Long term deposits |
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| Investments (Note 6) |
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||||||
| Goodwill |
|
|
||||||
| Total Assets | $ |
|
$ |
|
||||
| Liabilities | ||||||||
| Current | ||||||||
| Accounts payable | $ |
|
$ |
|
||||
| Accrued liabilities |
|
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| Income taxes payable |
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| Deferred revenue |
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| Short term lines of credit (Note 7) |
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| Current portion of long term debt (Note 8) |
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| Total current liabilities |
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| Deferred income tax liability |
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| Long term debt (Note 8) |
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| Total Liabilities |
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||||||
| Stockholders’ Equity | ||||||||
| Capital stock (Note 10) | ||||||||
| Authorized: common shares with a par value of $ each; preferred shares with a par value of $ each Issued and outstanding: (December 31, 2024: ) common shares |
|
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||||||
| Capital in excess of par value |
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||||||
| Accumulated other comprehensive loss |
(
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) |
(
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) | ||||
| Accumulated earnings |
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||||||
| Total stockholders’ equity – controlling interest |
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||||||
| Non-controlling interests (Note 11) |
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||||||
| Total Stockholders’ Equity |
|
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||||||
| Total Liabilities and Stockholders’ Equity | $ |
|
$ |
|
||||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
| 3 |
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(U.S. Dollars — Unaudited)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Sales | $ |
|
$ |
|
||||
| Cost of sales |
|
|
||||||
| Gross profit |
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| Operating Expenses | ||||||||
| Wages |
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| Administrative salaries and benefits |
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| Insurance |
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| Professional fees |
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| Office and miscellaneous |
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| Utilities |
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| Research |
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| Consulting |
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| Advertising and promotion |
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| Travel |
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| Investor relations and transfer agent fee |
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| Lease expense and rent |
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| Telecommunications |
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| Shipping |
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| Commissions |
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|||||||
| Currency exchange |
(
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) |
(
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) | ||||
| Total operating expenses |
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| Operating income (loss) |
(
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) |
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| Non-operating income (expense) | ||||||||
| Loss on lease termination |
(
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) | ||||||
| Gain on investment |
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| Interest expense |
(
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) |
(
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) | ||||
| Interest income |
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||||||
| Total non-operating income (expenses) |
(
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) |
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|||||
| Income (loss) before income tax |
(
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) |
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|||||
| Income taxes | ||||||||
| Income tax expense |
(
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) |
(
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) | ||||
| Net income (loss) |
(
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) |
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|||||
| Net income attributable to non-controlling interests |
(
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) |
(
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) | ||||
| Net income (loss) attributable to controlling interest | $ |
(
|
) | $ |
|
|||
| Income (loss) per share (basic and diluted) | $ | ) | $ | |||||
| Weighted average number of common shares (basic and diluted) | ||||||||
| Other comprehensive income (loss): | ||||||||
| Net income (loss) |
(
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) |
|
|||||
| Unrealized income (loss) on foreign currency translations |
|
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||||||
| Total comprehensive income (loss) | $ |
(
|
) | $ |
|
|||
| Comprehensive income – non-controlling interest |
(
|
) |
(
|
) | ||||
| Comprehensive income (loss) attributable to controlling interest | $ |
(
|
) | $ |
|
|||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
| 4 |
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. Dollars — Unaudited)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating activities | ||||||||
| Net income (loss) for the period | $ |
(
|
) | $ |
|
|||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Stock based compensation |
|
|
||||||
| Depreciation and amortization |
|
|
||||||
| Gain on investment |
(
|
) |
(
|
) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net |
(
|
) |
(
|
) | ||||
| Inventories |
(
|
) |
|
|||||
| Prepaid expenses and deposits |
|
|
||||||
| Long term deposits |
(
|
) |
(
|
) | ||||
| Accounts payable |
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(
|
) | |||||
| Accrued liabilities |
(
|
) |
|
|||||
| Income taxes payable |
|
|
||||||
| Deferred revenue |
(
|
) |
(
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) | ||||
| Cash used in operating activities |
(
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) |
(
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) | ||||
| Investing activities | ||||||||
| Purchase of property and equipment |
(
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) |
(
|
) | ||||
| Distributions received from equity investments |
|
|||||||
| Cash used in investing activities |
(
|
) |
(
|
) | ||||
| Financing activities | ||||||||
| Advance of short term lines of credit |
|
|
||||||
| Repayment of long term debt |
(
|
) |
(
|
) | ||||
| Proceeds of long term debt |
|
|||||||
| Proceeds from shares issued upon exercise of stock options |
|
|
||||||
| Cash provided by financing activities |
|
|
||||||
| Effect of exchange rate changes on cash |
|
|
||||||
| Increase (decrease) in cash and term deposits |
|
|
||||||
| Cash and term deposits, beginning |
|
|
||||||
| Cash and term deposits, ending | $ |
|
$ |
|
||||
| Cash and term deposits consist of: | ||||||||
| Cash | $ |
|
$ |
|
||||
| Term Deposits |
|
|
||||||
| $ |
|
$ |
|
|||||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
| 5 |
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM Consolidated Statements of Stockholders’ Equity
(U.S. Dollars – Unaudited)
| Shares | Capital Stock |
Capital in Excess of Par Value |
Accumulated Earnings |
Accumulated Other
Comprehensive
|
Total |
Non- Controlling Interests |
Total Stockholders’ Equity |
|||||||||||||||||||||||||
| Balance December 31, 2024 |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
|
$ |
|
||||||||||||||||
| Translation adjustment | — |
|
|
|
||||||||||||||||||||||||||||
| Net income (loss) | — |
(
|
) |
(
|
) |
|
(
|
) | ||||||||||||||||||||||||
| Common stock issued upon exercise of options |
|
|
|
|
|
|||||||||||||||||||||||||||
| Stock-based compensation | — |
|
|
|
||||||||||||||||||||||||||||
| Balance March 31, 2025 |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
|
$ |
|
||||||||||||||||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
FLEXIBLE SOLUTIONS INTERNATIONAL, INC.
CONDENSED INTERIM Consolidated Statements of Stockholders’ Equity
(U.S. Dollars – Unaudited)
| Shares |
Capital
Stock |
Capital in
Excess of Par Value |
Accumulated
Earnings |
Other
Comprehensive Loss |
Total |
Non-
Controlling Interests |
Total
Stockholders’ Equity |
|||||||||||||||||||||||||
| Balance December 31, 2023 |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
|
$ |
|
||||||||||||||||
| Translation adjustment | — |
|
|
|
||||||||||||||||||||||||||||
| Net income | — |
|
|
|
|
|||||||||||||||||||||||||||
| Common stock issued upon exercise of options |
|
|
|
|
|
|||||||||||||||||||||||||||
| Stock-based compensation | — |
|
|
|
||||||||||||||||||||||||||||
| Balance March 31, 2024 |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
|
$ |
|
||||||||||||||||
— See Notes to Unaudited Condensed Interim Consolidated Financial Statements —
| 6 |
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2025
(U.S. Dollars - Unaudited)
1. BASIS OF PRESENTATION
These
condensed interim consolidated financial statements (“consolidated financial statements”) include the accounts of Flexible
Solutions International, Inc. (the “Company”), its wholly-owned subsidiaries Flexible Fermentation Ltd., NanoChem Solutions
Inc. (“NanoChem”), Flexible Solutions Ltd., Flexible Biomass LP, FS Biomass Inc., NCS Deferred Corp., Natural Chem SEZC Ltd.,
Pana Chem Solutions Inc., InnFlex Holdings Inc., ENP Peru Investments LLC (“ENP Peru”), its
In
2022, NanoChem purchased an additional
% in ENP Peru, increasing its share to
. ENP Investments owned the remaining
In
2023, the Company purchased an
The Company and its subsidiaries develop, manufacture and market specialty chemicals which slow the evaporation of water. One product, 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 can be used as additives for household laundry detergents, consumer care products and pesticides. The TPA division also manufactures two nitrogen conservation products for agriculture that slows nitrogen loss from fields and has installed custom equipment used to produce food and nutritional materials. All the ingredients we produce are custom products for specific clients and are confidential. We anticipate that this market vertical will grow over time. The Company also manufactures food grade products that are made and sold by the TPA division.
2. SIGNIFICANT ACCOUNTING POLICIES
These condensed interim consolidated financial statements have been prepared on a historical cost basis, except where otherwise noted, in accordance with accounting principles generally accepted in the United States applicable to a going concern and reflect the policies outlined below.
In the opinion of management, the accompanying unaudited condensed interim consolidated financial statements contain all adjustments (all of which are of a normal recurring nature) and disclosures necessary for a fair statement of the Company’s financial position as of March 31, 2025 and the results of its operations and cash flows for the three months then ended. The consolidated balance sheet as of December 31, 2024 is derived from the December 31, 2024 audited financial statements. The unaudited condensed interim consolidated financial statements do not include all disclosures required of annual consolidated financial statements and, accordingly, should be read in conjunction with our annual financial statements for the year ended December 31, 2024. Operating results for the three months ended March 31, 2025 may not be indicative of results expected for the full year ending December 31, 2025.
For the three months ended March 31, 2025, the Company’s estimated effective tax rate differs from the U.S. federal statutory rate primarily due to the accrual of interest and penalties related to uncertain tax positions. These amounts are recognized as a component of income tax expense. As a result, the Company recorded income tax expense during the period despite reporting a net loss. The Company continues to monitor and assess its uncertain tax positions and adjusts its estimates as new information becomes available.
(a) Term Deposits .
The
Company has three term deposits that are maintained by commercials banks. The first term deposit is for $
(b) Inventories and Cost of Sales .
The
Company has three major classes of inventory: completed goods, work in progress and raw materials and supplies. In all classes inventories
are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis or weighted average cost formula
to inventories in different subsidiaries. Cost of sales includes all expenditures incurred in bringing the goods to the point of sale.
Inventory costs and costs 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.
Shipping and handling charges billed to customers are included in revenue (2025 - $
| 7 |
(c) Risk Management .
The
Company’s credit risk is primarily attributable to its accounts receivable. The amounts presented in the accompanying
condensed interim 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-payment by customers. Credit exposure is minimized by dealing with only credit worthy counterparties. Revenue for the
Company’s three primary customers totaled $
The credit risk on cash is limited because the Company limits its exposure to credit loss by placing its cash with major financial institutions. The Company maintains cash balances at financial institutions which at times exceed federally insured amounts. The Company has not experienced any losses in such accounts.
The Company is exposed to foreign exchange risk to the extent that market value rate fluctuations materially differ for financial assets and liabilities denominated in foreign currencies.
In order to manage its exposure to foreign exchange risks, the Company closely monitors the fluctuations in the foreign currency exchange rates and the impact on the value of cash, accounts receivable, and accounts payable and accrued liabilities. The Company has not hedged its exposure to currency fluctuations.
The Company is exposed to interest rate risk to the extent that the fair value or future cash flows for financial liabilities will fluctuate as a result of changes in market interest rates. The Company is exposed to interest rate risk on its long-term debt subject to fixed long-term interest rates.
In order to manage its exposure to interest rate risk, the Company closely monitors fluctuations in market interest risks and will refinance its long-term debt where possible to obtain more favourable rates.
(d) Reclassification .
Certain prior year amounts have been reclassified to conform to the 2025 financial statements presentation. Reclassifications had no effect on net income, cash flows, or stockholders’ equity as previously reported.
(e) Recent Accounting Pronouncements .
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09 ( Topic 740) Improvements to Income Tax Disclosures . The new guidance is intended to enhance annual income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity’s operations. The amendments in this standard require disclosure of additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state, and foreign income taxes. They also require greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. In addition to new disclosures associated with the rate reconciliation, the amendments in this update require information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The amendments in this update are effective on January 1, 2025 for annual periods beginning after December 15, 2024, and early adoption is permitted. The Company adopted the standard on January 1, 2025 and does not expect the adoption to have a material impact on the consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on our consolidated financial statements and disclosures.
| 8 |
3. ACCOUNTS RECEIVABLE
|
March 31, 2025 |
December 31, 2024 | |||||||
| Accounts receivable | $ |
|
$ |
|
||||
| Allowances for doubtful accounts |
(
|
) |
(
|
) | ||||
| $ |
|
$ |
|
|||||
4. INVENTORIES
|
March 31, 2025 |
December 31, 2024 | |||||||
| Completed goods | $ |
|
$ |
|
||||
| Raw materials and supplies |
|
|
||||||
| $ |
|
$ |
|
|||||
5. PROPERTY AND EQUIPMENT
| March 31, 2025 | Accumulated | March 31, 2025 | ||||||||||
| Cost | Depreciation | Net | ||||||||||
| Buildings and improvements | $ |
|
$ |
|
$ |
|
||||||
| Automobiles |
|
|
|
|||||||||
| Office equipment |
|
|
|
|||||||||
| Manufacturing equipment |
|
|
|
|||||||||
| Land |
|
|
||||||||||
| Technology |
|
|
||||||||||
| $ |
|
$ |
|
$ |
|
|||||||
| December 31, 2024 | Accumulated | December 31, 2024 | ||||||||||
| Cost | Depreciation | Net | ||||||||||
| Buildings and improvements | $ |
|
$ |
|
$ |
|
||||||
| Automobiles |
|
|
|
|||||||||
| Office equipment |
|
|
|
|||||||||
| Manufacturing equipment |
|
|
|
|||||||||
| Land |
|
|
||||||||||
| Technology |
|
|
||||||||||
| $ |
|
$ |
|
$ |
|
|||||||
Amount
of depreciation expense for three months ended March 31, 2025 was: $
| 9 |
6. INVESTMENTS
The Company’s investments at March 31, 2025 and December 31, 2024 consisted of the following:
|
March 31,
2025 |
December 31, 2024 |
|||||||
| Investments, at cost: | ||||||||
| Lygos Inc., simple agreement for future equity (“SAFE”) agreement | $ |
|
$ |
|
||||
|
Trio Opportunity Corp.,
|
|
|
||||||
| Investment, equity method: | ||||||||
| Florida-based LLC |
|
|
||||||
| Total | $ |
|
$ |
|
||||
In
January 2019, the Company invested in a Florida based LLC that is engaged in international sales of fertilizer additives. According to
the operating agreement, the Company had a
A summary of the activity associated with the Company’s investment in the Florida based LLC during the three months ended March 31, 2025 and the year ended December 31, 2024 is follows:
|
Balance, December 31, 2023 –
|
|
|||
| Company’s proportionate share of earnings |
|
|||
| Distribution received |
(
|
) | ||
|
Basis of
|
(
|
) | ||
|
Balance, December 31, 2024 –
|
$ |
|
||
| Company’s proportionate share of earnings |
|
|||
|
Balance, March 31, 2025 –
|
$ |
|
Summarized profit and loss information related to the Florida based LLC is as follows:
|
Three months ended
March 31, 2025 |
Three months ended
March 31, 2024 |
|||||||
| Net sales | $ |
|
$ |
|
||||
| Gross profit | $ |
|
$ |
|
||||
| Net income | $ |
|
$ |
|
||||
During
the three months ended March 31, 2025, the Company had sales of $
7. SHORT TERM LINES OF CREDIT
(
a
)
In
June 2024, ENP Investments renewed the line of credit with Stock Yards Bank and Trust (“Stock Yards”). The revolving line
of credit is for an aggregate amount of up to the lesser of (i) $
The
revolving line of credit contains customary affirmative and negative covenants, including the following: compliance with laws, provisions
of financial statements and periodic reports, payment of taxes, maintenance of inventory and insurance, maintenance of operating accounts
at Stock Yards, Stock Yard’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. NanoChem is a guarantor of
| 10 |
To secure the repayment of any amounts borrowed under the revolving line of credit, the Company granted Stock Yards a security interest in substantially all of the assets of ENP Investments, exclusive of intellectual property assets.
Short-term
borrowings outstanding under the revolving line as of March 31, 2025 were $
(b)
In August 2024, the Company renewed the line of credit with Stock Yards Bank and Trust
(“Stock Yards”). The revolving line of credit is for an aggregate amount of up to the lesser of (i) $
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 Stock Yards, Stock Yards 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.
To secure repayment of any amounts borrowed under the revolving line of credit, the Company granted Stock Yards a security interest in substantially all of the assets of NanoChem, exclusive of intellectual property assets.
Short-term borrowings outstanding under the revolving line as of March 31, 2025 were $ (December 31, 2024 were $ ).
8. LONG TERM DEBT
Long term debt, all of which is with StockYards Bank and Trust, at March 31, 2025 and December 31, 2024 consisted of the following:
| March 31, 2025 | December 31, 2024 | |||||||
|
ENP Mendota,
|
$ |
|
$ |
|
||||
|
NanoChem,
|
|
|
||||||
|
ENP Peru,
|
|
|
||||||
|
ENP Peru,
|
|
|
||||||
|
NanoChem,
|
|
|
||||||
|
317 Mendota,
|
|
|
||||||
|
NanoChem,
|
|
|
||||||
| Long-term debt |
|
|
||||||
| Less: current portion |
(
|
) |
(
|
) | ||||
| $ |
|
$ |
|
|||||
| 11 |
The following table summarizes the scheduled annual future principal payments as of March 31, 2025:
| Year Ended December 31, |
Principal Amount Due |
|||
| Remainder of 2025 | $ |
|
||
| 2026 |
|
|||
| 2027 |
|
|||
| 2028 |
|
|||
| Thereafter |
|
|||
| Total | $ |
|
||
The Company has 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 promote the success of the Company’s 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 % of the options granted will vest the year following the grant unless a executive employee is granted a multi-year stock option grant where an equal amount vests over the next years. The maximum term of options granted is 5 years and the exercise price for all options are issued for not less than fair market value at the date of the grant.
|
Number of shares |
Exercise
price
per share |
Weighted
average
|
||||||||||
| Balance, December 31, 2023 |
|
$ | – | $ |
|
|||||||
| Granted |
|
$ | – | $ |
|
|||||||
| Cancelled or expired |
(
|
) | $ | – | $ |
|
||||||
| Exercised |
(
|
) | $ | – | $ |
|
||||||
| Balance, December 31, 2024 |
|
$ | – | $ |
|
|||||||
| Exercised |
(
|
) | $ | – | $ |
|
||||||
| Balance, March 31, 2025 |
|
$ | – | $ |
|
|||||||
| Exercisable, March 31, 2025 |
|
$ | – | $ |
|
|||||||
| March 31, 2025 | March 31, 2024 | |||||||
| Line item on the statement of operations and comprehensive income (loss): | ||||||||
| Wages and administrative salaries | $ |
|
$ |
|
||||
| Consulting |
|
|
||||||
| $ |
|
$ |
|
|||||
| 12 |
During the three months ended March 31, 2025, the Company granted (2024 – ) stock options to consultants and (2024 – ) stock options to employees. The fair value of options granted during 2024 was calculated using the following range of assumptions:
| 2024 | ||||
| Expected life – years | ||||
| Interest rate | – | % | ||
| Volatility | – | % | ||
| Fair value of options granted | $ – | |||
As of March 31, 2025, the weighted-average remaining contractual life of outstanding and exercisable options is years and years, respectively. As of March 31, 2025, there was approximately $ of compensation expense related to non-vested awards that is expected to be recognized over a weighted average period of years.
The aggregate intrinsic value of options outstanding and exercisable at March 31, 2025 is $ (2024 - $ ) and $ (2024 - $ ), respectively. During the three months ended March 31, 2025, the intrinsic value of stock options exercised was $ (2024 - $ ).
10. CAPITAL STOCK
During the three months ended March 31, 2025, shares were issued upon the exercise of stock options (2024 – ).
11. NON-CONTROLLING INTERESTS
(
a
)
ENP
Investments is a limited liability corporation (“LLC”) that manufactures and distributes golf, turf and ornamental
agriculture products in Mendota, Illinois. The Company owns a
ENP Investments makes cash distributions to its equity owners based on formulas defined within its Ownership Interest Purchase Agreement dated October 1, 2018. Distributions are defined in the Ownership Interest Purchase Agreement as cash on hand to the extent it exceeds current and anticipated long-term and short-term needs, including, without limitation, needs for operating expenses, debt service, acquisitions, reserves, and mandatory distributions, if any.
From the effective date of acquisition onward, the minimum distributions requirements under the Ownership Interest Purchase Agreement were satisfied. The total distribution from the effective date of acquisition onward was $ .
| Balance, December 31, 2023 | $ |
|
||
| Distribution |
(
|
) | ||
| Non-controlling interest share of income |
|
|||
| Balance, December 31, 2024 |
|
|||
| Non-controlling interest share of income |
|
|||
| Balance, March 31, 2025 | $ |
|
| 13 |
During
the three months ended March 31, 2025, the Company had sales of $
b
)
317 Mendota is a LLC that owns real estate that the Company occupies part of while
renting out the excess. The Company owns a
| Balance, December 31, 2023 | $ |
|
||
| Non-controlling interest share of income (loss) |
(
|
) | ||
| Balance, December 31, 2024 |
|
|||
| Non-controlling interest share of income (loss) |
(
|
) | ||
| Balance, March 31, 2025 | $ |
|
12. SEGMENTED DISCLOSURE, SIGNIFICANT CUSTOMER INFORMATION AND ECONOMIC DEPENDENCY
The
Company operates in
(a) Energy and water conservation products (as shown under the column heading “EWCP” below), which consists of a (i) liquid swimming pool blankets which save energy and water by inhibiting evaporation from the pool surface, and (ii) food-safe powdered form of the active ingredient within the liquid blankets and which are designed to be used in still or slow moving drinking water sources.
(b) Biodegradable polymers, also known as TPA’s (as shown under the column heading “BCPA” below), 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 third product line is nitrogen conservation products used for the agriculture industry. These products decrease the loss of nitrogen fertilizer after initial application and allows less fertilizer to be used. These products are made and sold by the Company’s TPA division.
The Company also manufactures food grade products that are made and sold by the TPA division.
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. The economic factors that impact the nature, amount, timing, and uncertainty of revenue and cash flows vary among the Company’s operating segments and the geographical regions in which they operate. This operating segment structure is used by the Chief Operating Decision Maker (“CODM”), who has been determined to be the Chief Executive Officer, to make key operating decisions and assess performance of the Company. The CODM evaluates segment operating performance, and makes resource allocation and performance evaluation decisions, based on gross profit and net operating income.
Three months ended March 31, 2025:
| EWCP | BPCA | Other (1) | Consolidated | |||||||||||||
| Sales | $ |
|
$ |
|
$ | $ |
|
|||||||||
| Cost of sales |
|
|
|
|||||||||||||
| Gross profit |
(
|
) |
|
|
||||||||||||
| Wages and administrative salaries |
|
|
|
|||||||||||||
| Office & miscellaneous |
|
|
|
|
||||||||||||
| Other segment items (2) |
|
|
|
|
||||||||||||
| Net operating income (loss) |
(
|
) |
|
(
|
) |
(
|
||||||||||
| Interest expense |
|
|
||||||||||||||
| Depreciation and amortization (included in COGS) |
|
|
|
|||||||||||||
| Capital expenditures |
|
|
||||||||||||||
| Assets at March 31, 2025 (3) |
|
|
|
|
||||||||||||
| 14 |
Three months ended March 31, 2024:
| EWCP | BPCA | Other (1) | Consolidated | |||||||||||||
| Sales | $ |
|
$ |
|
$ | $ |
|
|||||||||
| Cost of sales |
|
|
|
|||||||||||||
| Gross profit |
|
|
|
|||||||||||||
| Wages and administrative salaries |
|
|
|
|||||||||||||
| Office & miscellaneous |
|
|
|
|
||||||||||||
| Other segment items (2) |
|
|
|
|
||||||||||||
| Net operating income (loss) |
(
|
) |
|
(
|
) |
|
||||||||||
| Interest expense |
|
|
||||||||||||||
| Depreciation and amortization (included in COGS) |
|
|
|
|||||||||||||
| Capital expenditures |
|
|
||||||||||||||
| Assets at December 31, 2024 (3) |
|
|
|
|
||||||||||||
| (1) |
|
| (2) |
|
| (3) |
|
Sales by territory are shown below:
|
Three months
ended March 31, 2025 |
Three months
ended March 31, 2024 |
|||||||
| Canada | $ |
|
$ |
|
||||
| United States and abroad |
|
|
||||||
| Total | $ |
|
$ |
|
||||
The Company’s long-lived assets (property, equipment, intangibles, and goodwill) are located in Canada and the United States as follows:
| March 31, 2025 | December 31, 2024 | |||||||
| Canada | $ |
|
$ |
|
||||
| United States |
|
|
||||||
| Total | $ |
|
$ |
|
||||
Three
primary customers accounted for $
13. SUBSEQUENT EVENTS
On May 7, 2025, the Company declared a $ special dividend payable on May 28, 2025 to shareholders of record on May 19, 2025.
| 15 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
The Company manufactures and markets biodegradable polymers which are used in the oil, gas and agriculture industries. The Company also develops, manufactures and markets specialty chemicals that slow the evaporation of water.
Results of Operations
The first is a chemical (“EWCP”) 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 thereby reducing the energy required to maintain the desired temperature of the water. A modified version of EWCP can also be used in reservoirs, potable water storage tanks, livestock watering pods, canals, and irrigation ditches for the purpose of reducing evaporation.
The second product, biodegradable polymers (“TPAs”), is used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. TPAs can also be used to increase biodegradability in detergents and in the agriculture industry to increase crop yields by enhancing fertilizer uptake.
The third product line is nitrogen conservation products used for the agriculture industry. These products decrease the loss of nitrogen fertilizer after initial application and allows less fertilizer to be used. These products are made and sold by the Company’s TPA division.
The Company also manufactures food grade products that are made and sold by the TPA division.
Material changes in the Company’s Statement of Operations for three months ended March 31, 2025 compared to the same period in the prior year are discussed below:
Three Months ended March 31, 2025
| Item |
Increase (I) or Decrease (D) |
Reason | ||
| Sales | ||||
| EWCP products | D | Decreased customer orders. | ||
| TPA products | D |
Decreased customer orders.
|
||
| Gross profit | D |
Increase in tariffs.
|
||
| Wages | D | Stock options granted in the three months ending March 31, 2024 did not reoccur in 2025. | ||
| Administrative salaries and benefits | D | Stock options granted in the three months ending March 31, 2024 did not reoccur in 2025. | ||
| Professional fees | I | Increase in accounting fees related to tax filings and increase in audit fees related to growth of the Company. | ||
| Utilities | I | Addition of real estate not yet rented out. | ||
| Advertising and promotion | I | Increased outreach to customers and prospects. | ||
| Travel | D | Travel requirements were lower in for the first quarter in 2025 than it was in 2024. | ||
| Lease expense | D | Termination of lease in Naperville, IL reduced costs. | ||
| Lease termination fee | D |
One time cost incurred in March 2024 upon terminating lease in Naperville, IL.
|
||
| Gain on investment | D |
Sale of 30.1% of profitable Florida based LLC in 2024 reduced the amount of our proportionate share of earnings.
|
||
| Interest expense | I |
Increased debt resulted in increased interest expense.
|
||
| Interest income | D | Decrease in term deposits held. |
| 16 |
Three primary customers accounted for 49% of the Company’s sales during the three months ended March 31, 2025 (2024 - 55%). The amount of revenue (all from the sale of TPA products) attributable to each customer is shown below.
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Company A | $ | 830,483 | $ | 1,291,426 | ||||
| Company B | $ | 1,856,395 | $ | 2,299,938 | ||||
| Company C | $ | 978,357 | $ | 1,515,541 | ||||
Customers with balances greater than 10% of our receivables as of March 31, 2025 and December 31, 2024 are shown below:
| March 31, 2025 |
December 31, 2024 |
|||||||
| Company A | $ | 5,986,298 | $ | 5,377,088 | ||||
| Company B | $ | 1,508,783 | $ | 1,866,645 | ||||
| Company D | $ | 344,528 | * | $ | 1,189,157 | |||
*less than 10% in that period
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 TPA products; | |
| ● | activity in the oil and gas industry, as we sell our TPA products to oil and gas companies; | |
| ● | drought conditions, since we also sell our TPA products to farmers; and | |
| ● | new tariffs relating to raw materials imported from China. |
| 17 |
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 three months ended March 31, 2025 and 2024 are shown below:
| 2025 | 2024 | |||||||
| Cash used in operating activities | (544,294 | ) | (604,819 | ) | ||||
| Purchase of property and equipment | (354,121 | ) | (478,123 | ) | ||||
| Distributions received from equity investments | - | 327,000 | ||||||
| Advance of short term lines of credit | 1,938,670 | 1,449,456 | ||||||
| Repayment of long term debt | (616,343 | ) | (185,916 | ) | ||||
| Proceeds of long term debt | - | 57,816 | ||||||
| Proceeds from shares issued upon exercise of stock options | 381,690 | 26,250 | ||||||
| Effect of exchange rate changes on cash | 188,840 | 27,223 | ||||||
The Company has sufficient cash resources to meets its future commitments and cash flow requirements for the coming year. As of March 31, 2025, working capital was $22,796,690 (December 31, 2024 - $22,714,190) and the Company has no substantial commitments that require significant outlays of cash over the coming fiscal year.
Other than as disclosed above, the Company does not anticipate any capital requirements for the twelve months ending March 31, 2026.
Other than as disclosed above, we do not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonable likely to result in, our liquidity increasing or decreasing in any material way.
Other than as disclosed above, we do not know of any significant changes in our expected sources and uses of cash.
We do not have any commitments or arrangements from any person to provide us with any equity capital.
There have been no significant changes to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Form 10-K.
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 March 31, 2025. 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 evaluation, our Principal Executive and Financial Officer concluded that these disclosure controls and procedures are effective as of March 31, 2025.
Changes in Internal Control over Financial Reporting
At December 31, 2024, management identified material weaknesses in our internal control over financial reporting (“ICFR”) related to a material adjustment identified during the audit process indicating that controls over the financial statement close and review process were not operating effectively to prevent or detect misstatements on a timely basis. Because of the material weaknesses described above, we implemented new procedures to improve our financial statement close and review process during the quarter ended March 31, 2025 which included hiring a new tax consultant to ensure for more timely Canadian tax filings moving forward.
| 18 |
PART II
Item 5. Other Information
None
of our directors or officers
Item 6. Exhibits.
| Number | Description | |
| 3.1 | Articles of Continuance (Articles of Incorporation) (1) | |
| 3.2 | Bylaws (2) | |
| 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.* | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed with this report.
| (1) | Incorporated by reference the same exhibit filed with the Company’s March 31, 2022 10-Q report. |
| (2) | Incorporated by reference to Exhibit 3(ii) filed the Company’s 8-K report dated April 10, 2022. |
| 19 |
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.
May 15, 2025
| 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: | Principal Financial and Accounting Officer | |
| 20 |