UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934 For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from ________ to ________
Commission file number: 0-29649
Flexible Solutions International Inc.
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(Name of small business issuer in its charter)
NEVADA 91-1922863
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2614 Queenswood Dr. Victoria BC Canada V8N 1X5
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(Address of principal executive offices)
( 250 )477 - 9969
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( Issuer's telephone number)
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 31, 2002: Common Stock, $0.001 par value - 9,519,816
Shares.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Attached hereto and incorporated herein by reference
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following information contains certain forward-looking statements that
anticipate future trends or events. These statements are based on certain
assumptions that may prove to be erroneous and are subject to certain risks
including but not limited to the risks of increased competition in the Company's
industry and other risks detailed in the Company's Securities and Exchange
Commission filings. Accordingly, actual results may differ, possibly materially,
from the predictions contained herein.
Overview
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Gross sales increased $25,173 during the first quarter of Fiscal 2002 as
compared to the first quarter of Fiscal 2001. During the first quarter of Fiscal
2002, the Company experienced a decrease in net income of $79,985 as compared to
the first quarter of Fiscal 2001. The decrease in net income was the result of
an increase in the cost of sales and an increase in operating expenses as
discussed below.
Results of Operations
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Flexible Solutions is an environmental biotechnology company active in energy
and water conservation products. The Company believes that its patented and
patent-pending products are effective. All of the Company's products are
biodegradable. The Company's corporate headquarters is located in Victoria,
British Columbia. It has two manufacturing centers. One located in Calgary,
Alberta and the second located in Ontario Canada.
For the first quarter of the current fiscal year, ending March 31, 2002, sales
increased 7.2% to $376,620 compared to $351,447 for the same quarter of the
previous year. The Company experienced a higher volume of sales during the first
quarter Fiscal 2002 as its "Tropical Fish" product gained greater acceptance in
the market place. Management expects that this trend will continue in the
future.
General and administrative expenses for the Company were $155,309 for the first
quarter up from $75,799 for the first quarter of last year. The increase in
operating expenses was the result of the growth in the Company both in its
Water$avr Division and its "Heat$aver" Division. Notable increases included:
wages up 28% ($31,755 compared to $24,781); administrative salaries and benefits
up 90% ($25,014 compared to $13,164); advertising up 908% ($15,329 compared to
only $1,520); professional fees up 540% ($26,952 compared to $4,213); and, rent
up 268% ($15,772 compared to $4,288) Increases also occurred in
depreciation; miscellaneous items; insurance; entertainment; utilities;
telecommunications; office; shipping; and, subcontracting.
Management attributes the increase in general and administrative expenses to the
fact that the Company has expanded the manufacturing and sales of its
"Water$avr" product and its "Heat$aver" product .
Subsequent to the conclusion of the first quarter of Fiscal 2001, the Company
hired a new President for the "Water$aver" division and marketing efforts within
this division have grown significantly as evidenced by the letters of intent for
the purchase of this product from a multinational company located in India and
from the Ministry of Water of the Peoples Republic of China and the National
Engineering Research Center for Water Saving and Irrigation at Yang Ling.
Management expects that sales from these sources will begin in the latter
portion of Fiscal 2002.
Also contributing to the increase in expenses, a new facility was put into place
after the first quarter of Fiscal 2001 to expand the manufacturing and
distribution of the "Tropical Fish" product. This facility is located in
Calgary, Alberta and augments the manufacturing and distribution activities
taking place at the Company's facility located in the province of BC.
Within the category of operating expenses, decreases did occur in the categories
of travel; commissions; stock promotion and transfer agent fees.
Net income for the quarter was $21,019 which represents a 79% decrease over the
first quarter of last year when net income was $101,004. As stated earlier, the
decrease in net income was due primarily to an increase in the activities of the
Water$avr Division and the expansion of facilities which occurred within the
"Heat$aver" Division.
Earnings per share (fully diluted) were $0.00 for the first quarter of Fiscal
2002 compared to $0.01 for the first quarter of fiscal 2001.
Liquidity and Capital Resources
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As of March 31, 2002, the Company had working capital of $534,827 which
represented an increase of $108,299 as compared to the working capital position
of $426,528 on March 31, 2001. The increase in working capital was due to an
increase in cash and cash equivalents of $73,752; an increase in accounts
receivable of $4,437; an increase in inventory of $13,634; an increase in
prepaid expenses of $6,329; and, an increase in income tax installments of
$27,544.
Accounts Receivable and Inventory represented 75.6% of current assets and both
continue to turn over at acceptable rates.
Based on the Company's current working capital position and its policy of
retaining earnings, the Company has adequate working capital to meet its needs
during the current fiscal year. On April 30, 2002, the Company announced the
closing of a private placement that raised $1,000,000 through the sale of
400,000 common shares at $2.50. The proceeds of this private
placement will be used to accelerate the sales initiatives of the Company's
Water$avr Division of the Company and for general corporate purposes.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In December 2001, the Company filed suit in British Columbia Supreme Court
against Equity Trust and John Wells. The Company is claiming that Equity Trust
and John Wells did not provide the services for which they were paid 100,000
shares of common stock and loaned $25,000. The Company is seeking return (and
cancellation) of the shares, repayment of the loan, costs and penalties from
Equity Trust and John Wells. As of 3/31/2002, the BC Supreme Court has enjoined
the defendant against any transaction regarding the shares until trial is
complete. The Company has accounted for the loan as un-collectable; the 100,000
shares are included in reported issued/outstanding common stock.
ITEM 2. CHANGES IN SECURITIES
a. No Disclosure Necessary.
b. No Disclosure Necessary.
c. 217,000 shares of common stock issued in 1st Quarter of 2002 upon exercise
of employee stock option with proceeds of $61,141 received.
d. No Disclosure Necessary.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No Disclosure Necessary.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No Disclosure Necessary
ITEM 5. OTHER INFORMATION
No Disclosure Necessary
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No Disclosure Necessary
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Flexible Solutions International Inc.
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Registrant
Date: 5-13-2002 /s/ Daniel B. O'Brien
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Daniel B. O'Brien, President/Treasurer/Secretary/Director
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Balance Sheets (Unaudited)
As of March 31
(U.S. Dollars)
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2002 2001
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Assets
Current
Cash $109,331 $35,579
Accounts receivable 415,560 411,123
In Trust 22,552 25,000
Short Term Loans 9,338 0
Inventory 133,621 119,987
Income Tax Installments 27,544 0
Prepaid expenses 8,823 2,494
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Total Current Assets 726,769 594,183
Property and Equipment 77,560 60,410
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Total Assets $804,329 $654,593
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Liabilities
Current
Accounts payable 78,177 15,158
Accrued liabilities 82,713 0
Income tax payable 31,051 152,497
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Total Current Liabilities 191,942 167,655
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
9,519,816 & 9,231,316 Common shares 9,520 9,231
Capital in Excess of Par Value 624,966 163,653
Other Comprehensive Income (Loss) (24,587) (2,366)
Retained Earnings 2,490 316,420
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612,389 486,938
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Total Liabilities and Stockholders' Equity $804,331 $654,593
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Operations (Unaudited)
Quarters Ended March 31
(U.S. Dollars)
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2002 2001
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Sales $376,620 $351,447
Cost of Sales (Exclusive of Depreciation) 187,410 112,755
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Gross Profit 189,210 238,692
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Operating Expenses
Wages 31,755 24,781
Bad Debt Expense -410 0
Administrative salaries and benefits 25,014 13,164
Advertising 15,328 1,520
Professional fees 26,952 4,213
Subcontracting 6,035 5,629
Shipping 3,164 1,912
Rent 15,772 4,288
Travel 7,611 8,454
Office 4,892 1,590
Telecommunications 2,257 553
Commission 0 178
Utilities 2,340 0
Entertainment 361 0
Stock promotion and transfer agent fees 3,820 5,471
Insurance 1,227 0
Miscellaneous 5,001 1,362
Water$avr 0 0
Depreciation 4,188 2,684
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155,309 75,799
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Income Before Income Tax 33,901 162,893
Income Tax 12,882 61,889
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Net Income $21,019 $101,004
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Earnings Per Share $0.00 $0.01
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Weighted Average Number of Shares 9,397,816 9,212,247
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Cash Flow (Unaudited)
Quarters Ended March 31
(U.S. Dollars)
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2002 2000
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Operating Activities
Net income $21,019 $100,994
provided by (used in) operating activities
Depreciation 4,188 2,684
Changes in non-cash working capital
Accounts receivable (369,186) (266,740)
Notes receivable 9,403 (25,000)
Inventory 48,077 (26,474)
Prepaid expenses & deposits 27,916 (3,657)
Income Tax Installments (27,544) 0
Accounts payable & accrued liabilities 140,299 2,736
Income tax payable 25,543 61,899
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Cash provided (Used in) Operating Activities (120,285) (153,558)
Investing Activities
Acquisitions and Equipment (12,355) (10,030)
Financing Activities
Funds received for share issues 61,500 0
Income Taxes Paid $27,544 $0
Effect of Exchange Rate Changes on Cash (9,986) 6,887
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Inflow (Outflow) of Cash (53,582) (156,701)
Cash, Beginning of Quarter 190,457 192,280
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Cash, End of Quarter $136,875 $35,579
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Flexible Solutions International Inc.
Notes to Consolidated Financials
For the Quarter Ended March 31, 2002
Note 1 Interim Reporting
While the information presented in the accompanying interim three months to
March 31, 2002 financial statements is unaudited, it includes all adjustments
which are, in the opinion of management, necessary to present fairly the
financial position, results of operations and cash flows for the interim periods
presented. These interim financial statements follow the same accounting
policies and methods of their application as the December 31, 2001 annual
financial statements. It is suggested that these interim financial statements be
read in conjunction with the company's December 31, 2001 annual financial
statements.