UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30th 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from___________ to ____________
Commission file number ______________
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA 91-1922863
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
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)
(Former name, former address and former fiscal year if changed
since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12,13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes[ ] No[ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common stock $.001 par value
11,449,416 shares as of Aug 1st 2002.
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. MANAGEMENTS 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.
During the three months ended June 30th 2002, the Company experienced a net
after tax income of $22,262 as compared to income of $145,885 for the three
months ended June 30th 2001. A decrease of $75,108 is a result of expensing
consultant options. Also, some decrease was due to reduced sales of our
residential swimming pool product possibly as a result of poor weather in the
Northeastern USA and Eastern Canada, our primary residential market area. As
well, in this period the Company hired additional personnel, expanded Water$avr
sales and marketing and increased expenditures for sales to the commercial pool
market. The overall result was a net income of $22,262 for the second quarter of
fiscal 2002 and a net income for the first six months of fiscal 2002 of $43,281.
RESULTS OF OPERATIONS
Reference is made to Item 2, "Management's Discussion and Analysis" included in
the Company's registration statement on Form 10-SB for the year ended December
31st 1999, as amended, on file with the Securities and Exchange Commission. The
following analysis and discussion pertains to the Company's results of
operations for the three month and six month periods ended June 30th 2002,
compared to the results of operations for the three month and six month periods
ended June 30th 2001, and to changes in the Company's financial condition from
December 31st 2001 to June 30th 2002.
THREE MONTHS ENDED June 30th 2002 and 2001
For the second quarter of the current fiscal year ending June 30th 2002, sales
were $665,245 compared to $808,025 for the same quarter of the previous year.
The decrease in sales were as a result of our distributors selling less into our
primary residential markets in the Northeastern US and Eastern Canada probably
due to cold weather early in the pool season and extremely hot weather later on.
Both conditions would be expected to reduce demand for our Tropical Fish
product.
Operating expenses were $232,257 for the second quarter, up from $112,890 for
the second quarter of last year. This is as a result of increased costs related
to factory expansion for swimming pool products and increased expenses for sales
and marketing of our commercial pool and water conservation products. The
largest increases were in the areas of stock option expenses ($75,108) wages
($54,199), rent ($13,664), administrative ($25,762) and stock promotion/transfer
agent fees (21,869).
The net income for the quarter was $22,262 which represents a decrease over
second quarter last year when the net income was $145,885. The decrease in
income was a result of lower sales of Tropical Fish to our distributor, very
likely as a result of poor weather in our primary residential markets. Stock
option expenses reduced earnings by $75,108 in the quarter. As well, a
proportion of the increased wage and administrative costs were associated with
increased research, development and marketing of new products. The earnings per
share (fully diluted) was $0.00 for the three months ended June 30th 2002
compared to $0.02 for the three months ended June 30th 2001.
SIX MONTHS ENDED June 30th 2002
Sales in the first six months ended June 30th 2002 were $1,041,865 compared to
$1,159,472 for the six months ended June 30th 2000. As was the case for the
three months ended June 30th 2002 the decrease in sales were a result of
decreased sales to our residential pool product distributor and likely
attributable to poor weather in primary markets.
Operating expenses for the Company were $387,566 for the six months ended June
30th 2002 up from $188,689 for the six months ended June 30th 2001. As well as
the costs of expensing options, the increase in operating expenses are a result
of increased salaries, wages, rent, stock promotion/transfer agent fees,
research and development and expansion of sales and marketing for commercial
pool products and water conservation products. In addition there were one time
expenses associated with listing the Company's shares on the Frankfurt stock
exchange in Germany.
The net income for the six months ended June 30th 2002 was $43,281 compared to a
net income of $246,889 for the six months ended June 30th 2001. The decrease in
income was due to the decrease in total sales for the six month period ended
June 30th 2001 and increase in expenses related to new product research,
development and marketing. As noted above, expensing of stock options
significantly reduced earnings.
The earnings per share (fully diluted) was $0.00 for the six month period ended
June 30th 2002 compared to $0.03 for the six month period ended June 30th 2001.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed it's cash flow requirements through
retained earnings from sales. Cash provided by operating earnings and issue of
common shares which occurred during the six months ended June 30th was
$1,151,370. This resulted in a total cash and cash equivalent position of
$1,647,707 at the end of the period.
As of June 30th 2002 the Company had working capital of $1,647,707 which
represented an increase of $1,073,074 as compared to the working capital of June
30th 2001. The increase was a result of operating earnings from the six month
period ending June 30th 2002 less the losses from third and fourth quarters 2001
plus the capital raised through the sale of common stock in the 6 month period
ended June 30th 2002 .
The Company has no external sources of liquidity in the form of credit lines
from banks.
Management believes that its available cash will be sufficient to fund the
Company's working capital requirements through December 31st 2002. Management
further believes that available cash will be sufficient to implement the
Company's expansion plans. No investment banking agreements are in place and
there is no guarantee that the Company will be able to raise capital in the
future should that become necessary.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS:
The Company does not have any derivative financial instruments as of June 30th
2002. However, the Company is exposed to interest rate risk.
The Company's interest income and expense are most sensitive to changes in the
general level of U.S. and Canadian interest rates. In this regard, changes in
U.S. and Canadian interest rates affect the interest paid on the Company's cash
equivalents as well as the interest paid on debt.
FOREIGN CURRENCY RISK
The Company operates primarily in Canada. Therefore, the Company's business and
financial condition is sensitive to currency exchange rates or any other
restriction imposed on its currency.
Part II - OTHER INFORMATION
Item 1. Legal proceedings - None
Item 2. Changes in Securities - 502,000 common shares were issued
during the quarter. Four hundred thousand shares were sold
from treasury in a private placement priced at $2.50 per
share resulting in net proceeds of $950,000. 102,000
shares were issued for options exercised for net proceeds
of $54,000. Total proceeds to the Company for shares
issued in the quarter were $1,004,000.
Item 3. Default upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Securities Holders - None
Item 5. Other Information - None
Item 6. Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, there unto duly authorized.
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
(Registrant)
Dated: August 10 2002 /s/ DAN O'BRIEN
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Dan O'Brien, President and Director
CERTIFICATION PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Flexible Solutions International Inc.
on form 10-Q for the period ended June 30th 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Dan O'Brien, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as
adopted pursuant to section 906 of the Sarbanes -Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and 2. The information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
/s/ DAN O'BRIEN
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Dan O'Brien
CEO, Aug 13th 2002
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Flexible Solutions International Inc.
(the Company) on form 10-Q for the period ended June 30th 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Dan
O'Brien, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
1. The Report fully complies with the requirements of Section 13(a) or 15(b) of
the Securities Exchange Act of 1934; and 2. The information contained in the
Report fairly represents, in all material respects, the financial condition and
results of operations of the Company.
/s/ DAN O'BRIEN
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Dan O'Brien
CFO, Aug 13th 2002
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Balance Sheets (Unaudited)
As of June 30
(U.S. Dollars)
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2002 2001
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Assets
Current
Cash $374,064 $153,109
Accounts receivable 250,287 540,844
In Trust 22,756 25,000
Short Term Loans 23,097 0
Inventory 128,050 86,836
Income Tax Installments 57,157 42,745
Prepaid expenses 14,148 3459
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Total Current Assets 869,560 851,993
Investments 913,307
Property and Equipment 76,213 66,289
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Total Assets $1,859,080 $918,282
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Liabilities
Current
Accounts payable 16,377 64,419
Accrued liabilities 49,917 61,628
Income tax payable 42,095 151,313
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Total Current Liabilities 108,389 277,360
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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
10,025,816 & 9,233,816 Common shares 10,026 9,233
Capital in Excess of Par Value 1,704,568 164,378
Other Comprehensive Income (Loss) (17,196) 5,106
Retained Earnings 53,293 462,205
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1,750,691 640,922
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Total Liabilities and Stockholders' Equity $1,859,080 $918,282
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Operations (Unaudited)
Quarters Ended June 30
(U.S. Dollars)
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2002 2001
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Sales $665,245 $808,025
Cost of Sales (Exclusive of Depreciation) 351,048 459,836
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Gross Profit 314,197 348,189
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Operating Expenses
Wages 75,449 47,564
Bad Debt Expense 64 0
Administrative salaries and benefits 47,012 18,638
Advertising 3,054 1,308
Professional fees 2,545 15,797
Subcontracting 9,642 4,987
Shipping 2,434 3,850
Rent 13,664 6,683
Travel 2,725 1,414
Office 2,672 2,209
Telecommunications 2,677 2,193
Commission 0 266
Utilities 1,950 0
Entertainment 829 0
Stock promotion and transfer agent fees 54,477 2,737
Insurance 1,061 0
Miscellaneous 7,402 1,706
Water$avr 175 654
Depreciation 4,425 2,884
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232,257 112,890
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Income Before Income Tax 81,940 235,299
Income Tax 59,678 89,414
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Net Income $22,262 $145,885
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Earnings Per Share $0.00 $0.02
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Weighted Average Number of Shares 9,893,728 9,232,966
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Operations (Unaudited)
Six Months Ended June 30
(U.S. Dollars)
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2002 2001
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Sales $1,041,865 $1,159,472
Cost of Sales (Exclusive of Depreciation) 538,458 575,591
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Gross Profit 503,407 583,881
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Operating Expenses
Wages 107,204 72,345
Bad Debt Expense -346 0
Administrative salaries and benefits 72,026 31,802
Advertising 18,382 2,828
Professional fees 29,497 20,010
Subcontracting 15,677 10,616
Shipping 5,598 5,762
Rent 29,437 10,971
Travel 10,336 9,868
Office 7,564 3,799
Telecommunications 4,934 2,746
Commission 0 444
Utilities 4,290 0
Entertainment 1,190 0
Stock promotion and transfer agent fees 58,297 8,208
Insurance 2,288 0
Miscellaneous 12,403 3,068
Water$avr 175 654
Depreciation 8,613 5,568
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387,566 188,689
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Income Before Income Tax 115,841 395,192
Income Tax 72,560 150,173
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Net Income $43,281 $245,019
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Earnings Per Share $0.00 $0.03
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Weighted Average Number of Shares 9,645,601 9,229,797
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Cash Flow (Unaudited)
Quarters Ended June 30
(U.S. Dollars)
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2002 2001
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Operating Activities
Net income $22,262 $145,885
provided by (used in) operating activities
Depreciation 4,425 2,884
Changes in non-cash working capital
Accounts receivable 165,272 (129,721)
Notes receivable (277) 0
Inventory 5,571 33,151
Prepaid expenses & deposits (5,529) (965)
Short Term Loans (13,482) 0
Income Tax Installments (29,704) (42,745)
Accounts payable & accrued liabilities (91,696) 110,889
Income tax payable 50,584 (1,184)
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Cash provided (Used in) Operating Activities 107,427 118,194
Investing Activities
Acquisitions and Equipment 0 (8,763)
Investments (US Treasury Bills) (913,307) 0
Financing Activities
Funds received for share issues 1,080,108 0
Income Taxes Paid -$29,704 -$42,745
Effect of Exchange Rate Changes on Cash (9,495) 8,099
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Inflow (Outflow) of Cash 264,733 117,530
Cash, Beginning of Quarter 109,331 35,579
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Cash, End of Quarter $374,064 $153,109
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Flexible Solutions International Inc.
Notes to Consolidated Financials
For the Quarter Ended June 30, 2002
Note 1 Interim Reporting
While the information presented in the accompanying interim six months to June
30, 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.
Note 2 FASB 123
If FASB 123 was used, Wages and Administrative Benefits would have an additional
$127,975 expensed for first quarter and $141,964 expensed for second quarter.