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 30, 2004
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA
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(State or other jurisdiction of incorporation or organization)
91-1922863
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(IRS Employer 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 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 11,831,916 shares as of June 30, 2004
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Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
-1-
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2004
(UNAUDITED - U.S. DOLLARS)
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JUNE 30 DECEMBER 31
2004 2003
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Assets
CURRENT
Cash and cash equivalents $ 738,337 $ 237,080
Short term investments 1,334,649 5,033,837
Accounts receivable 533,220 294,238
Income tax receivable 84,003 86,243
Loan receivable 17,540 17,585
Inventory 841,398 212,938
Prepaid expenses 69,820 36,101
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3,618,967 5,918,022
PROPERTY AND EQUIPMENT 5,252,053 167,589
INVESTMENT 303,500 303,500
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$ 9,174,520 $6,389,111
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LIABILITIES
CURRENT
Due to shareholders - 7,700
Short term loan 3,150,000
Accounts payable and accrued liabilities 189,195 $ 157,643
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3,339,195 165,343
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
11,831,916 (2003: 11,794,916) common shares 11,832 11,794
CAPITAL IN EXCESS OF PAR VALUE 7,499,305 7,306,613
OTHER COMPREHENSIVE INCOME (LOSS) - 3,023
DEFICIT (1,675,812) (1,097,662)
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TOTAL STOCKHOLDER'S EQUITY 5,835,325 6,223,768
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TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 9,174,520 $6,389,111
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-2-
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED - U.S. DOLLARS)
2004 2003
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SALES $ 1,035,871 $ 1,942,562
COST OF SALES 411,007 1,095,902
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GROSS PROFIT 624,864 846,660
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OPERATING EXPENSES
Wages 257,716 333,872
Administrative salaries and benefits 57,544 39,475
Advertising and promotion 56,792 29,158
Investor relations and transfer agent fee 122,625 68,667
Office and miscellaneous 96,922 34,775
Rent 52,216 37,522
Consulting 188,816 82,651
Professional fees 107,714 127,873
Travel 49,514 78,419
Telecommunications 14,714 24,600
Shipping 10,797 8,278
Research 15,842 19,704
Bad debt expense (recovery) (797) -
Currency exchange 3,324 62,959
Utilities 14,198 10,227
Depreciation 185,547 15,927
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1,233,484 974,107
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INCOME (LOSS) BEFORE INTEREST INCOME AND INCOME TAX (608,620) (127,447)
INTEREST INCOME 30,470 104,246
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INCOME (LOSS) BEFORE INCOME TAX (578,150) (23,201)
INCOME TAX (RECOVERY) 26,094
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NET INCOME (LOSS) (578,150) (49,295)
DEFICIT, BEGINNING (1,097,662) (3,100,974)
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DEFICIT, ENDING $ (1,675,812) $ (3,150,269)
NET INCOME (LOSS) PER SHARE (0.05) (0.00)
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WEIGHTED AVERAGE NUMBER OF SHARES 11,819,916 11,677,988
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-3-
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED - U.S. DOLLARS)
2004 2003
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SALES $ 547,761 $ 661,296
COST OF SALES 105,088 408,835
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GROSS PROFIT 442,673 252,461
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OPERATING EXPENSES
Wages 143,246 195,202
Administrative salaries and benefits 32,697 21,833
Advertising and promotion 49,062 13,094
Investor relations and transfer agent fee 57,947 35,547
Office and miscellaneous 62,332 4,817
Rent 30,867 23,124
Consulting 114,138 30,719
Professional fees 71,206 104,810
Travel 25,938 44,235
Telecommunications 9,014 15,838
Shipping 7,655 4,586
Research 6,681 2,173
Bad debt expense (recovery) (797) -
Currency exchange 2,902 46,792
Utilities 8,833 10,227
Depreciation 175,595 8,116
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797,316 561,113
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INCOME (LOSS) BEFORE INTEREST INCOME AND INCOME TAX (354,643) (308,652)
INTEREST INCOME 27,354 53,978
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INCOME (LOSS) BEFORE INCOME TAX (327,289) (254,674)
INCOME TAX (RECOVERY) (24,598)
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NET INCOME (LOSS) (327,289) (230,076)
DEFICIT, BEGINNING (1,348,523) (2,920,193)
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DEFICIT, ENDING $ (1,675,812) $ (3,150,269)
NET INCOME (LOSS) PER SHARE (0.03) (0.02)
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WEIGHTED AVERAGE NUMBER OF SHARES 11,819,916 11,709,916
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-4-
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED - U.S. DOLLARS)
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SIX MONTHS ENDED JUNE 30
2004 2003
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OPERATING ACTIVITIES
Net income (loss) $ (578,150) $ (49,297)
Stock compensation expense 135,230 56,591
Depreciation 185,547 15,927
Changes in non-cash working capital items:
Accounts receivable (238,982) (490,487)
Inventory (628,460) 57,589
Prepaid expenses (33,719) (14,124)
Accounts payable 31,552 10,777
Income tax receivable 2,240 87,024
Decrease in due to shareholders (7,700) -
Unrealized foreign exchange gain/loss - -
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,132,442) (326,000)
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INVESTING ACTIVITIES
Acquisition of property and equipment (5,270,011) (41,799)
Short-term investments 3,699,188 (91,071)
Loan receivable 45 (1,827)
Acquisition of investments - (271,000)
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CASH USED IN INVESTING ACTIVITIES (1,570,778) (405,697)
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FINANCING ACTIVITY
Subscriptions received - (4,560)
Short term loan 3,150,000
Proceeds from issuance of common stock 57,500 325,319
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CASH PROVIDED BY FINANCING ACTIVITIES 3,207,500 320,759
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Effect of exchange rate changes on cash (3,023) 94,933
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INFLOW (OUTFLOW) OF CASH 501,257 (316,005)
Cash and cash equivalents, beginning of period 237,080 556,789
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 738,337 $ 240,784
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ - $ 78,378
Interest received $ 30,470 $ 104,246
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-5-
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30
(U.S. DOLLARS)
(UNAUDITED)
1. BASIS OF PRESENTATION
These unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles in the United States for interim financial
information. 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, 2003 Annual Report on Form 10-KSB. This
quarterly report should be read in conjunction with such
annual report.
In the opinion of the Company's management, these consolidated
financial statements reflect all adjustments necessary to
present fairly the Company's consolidated financial position
at June 30, 2004 and the consolidated results of operations
and the consolidated statements of cash flows for the six
months ended June 30, 2004 and 2003. The results of operations
for the three months ended June 30, 2004 are not necessarily
indicative of the results to be expected for the entire fiscal
year.
2. SIGNIFIGANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles
accepted in the United States of America 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) Inventory -
Inventory is valued at the lower of cost and net realizable
value. Cost is determined on a first-in, first-out basis.
c) Property, Equipment and Leaseholds -
The following assets are recorded at cost and depreciated using
the following methods using the following annual rates:
Computer hardware 30% Declining balance
Furniture and fixtures 20% Declining balance
Manufacturing equipment 20% Declining balance
Office equipment 20% Declining balance
Trailer 30% Declining balance
Building 10% Declining balance
Leasehold improvements Straight-line over lease term
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.
-6-
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30
(U.S. DOLLARS)
(UNAUDITED)
d) Foreign Currency -
The functional currency of the company is the Canadian dollar.
The translation of the Canadian dollar to the reporting currency
of the U.S. dollar is performed for current assets and current
liabilities using exchange rates in effect at the balance sheet
date. Non-monetary assets and liabilities are translated using
rates prevailing at the time of the acquisition of the assets or
assumption of the liabilities. Revenue and expense transactions
are translated using average exchange rates prevailing during
the year. Translation adjustments arising on conversion of the
financial statements from the company's functional currency,
Canadian dollars, into the reporting currency, U.S. dollars, are
excluded from the determination of income and disclosed as other
comprehensive income (loss) in stockholders' equity.
Foreign exchange gains and losses relating to transactions not
denominated in the applicable local currency are included in
income if realized during the year and in comprehensive income
if they remain unrealized at the end of the year.
e) Revenue Recognition -
Revenue from product sales is recognized at the time the product
is shipped since title and risk of losses is transferred to
purchaser upon delivery to the carrier. Shipments are made
F.O.B. shipping point. Provisions are made at the time the
related revenue is recognized for estimated product returns.
Since the company's inception, product returns have been
insignificant, therefore no provision has been established for
estimated product returns.
f) Stock Issued in Exchange for Services -
The valuation of the common stock issued in exchange for
services is valued at an estimated fair market value as
determined by officers and directors of the company based upon
trading prices of the company's common stock on the dates of the
stock transactions.
g) Stock Based Compensation -
The company applies APB Opinion No. 25 and related
interpretations in accounting for its employee stock option
plans. Compensation expense is recorded when options are granted
to management at discounts to market.
h) 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.
i) Income (Loss) Per Share -
Income (loss) per share is calculated by dividing net income
(loss) by the weighted average number of shares outstanding.
-7-
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30
(U.S. DOLLARS)
(UNAUDITED)
j) Use of Estimates -
The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America 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.
k) Financial Instruments -
The fair market value of the company's financial instruments
comprising cash, short-term investment, accounts receivable,
income tax recoverable, loan receivable, accounts payable and
accrued liabilities and amounts due to shareholders were
estimated to approximate their carrying values due to immediate
or short-term maturity of these financial instruments.
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.
l) Recent Accounting Pronouncements -
i) In June 2001, the Financial Accounting Standards Board
(FASB) issued FAS 142, Goodwill and Other Intangible
Assets. Under FAS 142, goodwill and intangible assets with
indefinite lives are no longer amortized but are reviewed
at least annually for impairment. The amortization
provisions of FAS 142 apply to goodwill and intangible
assets acquired after June 30, 2001. With respect to
goodwill and intangible assets acquired prior to July 1,
2001, the company adopted FAS 142 effective January 1,
2002. Application of the non-amortization provisions of FAS
142 for goodwill did not have any impact on its financial
reporting
ii) In October 2001, the FASB issued Statement of Financial
Accounting Standards for FAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." FAS 144
addresses significant issues relating to the implementation
of FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," and
develops a single accounting model, based on the framework
established in FAS 121 for long-lived assets to be disposed
of by sale, whether such assets are or are not deemed to be
a business. FAS 144 also modifies the accounting and
disclosure rules for discontinued operations. The standard
was adopted on January 1, 2002 and did not have any impact
on the financial statements.
In November 2001, the FASB issued EITF Issue No. 01-14,.
"Income Statement Characterization of Reimbursements Received
for "Out of Pocket" Expenses Incurred." This guidance requires
companies to recognize the recovery of reimbursable expenses
such as travel costs on service contracts as revenue. These
costs are not to be netted as a reduction of cost. This
guidance was implemented January 1, 2002. The company does not
expect this guidance to have a material impact on the
financial statements
-8-
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30
(U.S. DOLLARS)
(UNAUDITED)
3. PROPERTY, EQUIPMENT AND LEASEHOLDS AT JUNE 30
Accumulated
Cost Amortization 2004 2003
Net Net
Computer hardware $ 33,587 $ 9,576 $ 24,011 $ 7,365
Furniture and equipment 12,278 2,583 9,695 3,268
Office equipment 25,745 8,210 17,535 19,875
Manufacturing equipment 1,996,107 197,738 1,798,369 117,344
Trailer 1,740 475 1,265 -
Building 3,082,956 77,074 3,005,882 -
Leasehold improvements 12,918 8,046 4,873 6,585
Land 390,422 - 390,422 -
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$5,555,754 $ 303,701 $5,252,053 $ 154,438
==========================================================================
4. STOCKHOLDERS' EQUITY
(a) During the prior periods, the Company granted stock
options to consultants and have recognized consulting
expense applying SFAS 123 using the Black-Scholes
option pricing model which resulted in expense of
$68,295 for the three months ended June 30, 2004.
(b) The following table summarizes the Company's stock
option activity for the period:
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2004
Weighted
Exercise Average
Number Price Exercise
of Shares Per Share Price
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Balance, March 31, 2004 1,669,000 $1.20 to $4.55 $ 3.18
Granted During the Period 77,000 $4.25 to $4.55 4.37
Exercised (12,000) $(1.00 to $1.50) (1.42)
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Balance, June 30, 2004 1,734,000 $1.00 to $ 4.25 $ 3.06
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-9-
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30
(U.S. DOLLARS)
(UNAUDITED)
5. ACQUISITION OF ASSETS OF DONLAR CORPORATION
Pursuant to a purchase agreement dated May 26, 2004, the
company acquired the assets of Donlar Corporation on June 9,
2004.
The purchase price of the transaction was $6,150,000 with
consideration being a combination of cash and debt. Under the
purchase agreement and as part of the consideration, the
company issued a promissory note bearing interest at the prime
rate to the vendor to satisfy $3,150,000 of the purchase
price.
The following table summarizes the estimated fair value of the
assets acquired at the date of acquisition:
As at June 9, 2004:
Current assets $ 1,126,805
Property and equipment 5,023,195
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$ 6,150,000
Acquisitions costs assigned to property and equipment 219,475
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Total assets acquired $ 6,369,475
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6. CONTIGENCIES
a) The company has been named as a plaintiff in a lawsuit
filed in the state of Illinois by a former employee. In
November 2003, an ex-employee, Patrick Grant filed suit
against Flexible Solutions in Cook County Circuit Court,
Cook County IL, claiming wrongful dismissal and seeking
return of options rights or cash. The company believes
these allegations are without merit and intends to
vigorously defend against them.
b) The company is plaintiff in a lawsuit demanding return of
the share certificate of 100,000 shares of stock
originally given to the defended as payment in advance for
services. The services for which the advance was given
were never performed or given to the company, and the
company therefore received no consideration or value for
such advance. Return of the share certificate for 100,000
shares was demanded within ten (10) days, namely August
22, 2001, however, to date remains unreturned.
On date of issue, January 4, 2001, the share transaction
was recorded as shares issued for services at fair market
value, a value of $0.80 per share.
-10-
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 2004, the Company experienced a net loss
of $327,289 as compared to a loss of $230,076 for the three months ended June
30th 2003. The loss resulted from the following: a continued loss from
operatioins including wages, travel and overhead in our Water$avr division
required by the world wide sales effort, start up expenses for the new Ecosavr
marketing office in Richmond BC, and a very large increase in depreciation
($175,596 vs $8,116) resulting from the acquisition of depreciable assets from
the bankruptcy estate of Donlar Corp on June 9th 2004. Our gross profit
increased from 38.3% to 80.8%. The ratio was positively affected by the
increased efficiency in our Calgary factory, the increase in revenue per unit
sold resulting from taking over the distribution of the Ecosavr residential
product and the addition of some low cost sales from the new NanoChem division.
Total sales in the swimming pool division were less than the previous year as a
result of excess product in the retail pipeline from product purchased in first
quarter 2004 and last quarter 2003 by our ex-distributor working its way through
the retail channels. Management believes that this product is now in the hands
of end users and residential sales will soon return to higher levels and at
twice the price per unit realized in 2003.
RESULTS OF OPERATIONS
The following analysis and discussion pertains to the Company's results of
operations for the three month and six month periods ended June 30th 2004
compared to the results of operations for the three month and six month periods
ended June 30th 2003, and to changes in the Company's financial condition from
December 31st 2003 to June 30th 2004.
THREE MONTHS ENDED June 30th 2004 and 2003
For the second quarter of the current fiscal year ending June 30th 2004, sales
were $547,761 compared to $661,296 for the same quarter of the previous year.
The small decrease in sales was a direct result of a one time switch in our
residential pool division from sales through external distribution to internal
distribution by our own employees. The previous distributor, Sunsolar Energy
Technologies, whose contract ended on February 29th 2004, preordered significant
quantities of product in anticipation of the lapse of the contract and that
purchase prevented us from realizing the dollar value of sales normally expected
in 2nd quarter. Sales from our newly formed NanoChem division mitigated this
somewhat and management expects that unit sales in residential pool products
will return to historical levels in 3rd quarter 2004.
Operating expenses were $797,316 for the second quarter, up from $561,113. Wages
decreased from $195,202 to $143, 246 as a result of reorganization and
efficiency increases in the Watersavr division. There were also reductions in
travel from 44,235 down to 25,938, in telecom from 15,838 down to 9,014 and in
professional fees down from 104,810 to 71,206 as we gained better control of
marketing costs in our Watersavr division. On the other hand, our costs for
consulting rose to 114,138 from 30,719, advertising rose to 49,062 from 13,094
as we became responsible for distribution of Ecosavr, and depreciation soared
from 8,116 to 175,595 resulting from acquisition of depreciable assets for cash
from the estate of Donlar Corp.
-11-
The net loss of $327,289 for the quarter represents an increase over second
quarter last year when the net loss was $230,076. The increased loss can be
attributed to the depreciation of assets acquired from the estate of Donlar
Corp. The loss per share was $0.03 for the three months ended June 30th 2004
compared to $0.02 for the three months ended June 30th 2003.
SIX MONTHS ENDED June 30th 2004
Sales in the six months ended June 30th 2004 were $1,035,871 compared to
$1,942,562 for the six months ended June 30th 2003. The large decrease in sales
was due to the following factors. In the comparable period of 2003, there were
sales of $473,000 in the Watersavr division that were not repeated this year
because the distributor responsible was unable to meet contractual quotas and
was terminated. The residential pool product distributor whose contract ended on
Feb 29th 2004 preordered large amounts of product in 4th quarter 2003 for sale
in the first 6 months of 2004. Our obligation to produce as requested shifted
revenue backwards into 2003 from 2004 first half. Finally, acquisition of the
assets of Donlar Corp (renamed NanoChem Solutions Inc.) was not complete until
June 9th and therefore only a small portion of the sales for the quarter and
half were consolidated with those of Flexible Solutions.
Operating expenses for the Company were $1,233,484 for the six months ended June
30th 2004 up from $974,107 for the six months ended June 30th 2003. The increase
in operating expense is a result of increased depreciation, advertising,
consulting fees, investor relations, research and development and expansion of
sales and marketing for commercial pool products and water conservation
products.
The net loss for the six months ended June 30th 2004 was $578,150compared to a
net loss of $49,295 for the six months ended June 30th 2003 The loss was due to
reduced sales in the Watersavr and swimming pool divisions combined with the
reduced interest income resulting from using capital to purchase assets and the
large increase in depreciation resulting from substituting depreciable assets
for cash. Cost of goods sold decreased to 39.7% from 56.4% as our pool products
factory increased efficiency and our price per unit rose. The loss per share was
$0.05 for the six-month period ended June 30th 2004 compared to $0.00 for the
six-month period ended June 30th 2003.
]
LIQUIDITY AND CAPITAL RESOURCES
As of June 30th 2004 the Company had working capital of $297,772, which
represented a decrease of $5,464,907 as compared to the working capital of
December 31st 2003. The decrease was entirely related to the purchase of assets
from the bankruptcy estate of Donlar that closed on June 9th. We used $3,000,000
in cash from our working capital and signed a promissory note for a further
$3,150,000 that is set against current assets because it has a term of less than
one year as of this report. The note is due June 9th 2005.
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 2004. 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.
-12-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS:
The Company does not have any derivative financial instruments as of June 30th
2004. 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 in both the United States and 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 - On July 27th 2004, Sunsolar Energy
Technologies of St. Laurent, Quebec filed suit in the Federal
Court of Canada against Flexible Solutions Ltd., Flexible
Solutions International Inc., and Daniel O'Brien alleging
trademark infringement and seeking up to $7,000,000 Canadian
in damages and costs. The Company considers the complaint
frivolous, has filed a statement of defense, is considering a
countersuit and will defend itself vigorously.
ITEM 2. Changes in Securities -12,000 common shares were issued during
the quarter.
ITEM 3. Default upon Senior Securities - None
ITEM 4. Submission of Matters to a Vote of Securities Holders - On May
26th the annual general meeting of shareholders was held in
Victoria BC. The results are as follows.
- Mr. Dan O'Brien, Mr. Robert O'Brien, Ms. Dale Friend, Mr.
John Bientjes and Mr. Eric Hodges were confirmed as
directors for the following year.
- Cinnamon Jang Willoughby were confirmed as Auditor for
the year ending Dec 31 2004
- Stock option compensation to directors and insiders was
approved
Item 5. Other Information - None
Item 6.(a) Exhibits
31 Certifications Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
32 Certifications Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
Item 6.(b) Reports on Form 8-K - July 26th 2004, June 1st 2004,
May 18th 2004, May 18th 2004
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 13th 2004 /s/ DAN O'BRIEN
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Dan O'Brien, President and Director
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