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 March 31st 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from___________ to ________
Commission file number 000-29649
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA 911922863
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(State or other jurisdiction (IRS Employer Identification No.)
of 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)
(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
9,231,136 shares as of March 31st 2001.
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 March 31st 2001, the Company experienced a net
after tax income of $100,994 as compared to income of $27,093 for the three
months ended March 31st 2000. The increase was due to a significant expansion of
operations which began in the fourth quarter of 2000 and continued through the
first quarter of 2001. During this period the Company hired additional
personnel, expanded corporate headquarters and increased production. The overall
result was a net income of $100,994.
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 and
to the same section of the Company's 10K-SB for the period ended Dec. 31st 2000
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
period ended March 31st 2001, compared to the results of operations for the
three month period ended March 31st 2000, and to changes in the Company's
financial condition from December 31st 2000 to March 31st 2001.
THREE MONTHS ENDED March 31st 2001 and 2000
For the first quarter of the current fiscal year ending March 31st 2001, sales
were $351,447 compared to $260,328 for the same quarter of the previous year.
The increase in sales were as a result of our distributors selling to more
retail outlets in more geographic areas and selling larger quantities to older
accounts.
Operating expenses were $75,799 for the first quarter, up from $66,978 for the
first quarter of last year. This is as a result of increased costs in all
categories of expenses due to the significant expansion in sales. The largest
increases were in the areas of administrative salaries and benefits
(13,164), travel (8,454) and stock promotion (5,471).
The net income for the quarter was $100,994 which represents a substantial
increase over first quarter last year when the net income was $27,093. The
increase in income was a result of increased sales, and lower cost of sales.
The earnings per share (fully diluted) was $0.01 for the three months ended
March 31st 2001 compared to $0.00 for the three months ended March 31st 2000.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed it's cash flow requirements through
retained earnings from sales. Cash provided by net earnings which occurred
during the three months ended March 31st was $100,994 This resulted in a total
cash and cash equivalent position of $60,579 at the end of the period.
As of March 31st 2001 the Company had working capital of $486,938 which
represented an increase of $200,211 as compared to the working capital of March
31st 2000. The increase was a result of retained earnings from the second, third
and fourth quarters of 2000 and the first quarter of 2001.
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 2001. 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.
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the year 2000 issue that may affect the company including
those related to customers, suppliers, or other third parties, have been fully
resolved.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS:
The Company does not have any derivative financial instruments as of March 31st
2001. 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
A) On Jan. 14th 2001, 100,000 restricted shares were issued to
Equity Trust SA in return for services rendered in the compilation
of an SB-2 filing document.
B) On Apr. 12th 2001 the Company registered by way of an S-8
document, on file with the Securities Exchange Commission, 636,000
options to buy common shares.
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.(a) Exhibit 27 - Financial Data Schedule
Item 6.(b) 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, thereunto duly authorized.
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
(Registrant)
Dated: May 4th 2001 /s/ Dan O'Brien, President and Director
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Balance Sheets (Unaudited)
March 31
(U.S. Dollars)
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2001 2000
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Assets
Current
Cash $35,579 $3,409
Accounts receivable (note 4) 411,123 228,560
Note receivable 25,000
Inventory 119,987 132,558
Prepaid expenses 2,494 0
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Total Current Assets 594,183 364,527
Property and Equipment (note 5) 60,410 52,654
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Total Assets $654,593 $417,181
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Liabilities
Current
Accounts payable 15,158 56,806
Accrued liabilities 0 0
Income tax payable 152,497 73,648
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Total Current Liabilities 167,655 130,454
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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
9,231,316 Common shares 9,231 9,131
Capital in Excess of Par Value 163,653 163,653
Other Comprehensive Income (Loss) -2,366 -3,488
Retained Earnings 316,420 117,431
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486,938 286,727
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Total Liabilities and Stockholders' Equity $654,593 $417,181
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Operations (Un-audited)
Quarter Ended March 31
(U.S. Dollars)
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2001 2000
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Sales $351,447 $260,328
Cost of Sales (Exclusive of Depreciation) 112,755 152,317
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Gross Profit 238,692 108,011
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Operating Expenses
Wages 24,781 26,657
Administrative salaries and benefits 13,164 0
Advertising 1,520 0
Professional fees 4,213 18,382
Subcontracting 5,629 7,848
Shipping 1,912 2,839
Rent 4,288 2,380
Travel 8,454 2,206
Office 1,590 870
Telephone 553 879
Commission 178 263
Stock promotion and transfer agent fee 5,471 0
Miscellaneous 1,362 2,120
Depreciation 2,684 2,534
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75,799 66,978
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Income Before Income Tax 162,893 41,033
Income Tax 61,899 13,940
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Net Income $100,994 $27,093
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Net Income Per Share $0.01 $0.00
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Weighted Average Number of Shares 9,212,427 9,131,316
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Cash Flow (Un-audited)
Quarter Ended March 31
(U.S. Dollars)
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2001 2000
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Operating Activities
Net income $100,994 $27,036
provided by (used in) operating activities
Depreciation 2,684 2,534
Changes in non-cash working capital
Accounts receivable -266,740 -115,721
Notes receivable -25,000
Inventory -26,474 4,002
Prepaid expenses -3,657 520
Accounts payable 2,736 29,795
Accrued liabilities 0 -6,929
Income tax payable 61,899 4,362
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Cash provided (Used in) Operating Activities -153,558 -54,401
Investing Activities
Acquisitions and Equipment -10,030 -5,406
Financing Activities
Repayment to shareholder 0 0
Effect of Exchange Rate Changes on Cash 6,887 3,775
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Inflow (Outflow) of Cash -156,701 -56,032
Cash, Beginning of Quarter 192,280 59,441
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Cash, End of Quarter $35,579 $3,409
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Notes to Financial Statements:
Foreign Currency - Flexible Solutions functions using the Canadian
dollar. Translation to US dollars for reporting is done at the
average exchange rates during the year. Losses and gains
arising from currency translation are disclosed as other
comprehensive income (loss) in shareholders equity.
Estimates- The preparation of consolidated financial statements
requires management to make estimates that affect the reported
assets and liabilities at the date of the statements. Actual
results could differ.
Inventory- Inventory is valued at the lower of cost or net realizable
value. Cost is determined on a first in-first out basis.
Property and Equipment - Property and equipment are recorded at cost
and depreciated using the declining balance with the following
annual rates:
Manufacturing equipment 20%
Trailer 30%
Computer hardware 30%
Furniture and Fixtures 20%
Office equipment 20%
Revenue Recognition - Revenue is recognized when product is shipped.
Returns have been insignificant since the Company's inception,
therefore no allowance has been established for product
returns.
Financialinstruments - The Company's instruments consist of cash,
accounts receivable, accounts payable and accrued liabilities.
Management opines that there are no significant currency or
credit risks from these instruments.
Income (loss) per share calculation - Calculated by dividing net
income by the weighted average number of shares outstanding.
Accounts Receivable - No provision has been made for uncollectible
accounts. Management believes all are collectible.