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 2001
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from___________ to ____________
Commission file number 000-29649
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA NONE
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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)
(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 9 233
836 shares as of June 30th 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 June 30th 2001, the Company experienced a net
after tax income of $145, 885 as compared to income of $175,046 for the three
months ended June 30th 2000. The decrease was due to an increase in unit costs
which were not offset by price increases to our customers. During this period
the Company hired additional personnel, expanded corporate headquarters and
increased production. The overall result was a net income of $145 885 for the
second quarter of fiscal 2001 and a net income for the first six months of
fiscal 2001 of $246,879.
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 2001,
compared to the results of operations for the three month and six month periods
ended June 30th 2000, and to changes in the Company's financial condition from
December 31st 2000 to June 30th 2001.
THREE MONTHS ENDED June 30th 2001 and 2000
For the second quarter of the current fiscal year ending June 30th 2001, sales
were $808,025 compared to $539,858 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 $112,890 for the second quarter, up from $91,520 for the
second 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 wages ($40 889), sub-contracting fees ($12 215)
and administrative ($18,638).
The net income for the quarter was $145 885 which represents a decrease over
second quarter last year when the net income was $175,047. The decrease in
income was a result of increased cost per unit of sales without a coincident
wholesale price raise for finished goods. As well, a proportion of the increased
wage and administrative costs were associated with increased research and
development of new products. The earnings per share (fully diluted) was $0.02
for the three months ended June 30th 2001 compared to $0.02 for the three months
ended June 30th 2000.
SIX MONTHS ENDED June 30th 2000
Sales in the first six months ended June 30th 2001 were $1,159,472 compared to
$800,186 for the six months ended June 30th 2000. As was the case for the three
months ended June 30th 2001 the increase in sales were a result of increased
numbers of customers and increased sales per customer.
Operating expenses for the Company were $188,689 for the six months ended June
30th 2001 up from $158,496 for the six months ended June 30th 2000. The increase
in operating expenses in virtually every category are a result of greatly
increased production and sales by the Company.
The net income for the six months ended June 30th 2001 was $246,879 compared to
a net income of $202,081 for the six months ended June 30th 2000. The increase
in income was due to the increase in total sales for the six month period ended
June 30th 2001.
The earnings per share (fully diluted) was $0.03 for the six month period ended
June 30th 2001 compared to $0.02 for the six month period ended June 30th 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 six months ended June 30th was $246,849. This resulted in a total
cash and cash equivalent position of $574,633 at the end of the period.
As of June 30th 2001 the Company had working capital of $574,633 which
represented an increase of $181,261 as compared to the working capital of June
30th 2000. The increase was a result of retained earnings from the six month
period ending June 30th 2001 less the losses from third quarter 2000 plus the
earnings from fourth quarter 2000 .
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 June 30th
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 - On May 1st 2001 options to
buy 2500 common shares were exercised at a price of
$.25 each for proceeds to the company of $625.
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, there unto duly authorized.
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
(Registrant)
Dated: August 10 2001 /s/DAN O'BRIEN
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Dan O'Brien, President and Director
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Balance Sheets (Unaudited)
June 30, 2001
(U.S. Dollars)
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2001 2000
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Assets
Current
Cash $153,109 $156,057
Accounts receivable (note 4) 540,844 301,837
Note receivable 25,000 0
Inventory 86,836 72,009
Income Tax Installments 42,745 0
Prepaid expenses 3,459 642
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Total Current Assets 851,993 530,545
Property and Equipment (note 5) 66,289 50,276
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Total Assets $918,282 $580,821
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Liabilities
Current
Accounts payable 64,419 12,978
Accrued liabilities 61628 20080
Income tax payable 151,313 104,115
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Total Current Liabilities 277,360 137,173
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 9,233 9,131
Capital in Excess of Par Value 164,378 163,653
Other Comprehensive Income (Loss) 5,107 (7,673)
Retained Earnings 462,205 278,537
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640,923 443,648
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Total Liabilities and Stockholders' Equity $918,283 $580,821
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Operations (Unaudited)
Quarters Ended June 30
(U.S. Dollars)
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2001 2000
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Sales $808,025 $539,858
Cost of Sales (Exclusive of Depreciation) 459,836 183,116
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Gross Profit 348,189 356,742
Operating Expenses
Wages 47,564 40,889
Administrative salaries and benefits 18,638 0
Advertising 1,308 0
Professional fees 15,797 15,342
Subcontracting 4,987 12,215
Shipping 3,850 4,670
Rent 6,683 3,740
Travel 1,414 2,798
Office 2,209 2909
Telephone 2193 1522
Commission 266 968
Stock promotion 2,737 0
Miscellaneous 1,706 3,793
Water$avr 654 0
Depreciation 2,884 2,674
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112,890 91,520
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Income Before Income Tax 235,299 265,222
Income Tax 89,414 90,175
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Net Income $145,885 $175,047
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Net Income Per Share $0.02 $0.02
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Weighted Average Number of Shares 9,232,966 9,131,316
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Cash Flow (Unaudited)
Quarter Ended June 30
(U.S. Dollars)
2001 2000
Operating Activities
Net income $145,885 $175,045
provided by (used in) operating activities
Depreciation 2,884 2,674
Changes in non-cash working capital
Accounts receivable (129,721) (73,277)
Notes receivable 0 0
Inventory 33,151 60,549
Income Tax Installments (42,745) 0
Prepaid expenses (965) (642)
Accounts payable 49,261 (43,828)
Accrued liabilities 61,628 20,080
Income tax payable (1,184) 30,467
Cash provided (Used in) Operating Activities 118,194 171,068
Investing Activities
Acquisitions and Equipment (8,763) (296)
Effect of Exchange Rate Changes on Cash 8,099 (18,124)
Inflow (Outflow) of Cash 117,530 152,648
Cash, Beginning of Quarter 35,579 3,409
Cash, End of Quarter $153,109 $156,057
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
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.