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 Sept. 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
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 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
9,233,816 shares as of Sept. 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 Sept. 30th 2001, the Company experienced a net
after tax loss of $14,630 as compared to a net after tax loss of $16,660 for the
three months ended Sept. 30th 2000. As in the quarter ending Sept. 30th 2000,
the end of the Northeastern USA pool season reduces demand for our products in
the usual cyclical manner. In addition, the Company increased expenditures in
the areas of WATER$AVR research and development, investor relations and
production equipment development. Finally, the Company did better at producing
the correct amount of product in Q-1 and Q-2 2001 as a percentage of annual
sales and therefore did not have to carry high production rates as far into Q-3
2001 as was the case in Q-3 2000.
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, and the Company's 10K-SB for the year 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 and nine month periods ended Sept. 30th 2001, compared to the results of
operations for the three month and nine month periods ended Sept. 30th 2000, and
to changes in the Company's financial condition from December 31st 2000 to Sept.
30th 2001.
THREE MONTHS ENDED Sept. 30th 2001 and 2000
For the third quarter of the current fiscal year ending Sept. 30th 2001, sales
were $148,177 compared to $143,102 for the same quarter of the previous year.
The increase in sales was in line with the general increase in sales year over
year reduced by our effectiveness in producing correct amounts for the
marketplace in the first two quarters of the year.
Operating expenses were $102,350 for the third quarter, up from $61,819 for the
third quarter of last year. This is as a result of increased spending on
research and development for Water$avr, higher investor relations costs and
development of advanced production machinery . The largest increases
were in the areas of administrative salaries and expenses ($18,803), and
professional fees ($17,131). The net loss for the quarter was $14,630, a slight
decrease from third quarter last year when the net loss was $16,660. The reduced
loss was too small to be significant.
The earnings per share (fully diluted) was $0.00 for the three months ended
Sept. 30th 2001 compared to $0.00 for the three months ended Sept. 30th 2000.
NINE MONTHS ENDED Sept. 30th 2001 and 2000
Sales in the first nine months ended Sept. 30th 2001 were $1,307,649 compared to
$943,288 for the nine months ended Sept. 30th 2000. As was the case for the six
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 $291,039 for the nine months ended Sept.
30th 2001 up from $220,317 for the nine months ended Sept. 30th 2000. The
increase in operating expenses in virtually every category are a result of
greatly increased production and sales by the Company and increased research and
product development costs.
The net income for the nine months ended Sept. 30th 2001 was $232,249 compared
to a net income of $185,468 for the nine months ended Sept. 30th 2000. The
increase in income was due to the increase in sales compared to the year earlier
period.
The earnings per share (fully diluted) was $0.03 for the nine month period ended
Sept. 30th 2001 compared to $0.02 for the nine month period ended Sept. 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 nine months ended Sept. 30th 2001 was $232,249. This resulted in a
total cash and cash equivalent position of $533,553 at the end of the period.
As of Sept. 30th 2001 the Company had working capital of $533,553 which
represented an increase of $138,332 as compared to the working capital of Sept.
30th 2000. The increase was a result of retained earnings from the fourth
quarter of 2000 and the nine month period ending Sept 30th 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS:
The Company does not have any derivative financial instruments as of Sept. 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 - 30,000 restricted common
shares were issued for management consulting fees in
the quarter ending Sept 30th 2001
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: November 8th 2001 /s/ Dan O'Brien, President and Director
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Balance Sheets (Unaudited)
September 30, 2001
(U.S. Dollars)
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2001 2000
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Assets
Current
Cash $360,255 $228,986
Accounts receivable 63,959 138,332
Note receivable 31,359 0
Inventory 193,452 105,484
Income Tax Installments 63,941 0
Prepaid expenses 9,766 1700
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Total Current Assets 722,732 474,502
Property and Equipment 72,544 50,011
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Total Assets $795,276 $524,513
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Liabilities
Current
Accounts payable 5,801 16,001
Accrued liabilities 40,196 5,200
Income tax payable 143,182 58,080
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Total Current Liabilities 189,179 79,281
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
9,233,816 Common shares 9,234 9,131
Capital in Excess of Par Value 164,378 163,653
Other Comprehensive Income (Loss) (14,564) 10,822
Retained Earnings 447,049 261,626
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606,097 445,232
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Total Liabilities and Stockholders' Equity $795,276 $524,513
======== ========
FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Operations (Unaudited)
Quarters Ended September 30
(U.S. Dollars)
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2001 2000
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Sales $148,177 $143,102
Cost of Sales (Exclusive of Depreciation) 69,423 106,526
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Gross Profit 78,753 36,576
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Operating Expenses
Wages 33,820 34,171
Administrative salaries and benefits 18,803 0
Advertising 4,900 0
Professional fees 17,131 1,161
Subcontracting 11,330 7,880
Shipping 1,709 3,297
Rent 5,624 3,037
Travel 1,900 5,735
Office 638 1,055
Telephone 1,322 1,065
Commission 694 283
Stock promotion 594 0
Miscellaneous 205 1,583
Water$avr 281 0
Depreciation 3,400 2,552
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102,350 61,819
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Income Before Income Tax (23,597) (25,243)
Income Tax (8,967) (8,583)
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Net Income ($14,630) ($16,660)
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Net Income Per Share ($0.00) ($0.00)
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Weighted Average Number of Shares 9,233,816 9,131,316
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Operations (Unaudited)
Nine Months Ended September 30
(U.S. Dollars)
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2001 2000
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Sales $1,307,649 $943,288
Cost of Sales (Exclusive of Depreciation) 642,014 441,959
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Gross Profit 665,634 501,329
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Operating Expenses
Wages 106,165 101,717
Administrative salaries and benefits 50,605 0
Advertising 7,728 0
Professional fees 37,141 34,885
Subcontracting 21,946 27,943
Shipping 7,471 10,806
Rent 16,595 9,157
Travel 18,768 10,739
Office 4,437 4,834
Telephone 4,068 3,466
Commission 1137.51 1514
Stock promotion 1,802 0
Miscellaneous 3,273 7,496
Water$avr 935 0
Depreciation 8,968 7,760
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291,039 220,317
-------- --------
Income Before Income Tax 374,595 281,012
Income Tax 142,346 95,544
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Net Income $232,249 $185,468
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Net Income Per Share $0.03 $0.02
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Weighted Average Number of Shares 9,232,705 9,131,316
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FLEXIBLE SOLUTIONS INTERNATIONAL INC.
Consolidated Statement of Cash Flow (Unaudited)
Quarter Ended September 31
(U.S. Dollars)
-------------------------------------------------------------------------------
2001 2000
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Operating Activities
Net income ($14,630) ($16,659)
provided by (used in) operating activities
Depreciation 3,400 2,552
Changes in non-cash working capital
Accounts receivable 476,885 163,505
Notes receivable (6,359) 0
Inventory (106,616) (33,475)
Income Tax Installments (21,196) 0
Prepaid expenses (6,307) (1,058)
Accounts payable (58,618) 3,023
Accrued liabilities (21,432) (14,880)
Income tax payable (8,131) (46,035)
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Cash provided (Used in) Operating Activities 236,996 56,973
Investing Activities
Acquisitions and Equipment (9,697) (2,286)
Effect of Exchange Rate Changes on Cash (20,153) 18,242
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Inflow (Outflow) of Cash 207,146 72,929
Cash, Beginning of Quarter 153,109 156,057
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Cash, End of Quarter $360,255 $228,986
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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.