UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





FORM
10-Q





[X]
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended March 31, 2008





OR





[  
      ]
            TRANSITION
      REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
the transition period from ________ to  ________





Commission
File Number:  000-2969




FLEXIBLE
SOLUTIONS INTERNATIONAL INC.


(Exact
Name of Issuer as Specified in Its Charter)




Nevada
            
            91-1922863(State or other
      jurisdiction of incorporation or organization)
            
            (I.R.S. Employer
      Identification No.)615
      Discovery St. Victoria, British Columbia, Canada
            
            V8T
      5G4(Address of Issuer's
      Principal Executive Offices)
            
            (Zip
      Code)Issuer’s
      telephone number:     (250)
    477-9969




N/A


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) had been subject to such filing requirements for
the past 90 days.




Yes X  No





Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check One):




Large
      accelerated filer [   ]
            
            Accelerated
      filer                   [
        ]Non-accelerated
      filer   [   ]
            
            Smaller
      reporting company [X](Do not check
      if a smaller reporting company)


Indicate
by check mark whether the Registrant is a shell company (as defined in Exchange
Act Rule 12b-2 of the Exchange Act).




Yes   No X






Class
      of Stock
            
            No.
      Shares Outstanding
            
            DateCommon
            
            14,057,567
            
            May 12,
      2008









FORM
10-QSB




Index






PART
      I.
            FINANCIAL
      INFORMATION
            PageItem
      1.
            Financial Statements.
            1(a)
            Unaudited Consolidated
      Balance Sheets at March 31, 2008 and December 31,
      2007.
            1(b)
            Unaudited Consolidated Statements of Operations for the
      Three Months Ended
              March 31, 2008 and 2007.
            23(c)
            Unaudited Consolidated Statements of Cash Flows for
      the Three Months Ended March 31, 2008 and 2007.(d)
            Notes to Unaudited Consolidated
      Financial Statements for the Period Ended
              March 31, 2008.
            4Item 2.
            Management’s Discussion and
      Analysis or Plan of Operation.
            15Item
      4T.
            Controls and Procedures.
            16PART II.
            OTHER INFORMATION
            18Item 1.
            Legal
      Proceedings.
            18Item 2.
            Unregistered Sales of
      Equity Securities and Use of Proceeds.
            18Item 3.
            Defaults Upon Senior
      Securities.
            18Item 4.
            Submission of Matters to a
      Vote of Security Holders.
            18Item 5.
            Other
      Information.
            18Item 6.
            Exhibits.
            19SIGNATURES
            
            19




i




CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS




This
document contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995.  All statements other than
statements of historical fact are “forward-looking statements” for the purposes
of the federal and state securities laws, including, but not limited to any
projections of earnings, revenue or other financials items; any statements of
the plans, strategies and objectives of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements regarding
future economic conditions or performance; any statements of belief; and any
statements of assumptions underlying any of the foregoing.




Forward-looking
statements may include the words “may,” “could,” “will,” “estimate,” “intend,”
“continue,” “believe,” “expect” or “anticipate” or other similar
words.  These forward-looking statements present our estimates and
assumptions only as of the date of this report.  Except for our
ongoing obligation to disclose material information as required by the federal
securities laws, we do not intend, and undertake no obligation, to update any
forward-looking statement.




Although
we believe that the expectations reflected in any of our forward-looking
statements are reasonable, actual results could differ materially from those
projected or assumed in any of our forward-looking statements.  Our
future financial condition and results of operations, as well as any
forward-looking statements, are subject to change and inherent risks and
uncertainties.  The factors impacting these risks and uncertainties
include but are not limited to:




●
            Increased
      competitive pressures from existing competitors and new
      entrants;




●
            Increases
      in interest rate or our cost of borrowing or a default under any material
      debt agreement;




●
            Deterioration
      in general or regional economic
conditions;




●
            Adverse
      state or federal legislation or regulation that increases the costs of
      compliance, or adverse findings by a regulator with respect to existing
      operations;




●
            Loss
      of customers or sales weakness;




●
            Inability
      to achieve future sales levels or other operating
  results;




●
            The
      unavailability of funds for capital expenditures;
  and




●
            Operational
      inefficiencies in distribution or other
systems.




For a
detailed description of these and other factors that could cause actual results
to differ materially from those expressed in any forward-looking statement,
please see “Risk Factors” in our Annual Report on Form 10-KSB for the year ended
December 31, 2007.




ii




PART
      I
            FINANCIAL
INFORMATION




Item 1.
            Financial
      Statements.




FLEXIBLE
SOLUTIONS INTERNATIONAL, INC.


CONSOLIDATED
BALANCE SHEETS


At
March 31, 2008


(U.S.
Dollars)




March
      31,
              2008
              (Unaudited)
            
            
            December
      31,
              2007AssetsCurrentCash
      and cash equivalents
            
            $
            2,897,678
            
            
            $
            3,355,854Accounts
      receivable
            
            
            2,670,544
            
            
            
            1,051,056Inventory
            
            
            1,841,470
            
            
            
            2,361,270Prepaid
      expenses
            
            
            116,550
            
            
            
            115,3537,526,241
            
            
            
            6,883,533Property,
      equipment and leaseholds
            
            
            4,709,082
            
            
            
            4,612,571Patents
            
            
            223,674
            
            
            
            230,438Long
      term deposits
            
            
            47,547
            
            
            
            48,034$
            12,506,545
            
            
            $
            11,774,576LiabilitiesCurrentAccounts
      payable and accrued liabilities
            
            $
            797,916
            
            
            $
            385,792Deferred
      revenue
            
            
            9,532
            
            
            
            9,870807,449
            
            
            
            395,662Mortgage
            
            
            448,989
            
            
            
            452,0181,256,438
            
            
            
            847,680Stockholders’
      EquityCapital
      stockAuthorized50,000,000
      Common shares with a par value of $0.001 each1,000,000
      Preferred shares with a par value of $0.01 eachIssued
      and outstanding14,057,567
      (2007: 14,057,567) common shares
            
            
            14,058
            
            
            
            14,058Capital
      in excess of par value
            
            
            15,997,004
            
            
            
            15,914,303Other
      comprehensive income
            
            
            324,626
            
            
            
            394,289Deficit
            
            
            (5,085,581
            )
            
            
            (5,395,754
            )Total
      Stockholders’ Equity
            
            
            11,250,107
            
            
            
            10,926,895Total
      Liabilities and Stockholders’ Equity
            
            $
            12,506,545
            
            
            $
            11,774,576




Commitments,
Contingencies and Subsequent events (Notes 11, 12 & 13)




-- See
Notes to Unaudited Consolidated Financial Statements --
 1




FLEXIBLE
SOLUTIONS INTERNATIONAL, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


For
the Three Months Ended March 31, 2008 and 2007


(U.S.
Dollars -- Unaudited)




Three
      Months Ended March 31,2008
            
            
            2007Sales
            
            $
            3,498,473
            
            
            $
            2,289,901Cost
      of sales
            
            
            2,285,732
            
            
            
            1,466,351Gross
      profit
            
            
            1,212,742
            
            
            
            823,550Operating
      expensesWages
            
            
            283,727
            
            
            
            257,186Administrative
      salaries and benefits
            
            
            91,225
            
            
            
            131,797Advertising
      and promotion
            
            
            39,800
            
            
            
            31,878Investor
      relations and transfer agent fee
            
            
            45,840
            
            
            
            58,191Office
      and miscellaneous
            
            
            72,698
            
            
            
            37,928Insurance
            
            
            49,486
            
            
            
            54,829Interest
      expense
            
            
            14,141
            
            
            
            1,025Rent
            
            
            67,842
            
            
            
            54,293Consulting
            
            
            50,191
            
            
            
            64,997Professional
      fees
            
            
            21,738
            
            
            
            38,796Travel
            
            
            27,614
            
            
            
            33,743Telecommunications
            
            
            9,201
            
            
            
            9,616Shipping
            
            
            12,301
            
            
            
            8,093Research
            
            
            19,961
            
            
            
            32,694Commissions
            
            
            29,126
            
            
            
            36,703Bad
      debt expense (recovery)
            
            
            120
            
            
            
            1,076Currency
      exchange
            
            
            (6,760
            )
            
            
            (10,093
            )Utilities
            
            
            4,342
            
            
            
            5,607832,563
            
            
            
            848,359Income
      (loss) before other items and income tax
            
            
            380,149
            
            
            
            (24,809
            )Loss
      on sale of equipment
            
            
            (29,026
            )
            
            
            -Write
      down of inventory
            
            
            (41,440
            )
            
            
            -Interest
      income
            
            
            490
            
            
            
            594Income
      (loss) before income tax
            
            
            310,173
            
            
            
            (24,215
            )Income
      tax (recovery)
            
            
            -
            
            
            
            -Net
      income (loss)
            
            
            310,173
            
            
            
            (24,215
            )Net
      income (loss) per share (basic and diluted)
            
            $
            0.02
            
            
            $
            0.00Weighted
      average number of  common shares
            
            
            14,057,567
            
            
            
            13,240,377




-- See
Notes to Unaudited Consolidated Financial Statements --
 2




FLEXIBLE
SOLUTIONS INTERNATIONAL, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


For
the Three Months Ended March 31, 2008 and 2007


(U.S.
Dollars -- Unaudited)




Three
      Months Ended March 31,2008
            
            
            2007Operating
      activitiesNet
      income (loss)
            
            $
            310,173
            
            
            $
            (24,215
            )Stock
      compensation expense
            
            
            82,699
            
            
            
            123,712Depreciation
            
            
            111,626
            
            
            
            127,733Assigned
      interest expense
            
            
            12,846
            
            
            
            -517,344
            
            
            
            227,230Changes
      in non-cash working capital items:(Increase)
      Decrease in accounts receivable
            
            
            (1,619,488
            )
            
            
            (330,165
            )(Increase)
      Decrease in inventory
            
            
            519,800
            
            
            
            153,316(Increase)
      Decrease in prepaid expenses
            
            
            (1,197
            )
            
            
            3,832Increase
      (Decrease) in accounts payable
            
            
            412,124
            
            
            
            104,108Increase
      (Decrease) in deferred revenue
            
            
            (338
            )
            
            
            (20,559
            )Cash
      provided by (used in) operating activities
            
            
            (171,754
            )
            
            
            137,762Investing
      activitiesLong
      term deposits
            
            
            487
            
            
            
            (311
            )Development
      of patents
            
            
            6,764
            
            
            
            (18,820
            )Acquisition
      of property and equipment
            
            
            (224,012
            )
            
            
            (3,824
            )Cash
      provided by (used in) investing activities
            
            
            (216,761
            )
            
            
            (22,955
            )Financing
      activitiesProceeds
      from issuance of common stock
            
            
            -
            
            
            
            197,850Cash
      provided by financing activities
            
            
            -
            
            
            
            197,850Effect
      of exchange rate changes on cash
            
            
            (69,661
            )
            
            
            17,231Inflow
      (outflow) of cash
            
            
            (458,176
            )
            
            
            329,888
            )Cash
      and cash equivalents, beginning
            
            
            3,355,854
            
            
            
            450,759Cash
      and cash equivalents, ending
            
            $
            2,897,678
            
            
            $
            780,647Supplemental
      disclosure of cash flow information:Interest
      paid
            
            $
            14,141
            
            
            $
            1,025




-- See
Notes to Unaudited Consolidated Financial Statements --
 3




FLEXIBLE SOLUTIONS INTERNATIONAL, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For
the Period Ended March 31, 2008


(U.S.
Dollars)




1.
            Basis
      of Presentation.




These
unaudited consolidated financial statements of Flexible Solutions International,
Inc (the “Company”) have been prepared in accordance with accounting principles
generally accepted 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, 2007 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 March 31, 2008, and the consolidated results of operations
and the consolidated statements of cash flows for the three months ended March
31, 2008 and 2007.  The results of operations for the three months
ended March 31, 2008 are not necessarily indicative of the results to be
expected for the entire fiscal year.




These
consolidated financial statements include the accounts of Flexible Solutions
International, Inc. (the “Company”), and its wholly-owned subsidiaries Flexible
Solutions, Ltd. (“Flexible Ltd.”), NanoChem Solutions Inc., WaterSavr Global
Solutions Inc., NanoDetect Technologies Inc. and Seahorse Systems
Inc.  All inter-company balances and transactions have been
eliminated.  The parent company was incorporated May 12, 1998 in the
State of Nevada and had no operations until June 30, 1998 as described further
below.




Flexible
Solutions International, Inc. and its subsidiaries develop, manufacture and
market specialty chemicals which slow down the evaporation of
water.  The Company’s primary product, HEAT$AVR®, is marketed for use
in swimming pools and spas where its use, by slowing the evaporation of water,
allows the water to retain a higher temperature for a longer period of time and
thereby reduces the energy required to maintain the desired temperature of the
water in the pool.  Another product, WATER$AVR®, is marketed for water
conservation in irrigation canals, aquaculture, and reservoirs where its use
slows down water loss due to evaporation.  In addition to the water
conservation products, the Company also manufacturers and markets water-soluble
chemicals utilizing thermal polyaspartate biopolymers (hereinafter referred to
as “TPAs”), which are beta-proteins manufactured from the common biological
amino acid, L-aspartic.  TPAs can be formulated to prevent corrosion
and scaling in water piping within the petroleum, chemical, utility and mining
industries.  TPAs are also used as proteins to enhance fertilizers in
improving crop yields and as additives for household laundry detergents,
consumer care products and pesticides.




On May 2,
2002, the Company established WaterSavr Global Solutions Inc. through the
issuance of 100 shares of common stock from WaterSavr Global Solutions Inc. to
the Company.




On
February 7, 2005, the Company established Nano Detect Technologies Inc. through
the issuance of 1,000 shares of common stock from Nano Detect Technologies Inc.
to the Company.




On June
21, 2005, the Company established Seahorse Systems Inc. through the issuance of
1,000 shares of common stock from Seahorse Systems Inc. to the
Company.




4




Pursuant
to a purchase agreement dated May 26, 2004, the Company acquired the assets of
Donlar Corporation (“Donlar”) on June 9,2004
and created a new company, NanoChem Solutions Inc. as the operating entity for
such assets.  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 4% to Donlar’s largest creditor to satisfy
$3,150,000 of the purchase price.  This note was paid June 2, 2005 and
upon payment, all former Donlar assets that were pledged as security were
released from their mortgage.  The remainder of the consideration
given was cash.




The
following table summarizes the estimated fair value of the assets acquired at
the date of acquisition (at June 9, 2004):




Current
      assets
            
            $
            1,126,805Property
      and equipment
            
            
            5,023,195$
            6,150,000Acquisition
      costs assigned to property and equipment
            
            
            314,724Total
      assets acquired
            
            $
            6,464,724




There was
no goodwill or other intangible assets accept certain patents recorded at nil
fair value, acquired as a result of the acquisition.  The
acquisition costs assigned to property and equipment include all direct costs
incurred by the Company to purchase the Donlar assets.  These costs
include due diligence fees paid to outside parties investigating and identifying
the assets, legal costs directly attributable to the purchase of the assets,
plus applicable transfer taxes.  These costs have been assigned to the
individual assets based on their proportional fair values and will be amortized
based on the rates associated with the related assets.






2.
            Significant
      Accounting Policies.




These
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States 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)           Inventories and Cost of
Sales




The
Company has three major classes of inventory:  finished goods, works
in progress, raw materials and supplies.  In all classes, inventory is
valued at the lower of cost and market.  Cost is determined on a
first-in, first-out basis.  Cost of sales includes all expenditures
incurred in bringing the goods to the point of sale.  Inventorial
costs and costs of sales include direct costs of the raw material, inbound
freight charges, warehousing costs, handling costs (receiving and purchasing)
and utilities and overhead expenses related to the Company’s manufacturing and
processing facilities.




In 2004,
the FASB issued SFAS No. 151, “Inventory Costs”, to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs and wasted
material.  This standard requires that such items be recognized as
current-period charges.  The standard also establishes the concept of
“normal capacity” and requires the allocation of fixed production overhead to
inventory based on the normal capacity of the production
facilities.  Any unallocated overhead must be recognized as an expense
in the period incurred.  This standard is effective for inventory
costs incurred starting January 1, 2006.




5




The
adoption of this standard did not have a material impact on its financial
position, results of operations or cash flows for 2007 or 2008.




(c)           Allowance for Doubtful
Accounts




The
Company provides an allowance for doubtful accounts when management estimates
collectibility to uncertain.  Accounts receivable are continually
reviewed to determine which, if any, accounts are doubtful of
collection.  In making the determination of the appropriate allowance
amount, the Company considers current economic and industry conditions,
relationships with each significant customer, overall customer credit-worthiness
and historical experience.




(d)           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 balanceTruck
            
            30%
      Declining balanceTrailers
            
            30%
      Declining balanceFurniture
      and fixtures
            
            20%
      Declining balanceManufacturing
      equipment
            
            20%
      Declining balanceOffice
      equipment
            
            20%
      Declining balanceBuilding
            
            10%
      Declining balanceLeasehold
      improvements
            
            Straight-line
      over lease term




Depreciation
is recorded at half for the year the assets are first
purchased.  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.




(e)           Impairment of Long-Lived
Assets.




In
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets”, the Company reviews long-lived assets, including, but not
limited to, property and equipment, patents and other assets, for impairment
annually or whenever events or changes in circumstances indicate the carrying
amounts of assets may not be recoverable.  The carrying value of
long-lived assets is assessed for impairment by evaluating operating performance
and future undiscounted cash flows of the underlying assets.  If the
sum of the expected future cash flows of an asset, is less than its carrying
value, an impairment measurement is indicated.  Impairment charges are
recorded to the extent that an asset’s carrying value exceeds its fair
value.  Accordingly, actual results could vary significantly from such
estimates.  There were no impairment charges during the periods
presented.




(f)           Investments.




Investment
in corporations subject to significant influence and investments in partnerships
are recorded using the equity method of accounting.  On this basis, the
Company’s share of income and losses of the corporations and partnerships is
included in earnings and the Company’s investment therein adjusted by a like
amount.  Dividends received from these entities reduce the investment
accounts.  Portfolio investments not subject to significant influence are
recorded using the cost method.




The fair
value of a cost method investment is not estimated if there are no identified
events or changes in circumstances that may have a significant adverse effect on
the fair value of the investment.





The
Company currently does not have any investments that require use of the equity
method of accounting.




6




(g)           Foreign
Currency.




The
functional currency of one of the subsidiaries is the Canadian
Dollar.  The translation of the Canadian Dollar to the reporting
currency of the U.S. Dollar is performed for assets and liabilities using
exchange rates in effect at the balance sheet date.  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 loss and are 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 the operating loss if realized during
the year and in comprehensive income if they remain unrealized at the end of the
year.




(h)           Revenue
Recognition.




Revenue
from product sales is recognized at the time the product is shipped since title
and risk of loss is transferred to the purchaser upon delivery to the
carrier.  Shipments are made F.O.B. shipping point.  The
Company recognizes revenue when there is persuasive evidence of an arrangement,
delivery has occurred, the fee is fixed or determinable, collectibility is
reasonably assured and there are no significant remaining performance
obligations.  When significant post-delivery obligations exist,
revenue is deferred until such obligations are fulfilled.  To date
there have been no such significant post-delivery obligations.




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.




(i)           Stock Issued in Exchange for
Services.




The
valuation of the Company’s 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.  The corresponding expense of the
services rendered is recognized over the period that the services are
performed.




(j)           Stock-based
Compensation.




In
December 2004, the Financial Accounting Standards Board (“FASB”) issued revised
SFAS No. 123(R), Share-Based
Payment, which replaces SFAS No. 123, “Accounting for Stock-Based
Compensation”, which superseded APB Opinion No. 25, “Accounting for Stock Issued to
Employees”.  FAS No. 123(R) requires the cost of all
share-based payment transactions to be recognized in an entity’s financial
statements, establishes fair value as the measurement objective and requires
entities to apply a fair-value-based measurement method in accounting for
share-based payment transactions.  SFAS No. 123(R) applies to all
awards granted, modified, repurchased or cancelled after July 1, 2005, and
unvested portions of previously issued and outstanding awards.  The
Company adopted this statement for its first quarter starting January 1, 2006
and will continue to evaluate the impact of adopting this
statement.




Prior to
2006, the Company adopted the disclosure provisions of SFAS No. 123 for stock
options granted to employees and directors.  The Company disclosed on
a supplemental basis, the pro-forma effect of accounting for stock options
awarded to employees and directors, as if the fair value based method had been
applied, using the Black-Scholes option-pricing model.  The Company
has always recognized the fair value of options granted to
consultants.




7




(k)           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.




(l)           Income (Loss) Per
Share.




Income
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of shares outstanding.  Diluted loss per share is
computed by giving effect to all potential dilutive options that were
outstanding during the year. For the years ended
December 31, 2007, 2006 and 2005, all outstanding options were
anti-dilutive.




(m)           Use of
Estimates.




The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States 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.




(n)           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 maintains cash balances at
financial institutions which at times, exceed federally insured amounts. The
Company has not experienced any material losses in such accounts.





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.





The Company is exposed to
credit-related losses in the event of non-performance by counterparties to the
financial instruments. Credit exposure is minimized by dealing with only credit
worthy counterparties. Accounts receivable for the three primary customers
totals $1,386,524 (52%) as at March 31, 2008 (2007 - $582,001 or
35%).





(o)           Contingencies




Certain conditions may exist as of the
date the financial statements are issued, which may result in a loss to the
Company but which will only be resolved when one or more future events occur or
fail to occur. The Company's management and its legal counsel assess such
contingent liabilities, and such assessment inherently involves an exercise of
judgment. In assessing loss contingencies related to legal proceedings that are
pending against the Company or unasserted claims that may result in such
proceedings, the Company's legal counsel evaluates the perceived merits of any
legal proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought therein.





If the
assessment of a contingency indicates that it is probable that a material loss
has been incurred and the amount of the liability can be estimated, the
estimated liability would be accrued in the Company's financial statements. If
the assessment indicates that a potentially material loss contingency is not
probable but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, would be
disclosed.




8




Loss
contingencies considered remote are generally not disclosed unless they involve
guarantees, in which case the guarantees would be disclosed.








3.
            Inventories




2008
            
            
            2007Completed
      goods
            
            $
            592,716
            
            
            $
            1
      ,664,777Works
      in progress
            
            
            481,589
            
            
            
            198,172Raw
      materials
            
            
            767,165
            
            
            
            498,321$
            1,841,470
            
            
            $
            2,361,270





4.
            Property,
      Plant & equipment





2008
            
            
            Accumulated
            
            
            2008Cost
            
            
            Depreciation
            
            
            NetBuildings
            
            $
            3,982,119
            
            
            $
            1,024,623
            
            
            $
            2,957,496Building
      Improvements
            
            
            65,971
            
            
            
            —
            
            
            
            65,971Computer
      hardware
            
            
            74,206
            
            
            
            49,152
            
            
            
            25,054Furniture
      and fixtures
            
            
            21,509
            
            
            
            12,310
            
            
            
            9,199Office
      equipment
            
            
            32,132
            
            
            
            22,050
            
            
            
            10,082Manufacturing
      equipment
            
            
            2,430,360
            
            
            
            1,293,213
            
            
            
            1,137,147Trailer
            
            
            15,021
            
            
            
            2,804
            
            
            
            12,217Leasehold
      improvements
            
            
            27,932
            
            
            
            18,970
            
            
            
            8,962Trade
      show booth
            
            
            8,465
            
            
            
            6,184
            
            
            
            2,281Truck
            
            
            11,583
            
            
            
            869
            
            
            
            10,714Land
            
            
            469,959
            
            
            
            —
            
            
            
            469,959$
            7,139,257
            
            
            $
            2,430,175
            
            
            $
            4,709,082








2007
              
              
              Accumulated
              
              
              2007Cost
              
              
              Depreciation
              
              
              NetBuildings
              
              $
              4,011,826
              
              
              $
              970,854
              
              
              $
              3,040,972Computer
      hardware
              
              
              75,458
              
              
              
              48,284
              
              
              
              27,174Furniture
      and fixtures
              
              
              21,788
              
              
              
              12,154
              
              
              
              9,634Office
      equipment
              
              
              32,905
              
              
              
              22,035
              
              
              
              10,870Manufacturing
      equipment
              
              
              2,313,363
              
              
              
              1,280,943
              
              
              
              1,032,420Trailer
              
              
              3,854
              
              
              
              1,863
              
              
              
              1,990Leasehold
      improvements
              
              
              46,304
              
              
              
              36,480
              
              
              
              9,825Trade
      show booth
              
              
              8,766
              
              
              
              6,212
              
              
              
              2,554Land
              
              
              477,133
              
              
              
              —
              
              
              
              477,133$
              6,991,397
              
              
              $
              2,378,829
              
              
              $
              4,612,571


9





5.
            Patents





In fiscal
2005, the Company started the patent process for additional WATER$AVR®
products.  Patents associated with these costs were granted in 2006
and they have been amortized over their legal life of 17 years.





2008
              Cost
            
            
            Accumulated
              Amortization
            
            
            2008
              NetPatents
            
            $
            237,485
            
            
            $
            13,811
            
            
            $
            223,674





2007
              Cost
            
            
            Accumulated
              Amortization
            
            
            2007
              NetPatents
            
            $
            243,853
            
            
            $
            13,415
            
            
            $
            230,438





6.
            Long
      Term Deposits




The Company has reclassified certain
security deposits to better reflect there long term nature.  Long term
deposits consist of damage deposits held by landlords and security deposits held
by various vendors.




2008
            
            
            2007Long
      term deposits
            
            $
            47,547
            
            
            $
            48,034







7.
            Stock
      Options.




The Company adopted
a stock option plan ("Plan").  The purpose of this Plan is to 
provide  additional  incentives  to  key  employees,
officers, directors and consultants  of  the  Company  and
its subsidiaries in order to help attract and retain  the  best 
available  personnel  for  positions  of 
responsibility  and otherwise promoting the success of the business
activities.  It is intended that options issued
under this Plan constitute non-qualified stock options.
The general terms of awards under the option plan are that 100%
of the options granted will vest the year following the grant. 
The maximum term of options granted is 5 years.




The
Company may issue stock options and stock bonuses for shares of its common stock
to provide incentives to directors, key employees and other persons who
contribute to the success of the Company.  The exercise price of all
incentive options are issued for not less than fair market value at the date of
grant.




The
following table summarizes the Company’s stock option activity for the years
ended December 31, 2007 and 2006 and the quarter ended March 31,
2008:




Number
      of shares
            
            
            Exercise
      price
              per
      share
            
            
            Weighted
      average exercise priceBalance,
      December 31, 2005
            
            
            1,060,740
            
            
            $1.40
      - $4.60
            
            
            $
            3.44Granted
            
            
            1,191,000
            
            
            $3.25
      - $3.60
            
            
            $
            3.25Exercised
            
            
            (46,000
            )
            
            $1.40
            
            
            $
            1.40Cancelled
      or expired
            
            
            (79,000
            )
            
            $1.40
      - $4.25
            
            
            $
            2.46Balance,
      December 31, 2006
            
            
            2,126,740
            
            
            $1.40
      - $4.60
            
            
            $
            3.44Granted
            
            
            235,700
            
            
            $1.50
      - $3.60
            
            
            $
            2.35Exercised
            
            
            (163,000
            )
            
            $1.50
      - $3.25
            
            
            $
            1.77Cancelled
      or expired
            
            
            (287,000
            )
            
            $3.00
      - $4.40
            
            
            $
            3.93Balance,
      December 31, 2007
            
            
            1,912,440
            
            
            $3.00
      – 4.60
            
            
            $
            3.38Granted
            
            
            83,000
            
            
            $3.60
            
            
            $
            3.60Balance,
      March 31, 2008
            
            
            1,995,440
            
            
            $3.00
      - 4.55
            
            
            $
            3.39








10




In
December 2004, the Financial Accounting Standards Board (“FASB”) issued revised
FAS No. 123(R), Share-Based
Payment, which replaces FAS No. 123, Accounting for Stock-Based
Compensation, which superseded APB Opinion No. 25, Accounting for Stock Issued to
Employees.  FAS No. 123(R) requires the cost of all share-based
payment transactions to be recognized in an entity’s financial statements,
establishes fair value as the measurement objective and requires entities to
apply a fair-value-based measurement method in accounting for share-based
payment transactions.  FAS No. 123(R) applies to all awards granted,
modified, repurchased or cancelled after July 1, 2005, and unvested portions of
previously issued and outstanding awards.  The Company adopted this
statement for its first quarter starting January 1, 2006 and will continue to
evaluate the impact of adopting this statement.





Prior to
2006, the Company applied APB Opinion No. 25 and related interpretations in
accounting for stock options granted to its employees and, accordingly, stock
compensation expense of nil was recognized as wages expense in 2005 and
2004.




The fair
value of each option grant is calculated using the following weighted average
assumptions:




2007
            
            
            2007Expected
      life – years
            
            
            5.0
            
            
            
            1.0
      - 5.0Interest
      rate
            
            
            2.27
            %
            
            
            4.18
      – 5.18
            %Volatility
            
            
            99
            %
            
            
            86.0
      – 115.0
            %Dividend
      yield
            
            
            —
            %
            
            
            —
            %Weighted
      average fair value of options granted
            
            $
            1.15
            
            
            $
            1.37
      – 2.67





During
the three months ended March 31, 2008 the Company granted 46,000 options to
consultants that resulted in $13,239 in expenses this quarter.  During
the same period, 37,000 options were granted to employees, resulting in $10,649
in expenses this quarter.  No stock options were exercised during the
period.




During
the three months ended March 31, 2007, the Company granted 150,000 stock options
to Mr. Grant as a part of the litigation settlement made January 3,
2007.  As the options were previously granted and expensed in 2001, no
expense was recorded in this quarter related to this transaction.




8.
            Warrants




On April 14, 2005, the Company
announced that it had raised $3,375,000 pursuant to a private placement of up to
1,800,000 shares of its common stock.  The investors collectively
purchased 900,000 shares of the Company’s common stock at a per share purchase
price of $3.75, together with warrants to purchase up to 900,000 additional
shares of the Company’s common stock.  The warrants have a four-year
term and are immediately exercisable at a price of $4.50 per share.




11




On
June 8, 2005, the Company announced that it had raised an additional
$327,750 pursuant to a private placement of up to 174,800 shares of its common
stock.  An investor purchased 87,400 shares of the Company’s common
stock at a per share price of $3.75, together with a warrant to purchase up to
87,400 additional shares of the Company’s common stock.  The warrant
has a four-year term and is immediately exercisable at a price of $4.50 per
share.




In May
2007 the Company closed a $3,042,455 private placement with select institutional
investors.  The terms are 936,140 units with each unit consisting of
one share at $3.25 and one half warrant with a three year term and a strike
price of $4.50 per share for total of 468,070 warrants.  The Company
also issued 16,154 warrants with the same terms for investment banking services
related to this transaction.




The
following table summarizes the Company’s warrant option activity for the
years  ended December 31, 2006 and 2007 (no subsequent
activity):




Number
      of shares
            
            
            Exercise
      price
              per
      share
            
            
            Weighted
      average exercise priceBalance,
      December 31, 2005
            
            
            987,400
            
            
            $
            4.50
            
            
            $
            4.50Granted
            
            
            —
            
            
            
            —
            
            
            
            —Exercised
            
            
            —
            
            
            
            —
            
            
            
            —Cancelled
            
            
            —
            
            
            
            —
            
            
            
            —Balance,
      December 31, 2006
            
            
            987,400
            
            
            $
            4.50
            
            
            $
            4.50Granted
            
            
            484,244
            
            
            $
            4.50
            
            
            $
            4.50Exercised
            
            
            —
            
            
            
            —
            
            
            
            —Cancelled
            
            
            —
            
            
            
            —
            
            
            
            —Balance,
      December 31, 2007
            
            
            1,471,644
            
            
            $
            4.50
            
            
            $
            4.50







9.
            Capital
      Stock.




During
the quarter ended March 31, 2007, the Company issued 120,800 shares of common
stock upon the exercise of stock options.  The strike price varied
from $1.50 – 3.25 per share.




No stock
was issued in the quarter ending March 31, 2008.




10.
            Segmented,
      Significant Customer Information and Economic
  Dependency.




The
Company operates in two segments:




(a)   Development
and marketing of two lines of energy and water conservation products (as shown
under the column heading “EWCP” below), which consists of a (i) liquid swimming
pool blanket which saves energy and water by inhibiting evaporation from the
pool surface, and (ii) food-safe powdered form of the active ingredient within
the liquid blanket and which is designed to be used in still or slow moving
drinking water sources.




(b)    Manufacture
of biodegradable polymers and chemical additives used within the petroleum,
chemical, utility and mining industries to prevent corrosion and scaling in
water piping (as shown under the column heading “BPCA” below).  These
chemical additives are also manufactured for use in laundry and dish detergents,
as well as in products to reduce levels of insecticides, herbicides and
fungicides.




The Company’s traditional
operating activities related to the production and sale of its energy
conversation product line.  Upon acquiring the Donlar assets, the
Company formed NanoChem, which was formed as its wholly-owned subsidiary in
exchange for the capital contribution necessary to purchase the Donlar
assets.  The assets the Company acquired from Donlar include domestic
and international patents and business processes relating to the production of
TPAs and other environmental products and technologies, as well as a
manufacturing plant.  These assets are currently used by NanoChem for
its revenue-producing activities.




12




The
accounting policies of the segments are the same as those described in Note 2 to
the Company’s consolidated financial statements, Significant Accounting
Policies.  The Company evaluates performance based on profit or
loss from operations before income taxes, not including nonrecurring gains and
losses and foreign exchange gains and losses.




The
Company’s reportable segments are strategic business units that offer different,
but synergistic products and services.  They are managed separately
because each business requires different technology and marketing
strategies.




EWCP
            
            
            BPCA
            
            
            TotalRevenue
            
            $
            410,828
            
            
            $
            3,087,645
            
            
            $
            3,498,473Interest
      revenue
            
            
            490
            
            
            
            -
            
            
            
            490Interest
      expense
            
            
            13,039
            
            
            
            1,102
            
            
            
            14,141Depreciation
      and
              amortization
            
            
            11,378
            
            
            
            100,248
            
            
            
            111,626Segment
      profit (loss)
            
            
            (347,068
            )
            
            
            657,241
            
            
            
            310,173Segment
      assets
            
            
            1,505,591
            
            
            
            3,203,491
            
            
            
            4,709,082Expenditures
      for
              segment
      assets
            
            
            192,032
            
            
            
            31,980
            
            
            
            224,012







The sales
generated in the United States and Canada are as follows:




2008
            
            
            2007Canada
            
            $
            74,723
            
            
            $
            31,278United
      States and abroad
            
            
            3,423,750
            
            
            
            2,258,623Total
            
            $
            3,498,473
            
            
            $
            2,289,901




The
Company’s long-lived assets are located in Canada and the United States as
follows:




2008
            
            
            2007Canada
            
            $
            1,501,963
            
            
            $
            1,331,166United
      States
            
            
            3,207,119
            
            
            
            3,511,843Total
            
            $
            4,709,082
            
            
            $
            4,843,009





Three
customers account for $1,748,545 (50%) of sales made in the period (2007 -
$840,310 or 37%).





11.
            Commitments.




The
Company is committed to minimum rental payments for property and premises
aggregating approximately $295,682 over the term of four leases, the last
expiring on December 31, 2011.




Commitments
in each of the next five years are approximately as follows:




2008
            
            135,6672009
            
            127,2532010
            
            16,3812011
            
            16,381




13




12.
            Contingencies.




On May 1,
2003, the Company filed a lawsuit in the Supreme Court of British Columbia,
Canada, against John Wells and Equity Trust, S.A. seeking the return of 100,000
shares of the Company’s common stock and the repayment of a $25,000 loan, which
were provided to defendants for investment banking services consisting of
securing a $5 million loan and a $25 million stock offering.  Such
services were not performed and in the proceeding the Company seeks return of
such shares after defendant’s failure to both return the shares voluntarily and
repay the note.  On May 7, 2003, the Company obtained an injunction
freezing the transfer of the shares.  On May 24, 2004, there was a
hearing on defendant’s motion to set aside the injunction, which motion was
denied by the trial court on May 29, 2004.  On the date of issuance,
the share transaction was recorded as shares issued for services at fair market
value, a value of $0.80 per share.  No amounts have been recorded as
receivable in the Company’s consolidated financial statements as the outcome of
this claim is not determinable.




As of
January 3, 2007 all litigation between FSI and Patrick Grant has been settled.
As part of the settlement FSI permited Mr. Grant to exercise an option to
purchase 100,000 shares of FSI’s common stock at a price of $1.50 per share and
to exercise a second option to purchase 50,000 shares of FSI’s common stock at a
price of $2.00 per share.  FSI also forgave a loan to Mr. Grant and
related parties in the amount of approximately $46,177. This amount has been
recorded as a bad debt expense in 2006.  FSI, its subsidiaries and
officers face no further liability in regard to the Grant lawsuit.




On July
23, 2004, we filed a lawsuit in the Circuit Court of Cook County, Illinois
against Tatko Biotech Inc. (“Tatko”).  The action arose from our Joint
Product Development Agreement with Tatko in which we agreed to invest $10,000
toward the product development venture and granted to Tatko 100,000 shares of
our restricted common stock.  In return, Tatko granted us a five-year
option to purchase 20% of Tatko’s outstanding capital stock.  Tatko refused
to collaborate on the agreement and, therefore, we filed the lawsuit to have the
court declare that Tatko is not entitled to the 100,000 shares of our restricted
common stock. On January 4, 2008, the lawsuit was dismissed pursuant to an
agreement by Tatko to treat the Joint Product Development Agreement as void. As
a result of the dismissal of the lawsuit and the agreement of the parties, the
100,000 shares of restricted stock will be returned or cancelled.




13.
            Subsequent
      Events.




There
have been no subsequent events.




14.
            Comparative
      Figures.




Certain
of the comparative figures have been reclassified to conform with the current
year’s presentation.




14




Item 2.
            Management’s
      Discussion and Analysis or Plan of
Operation.




Overview




Flexible
Solutions International, Inc. (“we,” “us,” and “our”) develops, manufactures and
markets specialty chemicals that slow the evaporation of water.  Our
initial product, HEAT$AVR®, is marketed for use in swimming pools and spas where
its use, by slowing the evaporation of water, allows the water to retain a
higher temperature for a longer period of time and thereby reduces the energy
required to maintain the desired temperature of the water in the
pool.  Using the same technology, WATER$AVR®, is marketed for water
conservation in irrigation canals, aquaculture, and reservoirs where its use
slows water loss due to evaporation.  We also manufacture and market
TPA’s for use in the oilfields to reduce scale and corrosion in many ‘topside’
water systems and in the agriculture industry to reduce fertilizer crystallization
before, during and after application.




Results
of Operations




Material
changes in our Statement of Operations for the periods presented are discussed
below:





Quarter Ended March 31,
2008




Item
            
            Increase
      (I) or Decrease (D)
            
            ReasonSales
            
            I
            
            Maintenance
      shutdowns in the oil extraction industry during 2007 had a comparative
      year-over-year effect.Wages
            
            I
            
            Increased
      sales required increased support on all levels.Administrative
      salaries and benefits
            
            D
            
            Five
      year stock option plans granted to several long term employees in 2006
      resulted in higher expenses in 2007 than 2008.  Granting of
      stock options plans resulted in an expense of $51,150 in first quarter
      2007 as compared to $34,140 in the same period 2008.Office
      and miscellaneous
            
            I
            
            Various
      administrative costs associated with the start up of the new facility have
      been allocated to this account.  Once the facility is
      operational, these costs will be allocated to overhead.Interest
      expense
            
            I
            
            Accounting
      regulations dictate that we must recognize interest expense comparable to
      what we would have incurred with a conventional mortgage despite having an
      interest free mortgage in place with the seller of the building for the
      new facility.Consulting
            
            D
            
            The
      granting of stock options to long term consultants in 2006 resulted in a
      stock option expense of $14,590 in first quarter 2008 as compared to
      $32,805 in the same period 2007.Professional
      fees
            
            D
            
            The
      Company experienced reduced professional fees after the conclusion of two
      lawsuits in December 2006 and January
2007.





15




Quarter Ended March 31,
2007





Item
            
            Increase
      (I) or Decrease (D)
            
            ReasonSales
            
            D
            
            Recent
      back logs in ports around the world prevented shipping of several orders
      towards the end of the quarter.Wages
            
            D
            
            Five
      year stock options plans granted to several key employees in 2006 resulted
      in higher expenses in 2006.  Granting of stock options plans
      resulted in an expense of $15,519 in first quarter 2007 as compared to
      $39,359 in the same period 2006.Administrative
      salaries and benefits
            
            D
            
            Five
      year stock option plans granted to several long term employees in 2006
      resulted in higher expenses in 2006.  Granting of stock options
      plans resulted in an expense of $51,150 in first quarter 2007 as compared
      to $92,498 in the same period 2006.Advertising
      and promotion
            
            I
            
            After
      reducing advertising expense in 2006, the Company decided to increase
      spending up to previous levels.Investor
      relations and transfer agent fee
            
            I
            
            Increase
      in external investor relations and transfer agent fees.Insurance
            
            I
            
            Increase
      is comparable to what others are experiencing in the
    industry.Consulting
            
            D
            
            The
      granting of stock options to long term consultants in 2006 resulted in a
      stock option expense of $61,152 in first quarter 2006 as compared to
      $32,805 in the same period 2007.Professional
      fees
            
            D
            
            The
      Company experienced reduced professional fees after the conclusion of two
      lawsuits in December 2006 and January
2007.








Capital
Resources and Liquidity





The sources and uses of funds are
directly obtainable from our Consolidated Statement of Cash Flows found on Page
3 of this document.





The Company has sufficient cash
resources to meets its future commitments and cash flow requirements for the
coming year.  As of March 31, 2008 working capital was $6,296,803
(2007 - $6,035,853) and the Company has no substantial commitments that requires
significant outlays of cash over the coming fiscal year.




16




The
Company is committed to minimum rental payments for property and premises
aggregating approximately $295,682 over the term of four leases, the last
expiring on December 31, 2011.




Commitments
in each of the next five years are approximately as follows:




2008
            
            135,6672009
            
            127,2532010
            
            16,3812011
            
            16,381





The
Company doesn’t anticipate any capital requirements for the twelve months ending
December 31, 2008.





The Company does not have any
commitments or arrangements from any person to provide with any additional
capital.





See Note 2 to the financial statements
included as part of this report for a description of our significant accounting
policies and recent accounting pronouncements.







Subsequent
Events




None.




Item 4T.
            Controls
      and Procedures.




Daniel
O’Brien, Flexible Solution International Inc.’s Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by this report; and
in his opinion the Company’s disclosure controls and procedures were
effective.  There were no changes in the Company’s internal controls
over financial reporting that occurred during the quarter ended March 31, 2008
that have affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.





Management’s
Report on Internal Control Over Financial Reporting





Flexible
Solution International Inc.’s management is responsible for establishing and
maintaining adequate internal control over financial reporting as required by
Sarbanes-Oxley (SOX) Section 404.A.  The Company’s internal control
over financial reporting is a process designed under the supervision of its
Chief Executive and Financial Officer to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of their financial
statements for external purposes in accordance with Generally Accepted
Accounting Principles.





As of the
end of the period covered by this report, Flexible Solution International Inc.’s
management assessed the effectiveness of its internal control over financial
reporting based on the criteria for effective internal control over financial
reporting established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and
SEC guidance on conducting such assessments.  Based on that
evaluation, Flexible Solutions International Inc.’s  management
concluded that during the period covered by this report its internal controls
and procedures were effective.





17




PART II
            OTHER
      INFORMATION




Item
      1.
            Legal Proceedings.




On May 1,
2003, the Company filed a lawsuit in the Supreme Court of British Columbia,
Canada, against John Wells and Equity Trust, S.A. seeking the return of 100,000
shares of the Company’s common stock and the repayment of a $25,000 loan, which
were provided to defendants for investment banking services consisting of
securing a $5 million loan and a $25 million stock offering.  Such
services were not performed and in the proceeding the Company seeks return of
such shares after defendant’s failure to both return the shares voluntarily and
repay the note.  On May 7, 2003, the Company obtained an injunction
freezing the transfer of the shares.  On May 24, 2004, there was a
hearing on defendant’s motion to set aside the injunction, which motion was
denied by the trial court on May 29, 2004.  On the date of issuance,
the share transaction was recorded as shares issued for services at fair market
value, a value of $0.80 per share.  No amounts have been recorded as
receivable in the Company’s consolidated financial statements as the outcome of
this claim is not determinable.




As of
January 3, 2007 all litigation between FSI and Patrick Grant has been settled.
As part of the settlement FSI permited Mr. Grant to exercise an option to
purchase 100,000 shares of FSI’s common stock at a price of $1.50 per share and
to exercise a second option to purchase 50,000 shares of FSI’s common stock at a
price of $2.00 per share.  FSI also forgave a loan to Mr. Grant and
related parties in the amount of approximately $46,177. This amount has been
recorded as a bad debt expense in 2006.  FSI, its subsidiaries and
officers face no further liability in regard to the Grant lawsuit.




On July
23, 2004, we filed a lawsuit in the Circuit Court of Cook County, Illinois
against Tatko Biotech Inc. (“Tatko”).  The action arose from our Joint
Product Development Agreement with Tatko in which we agreed to invest $10,000
toward the product development venture and granted to Tatko 100,000 shares of
our restricted common stock.  In return, Tatko granted us a five-year
option to purchase 20% of Tatko’s outstanding capital stock.  Tatko refused
to collaborate on the agreement and, therefore, we filed the lawsuit to have the
court declare that Tatko is not entitled to the 100,000 shares of our restricted
common stock. On January 4, 2008, the lawsuit was dismissed pursuant to an
agreement by Tatko to treat the Joint Product Development Agreement as void. As
a result of the dismissal of the lawsuit and the agreement of the parties, the
100,000 shares of restricted stock will be returned or cancelled.




Item 2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds.




None.




Item 3.
            Defaults
      Upon Senior Securities.




None.




Item 4.
            Submission
      of Matters to a Vote of Security
Holders.




None.




Item 5.
            Other
      Information.




None.




18




Item
      6.
            Exhibits.




Number
            Description3.1
            Amended
      and Restated Certificate of Incorporation of the registrant.
      (1)3.2
            Bylaws
      of the registrant. (1)31.1
            Certification of Principal Executive Officer
      Pursuant to §302 of the Sarbanes-Oxley Act of
2002.*31.2
            Certification of Principal Financial Officer
      Pursuant to §302 of the Sarbanes-Oxley Act of
2002.*32.1
            Certification of Principal Executive Officer
      Pursuant to 18 U.S.C. §1350 and §906 of the Sarbanes-Oxley Act of
      2002.*32.2
            Certification of Principal Financial Officer
      Pursuant to 18 U.S.C. §1350 and §906 of the Sarbanes-Oxley Act of
      2002.*


______________


*           Filed
with this report.




(1)           Incorporated
by reference to the registrant’s Registration Statement on Form 10-SB (SEC File.
No. 000-29649) filed February 22, 2000.




SIGNATURES




In
accordance with the requirements of Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.




Flexible
      Solutions International, Inc.Dated:  May
      15, 2008
              By:
              /s/ Daniel
      B. O’BrienDaniel
      B. O’BrienPresident
      and Chief Executive OfficerBy:
              /s/Daniel
      B. O’BrienDaniel
      B. O’BrienChief
      Financial and Accounting Officer

















19